The BLG Monthly Update is a digest of recent developments in the law which Neil Guthrie, our National Director of Research, thinks you will find interesting or relevant – or both.

In Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, the Supreme Court of Canada was called upon to consider whether orders issued by a regulatory body with respect to environmental remediation work are “provable claims” in a proceeding commenced under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c.C-36 (the “CCAA”).

Chapter 15 of the Bankruptcy Code provides a procedure to obtain recognition of a foreign bankruptcy, insolvency or debt adjustment proceeding (a “foreign proceeding”) in the United States. Chapter 15 draws a distinction between a “foreign main proceeding” (i.e., a foreign proceeding pending in a country where the debtor has the center of its main interests) and a “foreign nonmain proceeding” (i.e., a foreign proceeding pending where the debtor has “an establishment”).

Section 546(e) of the Bankruptcy Code is a “safe harbor” provision which restricts a debtor’s ability to recover or “clawback” what would otherwise be “avoidable” payments made to creditors. In the recent case of Lightfoot v. MXEnergy Elec., Inc., 690 F.3d 352 (5th Cir. 2012), the Fifth U.S.

A New York bankruptcy court recently rejected a debtor’s challenge to a consensual state court judgment (“Judgment”) in favor of mortgagee, General Electric Capital Corporation (“GECC”), that had accelerated a debt and obtained a prepetition foreclosure judgment against debtor, 410 East 92nd Street (the “Hotel”), in the amount of approximately $74 million. In re: Madison 92nd St. Associates LLC, 472 B.R. 189 (Bankr. S.D.N.Y. 2012).

On 27 July 2012, Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) released reasons for decision in the Sino-Forest CCAA case concerning the scope and effect of the 2009 amendments to the CCAA that subordinate “equity claims” to all other claims and provide that under a CCAA plan, no payment can be made in respect of equity claims until all other claims are paid in full.

The Delaware bankruptcy court in the KB Toys, Inc. cases recently held that a claims purchaser takes a claim subject to certain disabilities of the claim as held by the seller, regardless of whether the claim transfer is deemed a “sale” or an “assignment.” SeeIn re KB Toys, Inc., Case No. 04-10120 (KJC) (Bankr. Del. May 4, 2012). In so ruling, the Delaware court’s decision is somewhat at odds with the decision issued by the District Court for the Southern District of New York in the Enron bankruptcy cases. See Enron Corp. v.

After several years of unusually few corporate defaults, there has recently been an uptick in corporations failing to satisfy their bond and loan obligations. In a number of cases, the debts in question are part of multiple-lien or multi-tranche financing structures that incorporate complex subordination packages. The agreements at issue often go beyond merely subordinating rights to payments.

It is common for lenders to require borrowers to agree to pay a higher interest rate, known as the default rate, following an event of default under a loan. Some loan agreements also require the borrower to pay a fee in the event of a late payment. If the borrower files for bankruptcy protection, the Bankruptcy Code affords special protection to secured creditors with respect to collecting interest.

It is common knowledge that the Bankruptcy Code provides a debtor with a “fresh start” by allowing it to discharge prepetition claims. Similarly, section 363 of the Bankruptcy Code allows a trustee or debtor in possession to sell property of the estate “free and clear” of prior claims. These two concepts, while relatively straightforward, raise a fundamental question — when does a creditor hold a “claim” for purposes of the Bankruptcy Code?