Case Summary
This case presents a common scenario and dynamic that a party involved with a distressed bank holding company may have seen in the last several years.
Many indentures contain “make-whole provisions,” which protect a noteholder’s right to receive bargained-for interest payments by requiring compensation for lost interest when accrued principal and interest are paid early. Make-whole provisions permit a borrower to redeem or repay notes before maturity, but require the borrower to make a payment that is calculated to compensate noteholders for a loss of expected interest payments.
New legislation came in to force on 21 July 2014 with the intention of granting entry to the Pension Protection Fund (the “PPF”) for those members of the Olympic Airlines SA Pension and Life Assurance Scheme (the “Scheme”). The members of the Scheme had previously been denied entry as a result of a Court of Appeal decision in the case of the Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA.
In an opinion filed on July 3, 2014, in the case of In re Lower Bucks Hospital, et al., Case No. 10-10239 (ELF), the United States Court of Appeals for the Third Circuit (Third Circuit) affirmed a decision of the United States Bankruptcy Court for the Eastern District of Pennsylvania (Bankruptcy Court), which denied approval of third-party releases benefitting The Bank of New York Mellon Trust Company, N.A., in its capacity as indenture trustee (BNYM, or the Trustee).
On May 28, 2014, the District Court for the Southern District of New York affirmed an order from the bankruptcy court in Dishi & Sons v. Bay Condos LLC, et al.1, approving a sale of the Debtor’s assets, but found that the Debtor’s commercial tenant was entitled to remain in possession of the premises for the remainder of the lease at the specified rent.
Most Landlords, and Insolvency Practitioners (“IP”s), will be well aware of the issues and liabilities that can arise where a tenant (whether it be a company or individual, residential or commercial) experiences financial difficulties. Competing interests can lead to difficulties for all parties and, potentially, legal disputes.
Since the Welfare Reform and Pensions Act 1999 (“1999 Act”), it has been understood that the rights of a bankrupt under a tax approved pension plan are excluded from the bankruptcy estate and do not vest in his Trustee in Bankruptcy.
That said, where a Bankrupt was already drawing an income from his pension, his Trustee could seek an Income Payments Order over that income.
In 2011, the US Supreme Court issued its landmark decision in Stern v. Marshall. Turning decades of bankruptcy practice on its head, the Supreme Court held that, even though bankruptcy courts are statutorily authorized to enter final judgments in “core” matters, Article III of the Constitution prohibits them from finally adjudicating certain core matters, such as a debtor’s state law counterclaim against a creditor (so-called “Stern claims”).
Often times indenture trustees seek to sit on creditors committees in furtherance of their fiduciary duties to holders. Obviously, the professional fees and expenses can be paid as a first priority pursuant to a charging lien as provided for under the indenture documents. The payment of such fees and expenses becomes an issue, however, when there are no plan distributions to holders or the plan distributions are illiquid or non-cash.
The Insolvency Rules 1986 (“IR 1986”) are to be replaced in their entirety by the Insolvency Rules 2015 (“IR 2015”).
The Insolvency Service has been running a long-standing ‘modernisation’ project to consolidate the 23 amending instruments to IR 1986 and provide a number of substantive amendments to existing insolvency law and practice.