On January 6, 2012, Judge Thomas Bennett of the United States Bankruptcy Court for the Northern District of Alabama (the "Court") issued a 57-page opinion in the chapter 9 bankruptcy case of Jefferson County, Alabama (the "County") on several critical jurisdictionally related issues raised by the state court appointed receiver of the County's sewer system, the indenture trustee for the special revenue warrants for the sewer system (the "Indenture Trustee") and certain other joining creditors.
The Bottom Line:
In a significant expansion of the potential risk for distressed claims traders, the Delaware bankruptcy court has recently ruled1 that traders who engage in insider trading may have their claims subordinated to equity, and that traders who amass claims sufficient to block a plan of reorganization owe fiduciary duties to all other creditors and shareholders during plan negotiations.
In the last several months, there have been some significant legal developments that could impact acquisition finance. This article will survey some of the more notable ones.
In a case with implications for buyers of assets in a bankruptcy court-ordered sale under section 363(b) of the Bankruptcy Code, the Bankruptcy Court for the Southern District of New York recently issued a decision limiting the ability of manufacturers that are debtors in a bankruptcy case to sell assets free and clear of future liabilities.
Senior lenders often insist that subordinate lenders assign to them, under subordination and intercreditor agreements, their right to vote on a plan of reorganization proposed for the borrower should it end up in chapter 11. The intention of such assignments is to prevent junior lenders from facilitating or preventing confirmation of bankruptcy plans contrary to the desires of senior lenders. Lenders should be aware, however, that courts disagree whether such plan voting rights assignments are enforceable. In fact, the United States Bankruptcy Court for the District of Mas
IN RE: RESOURCE TECHNOLOGY CORP. (OCTOBER 31, 2011)
Can a U.S. patent licensee whose license has been rejected by a licensor under foreign law in a foreign bankruptcy rely on the protections of § 365(n) of the U.S. Bankruptcy Code? On October 28, 2011, the United States Bankruptcy Court for the Eastern District of Virginia issued an opinion addressing this in the Chapter 15 case of Qimonda AG (“Qimonda”).5 The bankruptcy court held that the application of § 365(n) to executory licenses to U.S. patents was required to sufficiently protect the interests of U.S.
Investors have agreed to settle securities claims against more than 30 underwriters who underwrote in excess of $31 billion in debt and equity offerings for Lehman Brothers, the collapse of which was a key chapter in the global financial crisis. The plaintiffs in these actions alleged that the underwriters, which included Bank of America and units of Bank of New York Mellon, Citigroup and Wells Fargo, assisted Lehman Brothers in making misstatements about its finances prior to its implosion and eventual bankruptcy filing. The proposed settlement still requires district court app
One of the concerns for creditors dealing with a distressed company is the possibility of bankruptcy, and the risk that payments to the creditor on account of previously incurred debt will be avoided as a "preference" in the debtor's bankruptcy proceeding. Generally speaking, a "preference" is a transfer of the debtor's property on the eve of bankruptcy to satisfy an old debt. The Bankruptcy Code allows a bankrupt company to reach back 90 days and avoid any transfers made to creditors during that time, subject to certain defenses.
Unless you are a specialized lender who makes loans to debtors-in-possession, you do not make a loan with the expectation that your borrower is going to file bankruptcy. Although the number of bankruptcy filings in California and nationally is trending slightly lower, filings remain at higher than normal levels. Nearly every lender has received the notice of a bankruptcy filing that was unexpected and then faced decisions as to what to do next.