Finds Bankruptcy Court to be Proper Forum for Claim Objection Despite Forum Selection Clauses in Investor Agreements
The Southern District of New York recently reiterated the critical difference between creditor claims and equity interests in the bankruptcy context. In a recent opinion arising out of the Arcapita Bank bankruptcy case, the Court was faced with an objection to a proof of claim filed by an investor, Captain Hani Alsohaibi, who characterized his right to recovery against the debtors as being based on a “corporate investment.”
Once again, those of us in the commercial finance world are reminded of the age-old adage caveat emptor. This time the warning is directed at hedge funds and other investors with a penchant for purchasing distressed debt from bank syndicates.
A recent decision from an Oregon bankruptcy court provides a cautionary tale for lenders attempting to “bankruptcy proof” their borrowers.
Both the Loan Syndications and Trading Association, Inc. (the “LSTA”) and the Loan Market Association (the “LMA”) publish the forms of documentation used by sophisticated financial entities involved in the trading of large corporate syndicated loans in the secondary trading market. The LSTA based in New York was founded in 1995. The LMA based in London was formed in 1996. Both the LSTA and LMA share the common aim of assisting in developing best practices and standard documentation to facilitate the growth and liquidity of efficient trading of syndicated corporate loans.
On April 28, in the wake of Mt. Gox’s Japanese rehabilitation proceeding having been converted to a liquidation proceeding, a proposal for selling and restarting the Mt. Gox exchange was submitted in the pending class action litigation in Illinois. The proposal was accepted by plaintiffs in the class action litigation before a class had even been certified.
The U.S. District Court for the Western District of Washington recently construed the terms of a customary loan agreement to preclude certain hedge funds viewed as “acquir[ing] distressed debt and engag[ing] in predatory lending” from voting on a debtor’s plan of reorganization. Meridian Sunrise Village, LLC v. NB Distressed Debt Investment Fund Ltd. (In re Meridian Sunrise Village, LLC), 2014 WL 909219 (W.D. Wash. Mar. 7, 2014).
The US District Court for the Western District of Washington (the "District Court") recently affirmed a bankruptcy court decision that prohibited a transferee of a secured lender's interest in a loan from voting on a debtor's plan of reorganization on the grounds that such transferee, a distressed debt investor, was not an Eligible Assignee under the applicable loan agreement.Meridian Sunrise Village, LLC v. NB Distressed Debt Investment Fund Ltd., et al., No. 13-5503 (W.D. Wash. March 6, 2014) (In re Meridian Sunrise Village, LLC).
Background
In this week’s Alabama Law Weekly Update, we consider two recent decisions concerning potential lender/loan servicer defenses to suit in federal court.
Marrisette v. Green Tree-Al, LLC, 2014 WL 1653259 (S.D. Ala. Apr. 24, 2014) (dismissing challenge to state court foreclosure judgment underRooker-Feldman doctrine).
- Landlord/Tenant: lessor did not breach commercial lease by failing to complete construction by date certain where lease did not provide date by which property was to be ready for occupation – 326-330 St. Armands Circle, LLC v. GEE22, LLC, No. 2D12-2395 (Fla.
The United States Court of Appeals for the Tenth Circuit recently ruled that a chapter 7 trustee may not avoid a post-petition transfer under either § 549 or § 362, where recovery of the transfer would not benefit the estate, even though the elements for avoidance under those sections are established by the evidence.