In a decision entirely consistent with its ruling in the “Perpetual” adversary proceeding last year, on May 12, 2011, the United States Bankruptcy Court in the Lehman chapter 11 cases endorsed a strict interpretation of certain Bankruptcy Code provisions to the benefit of Lehman, which will result in Lehman having more leverage in its negotiations with derivatives counterparties. See Lehman Brothers Special Financing Inc. v. Ballyrock ABS CDO 2007-1 Limited and Wells Fargo Bank, N.A., Trustee, Adv. Proc. 09-01032 (Bankr. S.D.N.Y. May 12, 2011).
It is important that directors and officers insurance provide the necessary protections. In times of financial turmoil, it is especially advisable for companies to review their D&O insurance coverage to ensure that their directors and officers are adequately protected. Although not exhaustive, set forth below are some of the critical issues to be considered in the context of D&O insurance policies.
The Extent of Coverage
The well known travails of Fred Wilpon, the principal owner of the New York Mets, have all converged this past week. He, his partner Saul Katz and their families and affiliated enterprises (the “Wilpon/Katz Group”) lost several hundred million dollars when Bernard Madoff’s long running Ponzi scheme finally unraveled at the height of the financial crisis in 2008.
The enduring impact of the Great Recession on businesses, individuals, municipalities, and even sovereign nations has figured prominently in world headlines during the last three years. Comparatively absent from the lede, however, has been the plight of charitable and other nonprofit entities that depend in large part on the largesse of donors who themselves have been less able or less willing to provide eleemosynary institutions with badly needed sources of capital in the current economic climate.
Over the past five years, courts have issued rulings of potential concern to buyers of distressed debt. Courts have addressed, among other things, “loan to own” acquisition strategies resulting in vote designation; equitable subordination, disallowance, and other lender liability exposure based upon the claim seller’s misconduct; disclosure requirements for ad hoc committees of debtholders; the adequacy of standardized claims-trading agreements; and claim-filing requirements in the era of computerized records.
Section 108 of the Bankruptcy Code grants a two-year extension of time for a trustee in bankruptcy (or a debtor in possession) to bring law suits, provided that the applicable period to sue didn’t expire before the petition date. It also gives a short extension to the trustee for filing pleadings, curing defaults, and performing other acts on behalf of the debtor. These provisions afford a trustee and debtor in possession valuable time to discover and evaluate potential causes of action and to perform other acts to preserve the debtor’s rights.
Introduction
Last week, Visteon Corporation began filing preference complaints against hundreds of current and former creditors of the company. This post will look briefly at the nature of Visteon’s business, why the company filed for bankruptcy, as well some of the likely “next steps” now that the company has filed its preference complaints.
The Bankruptcy Filing
Introduction
Last month, the United States Court of Appeals in two separate circuits held that liability insurers have standing as parties in interest to appear and be heard in an insured's Chapter 11 case where the insurer might be liable to indemnify the claims of the insured's creditors.
On June 8, 2011, Governor Andrew M. Cuomo announced the appointment of Assemblyman Jonathan Bing to serve as Special Deputy Superintendent of the New York Liquidation Bureau, an agency tasked with protecting policyholders and creditors of insurance companies that have gone bankrupt. Bing steps in as the successor to Dennis J. Hayes, who was appointed to the position in September 2009. Bing’s appointment ends his fifth term in the New York State Assembly, where he has represented the 73rd District since November 2002.