KEY POINTS

• A US Bankruptcy Court decision held that loans to a homebuilding company that subsequently filed for bankruptcy constituted a fraudulent transfer.

In today’s difficult economic environment, it is vital for trade vendors faced with customers’ bankruptcies to have optimal strategies for collecting invoices for past shipments and protecting prior payments from being clawed back by a bankruptcy estate as preferences. The need for such strategies will only increase as record amounts of corporate debt mature. Nelson D. Schwartz, Corporate Debt Coming Due May Squeeze Credit, N.Y.

federal court in New York has dismissed as moot an appeal filed by plaintiffs with products liability claims pending against General Motors Corp. (GM) before it was sold in bankruptcy. In re: Motors Liquidation Co., No. 09 Civ. 6818 (U.S. Dist. Ct., S.D.N.Y., decided April 13, 2010). The plaintiffs sought to overturn a bankruptcy court’s approval of the automaker’s sale “free and clear” of their existing products liability claims as well as any successor liability claims they may have against the “new” GM.

A recent Delaware bankruptcy court decision1 on the ability of “bankruptcy remote” single-purpose entities emphasizes the complicated nature of the bankruptcy process and the issues that need to be considered when using “bankruptcy remote” entities in funding structures. Given the prevalence of such entities, this is an important decision for all participants in the structured fi nance industry.

Credit bidding has become a really hot issue recently. For those of us who don't normally work on bankruptcy matters, the right to credit bid is an important right that secured lenders usually have in a bankruptcy proceeding. If you're the senior secured lender and you want to buy the company's assets in a bankruptcy sale, you can show up at the auction and, instead of bidding cash, you can place credit bids.

Many bankruptcy practitioners are familiar with the general tenet that an obligation secured only by a mortgage on the Debtor’s principal residence is immune from modification or avoidance by the Debtor. Sections 1123(b)(5) and 1322(b)(2) of the Bankruptcy Code protect residential mortgages from being “stripped-down” to the value of the subject real estate or subjecting the terms of the underlying obligation to modification.

On May 5, 2010, the United States Bankruptcy Court for the Southern District of New York issued a decision declaring that a party’s right to setoff in an ISDA Master Agreement is unenforceable in bankruptcy unless strict mutuality exists. (Decision and Order).

A bankruptcy court recently held that in order for a supplier of goods on credit to establish an administrative claim under Bankruptcy Code section 503(b)(9) in the bankruptcy case of its buyer, the supplier will need to show that its buyer "physically" received the goods within 20 days prior to the buyer's bankruptcy filing, regardless of when title to the goods passed. In Re Circuit City Stores, Inc., et al., Case No. 08-35653, No. 7149 (Bankr. E.D. VA April 8, 2010).

On May 5, 2009, Judge James Peck, the Bankruptcy Judge in the Lehman Brothers bankruptcy cases, held that the safe harbor provisions of the Bankruptcy Code do not override the mutuality requirements for setoff under section 553(a) of the Bankruptcy Code. As a consequence, the Bankruptcy Court prohibited Swedbank, a non-debtor counter party to a swap agreement, from setting off pre-petition claims against Lehman against funds collected for Lehman’s account postpetition. See In re Lehman Bros. Holdings Inc., Bankr. Case No. 08-13555 (JMP) (Bankr. S.D.N.Y.

Introduction