In re Shubh Hotels Pittsburgh, Inc., Bankr. No. 10-26337JAD (Bankr. W.D. Pa. July 24, 2012)

CASE SNAPSHOT

CML V, LLC v. Bax, et al., 2011 Del. LEXIS 480 (Del. Sept. 2, 2011)

CASE SNAPSHOT

Affirming the decision of the Court of Chancery for the State of Delaware, the Delaware Supreme Court held that, unlike corporate creditors, creditors of a Delaware Limited Liability Company do not have standing to sue the LLC’s officers derivatively on behalf of an insolvent LLC.  

FACTUAL BACKGROUND

It will be almost Christmas before we know, at least for portfolio companies that can file in the Delaware Bankruptcy Court. The case that will provide guidance is Friendly Ice Cream Corp., where Sun Capital, which is both equity owner and term lender, put Friendly into Chapter 11 on October 5, 2011. It did so after agreeing to a Section 363 purchase agreement with Friendly that would allow a Sun affiliate to buy assets (including desirable lease locations) free and clear by credit bidding outstanding pre-petition term debt owed to Sun.

On November 4, 2011, the SIPC Trustee took his first steps toward transferring frozen customer securities accounts held by MF Global Inc. ("MFGI") when he announced that he will be accepting proposals for the transfer of all customer securities accounts of MFGI (the "Securities Accounts") to another member of the Securities Investor Protection Corporation. This action is in addition to the steps the Trustee took last week to transfer certain segregated commodities accounts from MFGI to other futures commission merchants.

Last week’s Chapter 11 filing by NewPage Corporation, a company with assets and liabilities in the billions of dollars, stands as a relative rarity in the current restructuring environment.

A debtor’s exclusive right to formulate and solicit acceptances for a plan of reorganization during the initial stages of a chapter 11 case is one of the most important benefits conferred under the Bankruptcy Code as a means of facilitating the successful restructuring of an ailing enterprise. By giving a chapter 11 debtor-in-possession time to devise a solution to balance sheet and operational problems without being burdened by the competing agendas of other stakeholders in the bankruptcy case, exclusivity levels the playing field, at least temporarily.

A bankruptcy court wrote that filing for bankruptcy is “powerful magic.”  By finding federal preemption of state law fraudulent transfer claims, the Second Circuit Court of Appeals’ decision in the long-running Tribune case showed just how powerful this magic can be.

Yesterday, Energy XXI Ltd. became the latest domestic oil and gas company to pursue a more deleveraged balance sheet via Chapter 11 restructuring. This does not come as a surprise to those following the company – for much of the last three months Energy XXI’s stock has been trading at less than $1.00 per share. According to the press release issued by the company, the filing comes after the company reached agreement with more than 63% of second lien note holders on the material terms of the restructuring.

Prepackaged Bankruptcy Offers Investors a Quick Return to Liquidity Chapter 11 bankruptcy cases are typically lengthy and expensive, potentially lasting years and costing millions of dollars in fees and expenses. One valuable technique to minimize a debtor’s time in Chapter 11, reduce cost and disruption, and still secure the benefits of a Chapter 11 plan is a prepackaged bankruptcy (also called a “prepack”). In a prepack, a debtor negotiates the terms of a chapter 11 plan and solicits votes prior to the bankruptcy filing.

28 July 2015 Should Solvency Tests Give the Same Answer?1 By Dr. David Tabak Solvency is an important issue in many bankruptcy and related matters. Unfortunately for the sake of consistency, there is not a single definition of solvency, nor is there a single test for bankruptcy. This paper addresses two of the primary tests for bankruptcy, discussing when these tests should give the same or potentially different results. A case study is provided based on a bankruptcy case in which the author served as an expert witness.