Recent Developments
Recent Developments
The financial crisis following the collapse of Lehman Brothers and the subsequent sluggish European economy have thrown a spotlight on European Union (“EU”) state aid rules and, in particular, the circumstances under which governments can and will intervene to support a firm in difficulty. This article looks beyond the banking sector and provides an overview of the rules governing state aid to all other firms in difficulty.
State Aid—The Basics
Recent Developments
Recent Developments
Recent Developments
On May 15, 2012, the United States Court of Appeals for the Eleventh Circuit issued a decision[1] in the much-watched litigation involving the residential construction company, TOUSA, Inc. ("TOUSA"). The decision reversed the prior decision of the District Court, [2] reinstating the ruling of the Bankruptcy Court.[3]
Background
Indentures often contain make-whole premiums payable upon early redemption of the debt, and term B loan agreements often include "soft call" protection in the form of prepayment premiums during the early life of the loan. If the debt issuer becomes subject to a chapter 11 proceeding after the debt issuance, the question then arises as to how this payment obligation is to be treated: Does the make-whole or prepayment premium constitute unmatured interest due as a result of the debt acceleration, which would be disallowed, or is it liquidated damages?
In a recent decision, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware greatly limited debtors’ ability to release parties under a chapter 11 plan in the bankruptcy cases of Washington Mutual, Inc. (“WMI”), and its debtor affiliates (together with WMI, the “Debtors”). In In re Washington Mutual, Inc., Judge Walrath approved a global settlement agreement (the “Global Settlement”) reached by the Federal Deposit Insurance Corporation (“FDIC”) as receiver for Washington Mutual Bank (“WaMu Bank”); JPMorgan Chase Bank, N.A.
What should have been the best economic news of 2010 was largely obscured by the deluge of bad news dominating world headlines. The latter included tidings of chronically high unemployment; a continuing malaise in the U.S. housing market; wars in Iraq and Afghanistan; debt crises precipitating the implementation of austerity measures in Britain, Portugal, Italy, Greece, Spain, and Ireland (to name but a few), as well as countless state and local governments in the U.S.; a sharp escalation of food prices worldwide; a deepening U.S.