The U.S. Court of Appeals for the Fifth Circuit recently held that a transfer of a tax lien to a tax buyer under Texas law does not constitute an extension of credit that is subject to the federal Truth in Lending Act (TILA).
A copy of the opinion is available at: Link to Opinion.
A recent case out of the Southern District of New York, Citibank, NA, London Branch v. Norske Skogindustrier ASA(S.D.N.Y. March 8, 2016), once again illustrates the difficulty of obtaining injunctive relief against prospective indenture violations of a financially troubled issuer.
The Facts
With the current interest being focused on Section 316(b) of the Trust Indenture Act, this may be a good time to examine the differing rights of noteholders under an indenture governed by the TIA and the rights of lenders under credit agreements governed by New York law.
Essentially all securitization structures utilize a bankruptcy remote entity, a/k/a special purpose entity (“SPE”), to reduce the lenders’ or investors’ exposure to a bankruptcy of the sponsor. A standard feature of SPEs is the appointment of an independent person (director, member, manager) to the body managing the SPEs. That independent person’s consent is required for “major decisions,” one of which is the filing of, or consenting to a bankruptcy of the SPE (hence the court’s reference to them as “blocking directors”).
The courts have long struggled with the question of whether particular orders entered by a bankruptcy court are final, and therefore appealable as a matter of right. It is generally recognized that a bankruptcy case is distinctly different from the usual civil case in that it is a framework within which a variety of disputes arise and are resolved. That distinction is recognized in 28 U.S.C. §158(d)(1), which provides that appeals as of right maybe taken not only from final judgments in cases but from “final judgments, orders, and decrees…in cases and proceedings….”
The Eleventh Circuit has made it clear: it will not back down from its decision in Crawford v. LVNV Funding, a decision it issued in 2014 and one which has been the subject of hot debate ever since.In Crawford, the Eleventh Circuit ruled that the filing of a proof of claim was an attempt to collect a debt and that the filing of a proof of claim on time barred debt violated the FDCPA. Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014).
A typical bond indenture provides that prior to the incurrence of an event of default, a trustee’s obligations are limited to those specifically set forth in the indenture. It is only following the occurrence of an event of default that the trustee’s duties of prudent conduct seem to ripen. This often leaves trustees and bondholders in a state of uncertainty over what actions, if any, a trustee may be obligated to take as the financial condition of an issuer worsens but has not yet crossed the default line. A recent case from the Eastern District of Pennsylvania, Becker v.
In most financing transactions, particularly project finance transactions, lenders seek to obtain security over all of a borrower’s assets. One crucial asset that sometimes does not get sufficient attention is insurance proceeds. Lenders are accustomed to ensuring access to the borrower’s insurance coverage through “additional insured” or “loss payee” provisions.
UNITED STATES SUPREME COURT Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015) Key Issue: Post-Stern v. Marshall, whether a Bankruptcy Court (as an Art. I court) has a proper delegation of authority from the District Court (as an Art. III court) to enter findings of fact and final orders on non-core issues upon the consent of the parties and, if so, whether consent must be express or may be implied? Holding: In a 5/1/3 opinion, relying heavily on Commodity Futures Trading Comm’n v. Schor, 478 U. S.
Imagine that you are an unsecured lender who has learned that a borrower has filed for bankruptcy and has little to no assets available to pay creditors. Is there any way to prevent your debt from being extinguished? This is a common question and often the answer unfortunately is no; however, if the debtor is an individual and the debt meets certain requirements established by the Bankruptcy Code, the court may declare the debt nondischargeable (in other words, the debt will remain with the debtor after the bankruptcy case is closed).