In the 2010 decision of In re Philadelphia Newspapers, 599 F.3d 298 (3d. Cir. 2010), the Third Circuit Court of Appeals concluded that a plan proponent could deny a secured creditor the right to credit bid on its collateral when the sale was made pursuant to a plan of reorganization. That holding was a surprise to many given that secured creditors were specifically authorized to credit bid in stand-alone sales under section 363 of the Bankruptcy Code. A year or so later, another circuit court, the Seventh Circuit Court of Appeals, came to the opposite conclusion.
The First Chamber of the Supreme Court recently handed down a decision dealing with the constitutionality of one of the timeframes set by the Bankruptcy Law for filing a proof of claim in bankruptcy proceedings.
On April 6, 2011, the Ontario Superior Court of Justice released its decision in the priority disputes between the lessors and aviation authorities resulting from the Skyservice receivership. The Court, in interpreting and applying the decisions in Canada 3000 and Zoom, raised the bar for lessors to defeat the seizure and detention rights of the aviation authorities in Canada.
Asbestos settlement trusts are a major source of payment of asbestos claims in the United States, with over fifty such trusts instituted as of March, 2011.1 While insurance recoveries are a principal source of funding for these trusts, courts generally have not allowed insurers to challenge chapter 11 plans where they are found to be “insurance neutral.” A plan is insurance neutral where the plan does not increase an insurer’s pre-petition liabilities or impair an insurer’s contractual rights under its insurance policies.
Yes, on the facts in the Chapter 11 proceedings involving Borders, the insolvent bookseller.
Jefferies & Company, an investment bank, was retained by Borders to pursue reorganisation strategies, including a possible sale of the company’s assets as a going concern. The bank made considerable efforts in flogging the assets, which resulted in an offer from an interested party, but an actual sale of assets did not happen. Jefferies nevertheless claimed the liquidation fee under its agreement with Borders. The company’s creditors opposed this: no sale, no success fee.
A New York trial court recently held that affiliates and subsidiaries of a bankrupt Mexican holding company were liable as guarantors on indentures issued by the corporation, despite ongoing Mexican bankruptcy proceedings that could potentially discharge their liability under Mexican law. Wilmington Trust, National Assoc. v. Vitro Automotriz, S.A. De C.V., et al., No. 652303/11 (N.Y. Sup. Ct. 2011).
Although 2011 saw major decisions concerning many facets of bankruptcy law, perhaps no area of bankruptcy law drew as many high-profile decisions as the standards for confirming a chapter 11 plan of reorganization. We draw your attention to three particularly important 2011 decisions that are likely to heavily influence the contours of many future chapter 11 plans.
Designating Votes Not Cast in Good Faith
Chapter 15 of the Bankruptcy Code was enacted in 2005 to create a procedure to recognize an insolvency or debt adjustment proceeding in another country and to, in essence, domesticate that proceeding in the United States. Once a foreign proceeding is “recognized,” a step which cannot be achieved without a foreign representative satisfying various requirements, the foreign representative may obtain certain protections from a United Stated bankruptcy court, including the imposition of the automatic stay to protect the foreign debtor’s property in the United States.
2011 did not begin with a bang for bankruptcy professionals. Commercial bankruptcy case filings were infrequent and so too were the release (or publication) of major bankruptcy court decisions. The second half of the year was a different story.