Can another vain attempt to mitigate a $1.5 billion mistake provide the occasion for a thorough review of the doctrine of earmarking? It did for Southern District Bankruptcy Judge Martin Glenn in the long tail on the General Motors bankruptcy case.
In a recent post, here, we wrote about a court decision that discussed deadlines for proofs of claim in a case involving a Ponzi scheme. Then, last week, another court issued a decision concerning late amendments to proofs of claim. In re James F.
Fraudulent transfer law allows creditors and bankruptcy trustees, under certain circumstances, to sue transferees to recover funds received where a debtor’s transfers to the transferees actually or constructively defrauded its creditors. Under both the Uniform Fraudulent Transfer Act adopted by most states and the fraudulent transfer action created by federal bankruptcy law, a transferee of an alleged fraudulent transfer may assert a defense from such liability by establishing that it received the transfer in good faith and for reasonably equivalent value. See 11 U.S.C.
The City Once Dubbed “New England's Rising Star” Has Fallen on Hard Times
On Tuesday, two leading credit-rating agencies again downgraded the city of Hartford: Moody’s Investors Service now rates the struggling city at Caa3, while S&P Global Ratings has lowered its rating to CC. They attribute the junk classification to the increasing likelihood of a default by Hartford on its debt service obligations to bondholders.
Section 316(b) of the Trust Indenture Act, which prohibits action that would deprive individual bondholders of the right to receive principal and interest, has taken center stage of late with rulings on the scope of its applicability. But another provision of Section 316 of the TIA drives in the opposite direction, and is equally fundamental to the architecture of indenture debt as commonly issued in this country. Section 316(a)(1) prescribes the default rule that a majority of bondholders have the power to direct the remedial actions of the trustee.
Overview
In Hilal K. Homaidan v. Sallie Mae, Inc., Navient Solutions, LLC, Navient Credit Finance Corporation, Case No. 20-1981 (2d Cir. 2021), the Second Circuit affirmed the opinion of the U.S. Bankruptcy Court for the Eastern District of New York, which held that private student loans are not excepted from discharge under Section 523(a)(8)(A)(ii) of the Bankruptcy Code, which excepts from discharge “an obligation to repay funds received as an educational benefit, scholarship, or stipend.” 11 U.S.C. § 523(a)(8)(A)(ii).
Background
Borrowers, agent banks, syndicate members and secondary market purchasers incur, syndicate, sell and buy bank debt on the assumption that bank debt is not a “security.” However, a June 30, 2016, opinion in the General Motors preference litigation1shows that such an assumption may no longer be valid, at least under the Bankruptcy Code.
On March 27, the president signed into law Phase 3 of the federal stimulus program, called the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. Title I of the act, titled the Keeping American Workers Paid and Employed Act (KAWPEA), directs, among other amounts, $349 billion to small businesses as part of an expansion of the U.S. Small Business Administration’s (SBA) Section 7(a) loan program under a new paycheck protection loan program (PPP) as well as $10 billion through an expansion to the SBA’s Section 7(b) economic injury disaster loan (EIDL) program.
Virtually all public indentures contain provisions allowing the issuer to cure ambiguities and make other technical changes to the debt documentation without debtholder consent. When the purported ambiguities have substantive consequences, however, issuers may not be able to get away with an amendment that lacks debtholder approval. InGSO Coastline Credit Partners L.P. v. Global A&T Electronics Ltd. (NY App. Div. 1st Dept. May 3, 2016), a New York lower court bought into a “cure of ambiguity” argument and on that basis granted a motion to dismiss.