On November 15, 2013, Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York held that original issue discount (“OID”) created in a prepetition “fair market value” debt exchange is not disallowable in bankruptcy.1 This noteworthy ruling provides important and long-awaited guidance for the investing community on the question left open by the Second Circuit’s 1992 ruling in LTV Corp. v. Valley Fidelity Bank & Trust Co. (In re Chateaugay Corp.).2
BACKGROUND
In a recent advisory, we reported on an apparently favorable decision to secured creditors from the Fifth Circuit Court of Appeals that held that a secured creditor’s claim survives bankruptcy where the secured creditor received notice of the case and was found to have not actively participated in it.
This week, the U.S. House of Representatives passed the Asbestos Bankruptcy Trust Transparency Bill. The legislation would, if enacted into law, require bankruptcy trusts to file quarterly reports with bankruptcy courts disclosing the names, asbestos-related exposure history, and basis of the victim’s claims for each claimant. These reports would be made available on the courts’ public dockets. Confidential medical records or social security information would not be disclosed.
Asbestos defendants are one step closer to greater transparency regarding the often illusive bankruptcy trust claims and payments. On Wednesday, November 13, 2013, the U.S. House of Representatives passed H.R. 982, the Furthering Asbestos Claim Transparency (FACT) Act by a 221-199 vote. FACT would amend the U.S. Bankruptcy Code to require trusts formed under a bankruptcy reorganization plan and charged with paying claims connected to asbestos exposure to disclose all demands made by claimants and the basis of any payments made to claimants.
Cash Is King. An army may march on its stomach, but for companies, it's liquidity that keeps the business going. For many companies, typical sources of liquidity, beyond cash flow from sales or other revenue, are (1) financing from banks or other secured lenders, (2) credit from vendors that can reduce immediate liquidity needs, and (3) when needed, loans from owners, investors, or other insiders.
What is the legal, political, and financial fallout of Detroit’s highly publicized Chapter 9 bankruptcy? That was the central question in a Nov. 7 panel discussion in St. Louis hosted by Thompson Coburn. Below are the issues discussed by Thompson Coburn attorneys, and leaders from St. Louis’ business and financial communities.
Although its Israel-based electric car company had already filed bankruptcy in its home country, Better Place, Inc., the U.S. parent of the foreign debtor, filed for protection under chapter 15 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware earlier this summer, in the hopes of obtaining protection of its U.S. assets while the foreign bankruptcy was being administered.
Last year, a U.S. bankruptcy court held that a bankruptcy trustee could settle a Financial Industry Regulatory Authority (“FINRA”) suit against a broker-dealer by its former employee seeking damages and expungement of alleged false and defamatory FINRA Form U-5 termination disclosure language, over the objection of the former employee-debtor.2 Once a bankruptcy case is filed by a former employee, the claims become property of the bankruptcy estate.
The U.S. Bankruptcy Appellate Panel for the Eighth Circuit affirmed a lower court ruling that the funds in a debtor’s Health Savings Account (HSA) are not excluded from the bankruptcy estate and are not exempt. On the date of his bankruptcy filing, the debtor listed the funds in his HSA as an asset that should be excluded from the bankruptcy estate. He specifically asserted that under 11 U.S.C.
In a decision that comes as welcome news to some employers, the Ninth Circuit Court of Appeals recently ruled that an employer that incurred withdrawal liability to a multiemployer pension plan had not become a plan fiduciary by failing to pay the withdrawal liability, and could discharge that liability in bankruptcy.