By some accounts, there is over $300 billion of commercial real estate debt set to mature over each of the next four years. As a result of a lack of demand, a lack of liquidity and lackluster valuations, a significant portion of this debt will go into default. In many cases, bankruptcies will ensue for both the projects and their owners.
On August 11, 2009, Judge Gropper of the United States Bankruptcy Court for the Southern District of New York denied motions to dismiss bankruptcy petitions of several special-purpose entity subsidiaries (SPEs) of General Growth Properties, Inc. (GGP) that were solvent, financially healthy companies structured to be remote from the bankruptcy risks of GGP and its other affiliates.
On August 11, 2009, in a long-anticipated ruling in the Chapter 11 case of General Growth Properties, Inc. (GGP), the court denied the motions to dismiss that had been brought on behalf of several of the property-level lenders.1 Few, if any, observers expected that the court would grant these motions and actually dismiss any of the individual SPE borrowers from the larger GGP bankruptcy, as doing so would have likely opened the door for the other secured lenders to seek dismissal.
Masuda Funai routinely represents creditors in bankruptcy proceedings in order to protect their contractual and legal interests and rights to payment. The following is a list of some recent larger U.S. bankruptcy filings in various industries. To the extent you are a creditor to any of these debtors, or other entities which may have filed for bankruptcy protection, you as a creditor are entitled to certain protections under the Bankruptcy Code.
AUTOMOTIVE
Cooper-Standards files Chapter 11.
The recent equitable subordination cases of In re Kreisler and Erenberg, 546 F.3d 863 (7th Cir. 2008) and Credit Suisse v. Official Committee of Unsecured Creditors (In re Yellowstone Mountain Club, LLC), Bankr. D. Mont., No. 09-00014 show a possible deviation in the courts regarding the proper application of the doctrine of equitable subordination. Accordingly, secured lenders should stay abreast of these different interpretations and possibly consider adjusting their lending practices.
On August 11, 2009, in a closely monitored dispute in the bankruptcy proceeding of General Growth Properties, Inc. (“GGP”), the Bankruptcy Court for the Southern District of New York rejected motions filed by several mortgage lenders to dismiss the bankruptcy filings of certain special purpose entity subsidiaries (SPEs) of GGP. In re General Growth Properties, Inc., et al., No. 09-11977, slip op. (Bankr. S.D.N.Y. Aug. 11, 2009).
On August 11, the Honorable Allan L. Gropper issued an opinion of the U.S. Bankruptcy Court for the Southern District of New York denying five motions to dismiss certain Chapter 11 bankruptcy cases of several property-specific special purpose subsidiaries (SPE Debtors), including a number of issuers of commercial mortgage-backed securities (CMBS), that are owned by mall operator General Growth Properties, Inc.
In Greene v. Mullarkey, Case No. 07-30561-HJB, Adversary Proceeding No. 08-03009, 2009 Bankr. LEXIS 2191 (Bankr. D. Mass. Aug. 13, 2009), Christine Greene, her brother Matthew Mullarkey, and his wife Nicole Mullarkey were entangled in what the Bankruptcy Court described as an intra-family feud. The feud related to ownership of a two-family residential property and "played out on or in the property's porch, attic, basement, garage, yard and in-ground pool," prompting the Court to pay its "respect and admiration for the work done by the Massachusetts Probate and Family Court."
During the bankruptcy cycle following the recession of 2001, numerous debtors – notably airlines such as US Airways and United Air Lines, Inc. – undertook “distress terminations” of their ERISA-qualified defined benefit pension plans, which are insured by the Pension Benefit Guaranty Corporation (PBGC). The PBGC found itself holding large general unsecured claims arising from significant underfunding of pension plans insured by the PBGC as a result of these terminations. Efforts by the PBGC to obtain either administrative priority or secured status for these claims invariably failed.1
On May 31, 2009, approximately 30 days after Chrysler Group LLC and affiliated debtors filed for bankruptcy relief, the United States Bankruptcy Court for the Southern District of New York authorized the sale of substantially all of Chrysler’s assets to “New Chrysler” – an entity formed by Chrysler and Fiat Automobiles SpA and initially majority-owned by Chrysler’s Voluntary Employees’ Beneficiary Association (VEBA) – free and clear of liens, claims and encumbrances under section 363 of the United States Bankruptcy Code (the Fiat Transaction).