In difficult economic times, debtors’ attorneys closely review credit reports looking for potential legal claims against creditors. Long after a debtor has been discharged from bankruptcy, creditors can find themselves defending claims of improper credit reporting. A recent case from the Eastern District of North Carolina illustrates the trouble facing creditors who furnish incorrect reports of discharged debt. See In re Adams (Bankr. E.D.N.C. 2010).

In an October 19, 2010 opinion arising out of the Scotia Pacific bankruptcy cases, the Fifth Circuit ruled that reorganized Scotia and its affiliate Pacific Lumber Company were obliged – nearly 2½ years after Scotia’s reorganization plan was consummated – to pay Scotia’s former secured lenders approximately $30 million on account of a mistake made by the bankruptcy judge in calculating the amount owed to the secured lenders for the use of their collateral during the bankruptcy cases.

On November 10th, the International Swaps and Derivatives Association announced that its Americas Credit Derivatives Determinations Committee resolved that a bankruptcy credit event has occurred in respect of Ambac Financial Group, Inc. An auction will be held for Ambac Financial Group for which ISDA will publish the auction terms. ISDA Press Release.  

Last Thursday, a Delaware Bankruptcy Court disqualified two law firms from representing an Official Committee of Unsecured Creditors based on their conduct in soliciting proxies from creditors who were not existing firm clients. In re Universal Building Products, No. 10-12453 (Bankr. D. Del. Nov. 4, 2010), involved an extreme fact pattern but it may nonetheless have a substantial effect not only on the selection of professionals for future Committees but also on the appointment of creditors to Committees, at least in Delaware.

When selling assets under section 363 of the Bankruptcy Code or pursuant to a plan, debtors typically conduct auctions, selecting the highest or best bidder as the purchaser. Section 363 auctions are intended to enable debtors to maximize the value of their assets, while ensuring "finality and integrity in the process . . . ."1

Section 365(n) of the Bankruptcy Code provides offers substantial protection for licensees when a licensor files for bankruptcy. In a bankruptcy proceeding, a licensor/executor has the option of either accepting and continuing an intellectual property license agreement, or rejecting the license. If an intellectual property license is rejected, a licensee is afforded beneficial options under the Code. The Bankruptcy Code defines “intellectual property” in Section 101 (35A) as a-

In the jargon of the secondary bank loan market, loans beneficially owned by participation may be "elevated" to direct assignments once requisite administrative agent and/or borrower consent is obtained. Such "elevations" customarily have been viewed as straightforward transactions -- when completed, the participant simply stands in the shoes of the grantor and becomes the lender of record of the loan on the books of the administrative agent.

The current economic climate has led to an increasing number of bankruptcy filings. This article summarizes some important strategic considerations and initial steps that can be taken upon learning of such a filing by your customer or vendor in order to help minimize risks while maximizing your potential return in the bankruptcy.

Prompt Action and Verification of Bankruptcy

Introduction

Manufacturers, distributors and other merchants of goods who sell their products on credit terms routinely accept a high level of risk of defaulted payment from their customers. In good times, credit-related losses are relatively predictable as a percentage of sales and can be offset by variations in pricing and volume across a seller’s sales transactions. Unfortunately, we are far removed from the good times. The prolonged economic slump has resulted in increased payment defaults and a 150 percent rise in business bankruptcies since the summer of 2007.