LITIGATION, ARBITRATION, INVESTIGATIONS AND FINANCIAL CRIME

QUARTERLY UPDATE

Welcome to the latest issue of our Quarterly Update, in which we look at some of the recent highlights and developments in banking and finance disputes and financial crime.

IN THIS ISSUE WE LOOK AT:

A salutary lesson: if you do not intend to be bound by a letter of commitment, say so clearly

In a recent opinion issued in the case In re Philadelphia Newspapers, LLC, et al., Case No. 09-4266 (3rd Cir. 2010), the United States Court of Appeals for the Third Circuit held that secured lenders do not have an absolute right to credit bid on all asset sales under section 1129(b)(2)(A) of the Bankruptcy Code. This opinion could have a profound effect on the manner in which debtors seek approval of a sale pursuant to a plan of reorganization and, potentially, a chilling effect on the willingness of lenders to extend credit in the future.

On Friday, OTS closed Key West Bank, headquartered in Key West, Florida, and the FDIC was named receiver.

On Friday, the Arizona Department of Financial Institutions closed Desert Hills Bank, headquartered in Phoenix, Arizona, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with New York Community Bancorp, headquartered in Westbury, NY to assume all of the deposits of Desert Hills Bank.

On March 22, 2010, the Third Circuit released its long-awaited ruling in the Philadelphia Newspapers case regarding the applicability of credit bidding.

On March 24th, the Sixth Circuit joined seven other federal appellate courts in holding that negative equity is included in a creditor's purchase money security interest and is not subject to a bankruptcy court's cramdown authority under Chapter 13 of the Bankruptcy Code. Nuvell Credit Corp. v. Westfall.  

The recent case of In re Tousa, Inc. (Official Committee of Unsecured Creditors of Tousa, Inc., v. Citicorp North America, Inc., Adv. Pro. No. 08-1435-JKO (Bankr. S.D. Fla., October 13, 2009)) has attracted considerable attention – and dread – in the banking and legal communities.

On Friday, the OCC closed Unity National Bank, headquartered in Cartersville, Georgia, and the FDIC was named receiver.

On Friday, the Georgia Department of Banking and Finance closed McIntosh Commercial Bank, headquartered in Carrollton, Georgia, and the FDIC was named receiver.

On April 1st, the FDIC closed on a sale of an equity interest in a limited liability company (LLC) created to hold certain assets transferred from 19 failed bank receiverships. The purchaser of the interest in the Multibank Structured Transaction Single Family Residential 2010-1 is Roundpoint Mortgage Servicing Corporation. The sale was conducted through a competitive auction held on February 24, 2010. Nine different qualified groups submitted bids to purchase either a 50% leveraged ownership interest or a 20% unleveraged ownership interest in the newly formed LLC.