Judge Parker of the U.S. Bankruptcy Court for the Western District of Texas recently issued an order in the case of Hilltop SPV, LLC, granting debtor Hilltop SPV LLC’s (“Hilltop”) motion to reject a Gas Gathering Agreement (“GGA”) with counter-party Monarch Midstream, LLC (“Monarch”).[1] This decision allows Hilltop to reject the GGA while allowing Monarch to retain the covenants that run with the land post-rejection.

Overview: The Fifth Circuit’s highly anticipated decision on December 31, 2024, in the Serta Simmons case has significant implications for borrowers and lenders in financial distress situations. The issue on appeal concerned an uptier transaction, a liability management exercise sometimes referred to as “lender-on-lender violence.” The Fifth Circuit’s opinion addresses the contractual viability of uptier transactions and the enforceability of related indemnities in bankruptcy plans, potentially reshaping the landscape for future financial restructurings.

An involuntary bankruptcy can be a powerful tool in a creditor's arsenal. Involuntary bankruptcies are rarely filed, however, because of the significant risk of liability for the petitioning creditor if the case is dismissed. A creditor considering filing an involuntary bankruptcy must understand the requirements for filing involuntary bankruptcy cases, which are strictly construed and applied, and be mindful of the associated risks.

Harrington v. Purdue Pharma L.P., 144 S. Ct. 2017 (June 27, 2024)

When a company files for bankruptcy, its creditors often ask the same question: will I get paid? The answer, in part, depends on the priority and proposed treatment of each creditor's claim in the bankruptcy (i.e., who gets paid and in what order).1 In addition to the Bankruptcy Code's other provisions affecting the priority of a claim, the doctrines of recharacterization and equitable subordination can affect the priority of a challenged claim by effectively postponing or eliminating payment on the claim.

Recharacterization

Often, after filing a proof of claim, a creditor can go months, or even years, without hearing anything regarding their claim. Then, unexpectedly, the creditor's proof of claim faces an objection, possibly on multiple grounds, with a limited window to respond. A claim objection can raise several important strategic considerations for crafting the best response.

Key Issues

An assignment for the benefit of creditors (ABC) is a process by which a financially distressed company (referred to as the assignor) transfers its assets to a third-party fiduciary (referred to as the assignee). The assignee is responsible for liquidating those assets and distributing the proceeds to the assignor's creditors, pursuant to the priorities established under applicable law. From the perspective of a creditor, there are many important distinctions between an ABC and a bankruptcy case.

Key Issues

On July 2, 2024, the Court of Appeal for British Columbia (the “Court”) released its highly anticipated decision in British Columbia v. Peakhill Capital Inc., 2024 BCCA 246 (“Peakhill”) concerning the use of reverse vesting orders (“RVOs”) to effect sale transactions structured to avoid provincial property transfer taxes for the benefit of creditors.

Many litigators and corporate lawyers view the practice of representing a large shareholder and the company in which it is invested as common practice. In many instances, no conflict of interest will ever materialize such that the shareholder and the company require separate representation. However, in a recent opinion rendered by the United States Bankruptcy Court, Eastern District of Virginia (the “Court”), a large international law firm (the “Firm”) was disqualified from representing Enviva Inc.

2275518 Ontario Inc. v. The Toronto-Dominion Bank, 2024 ONCA 343

On May 6, 2024, the Ontario Court of Appeal upheld a summary judgment motion decision in favour of The Toronto-Dominion Bank (“TD Bank”) in 2275518 Ontario Inc. v. The Toronto-Dominion Bank, 2024 ONCA 343.^[1]