Trillions of dollars of securities are issued on the strength of bankruptcy remoteness and special purpose entities (“SPVs”) intended to be bankruptcy remote. These transactions generally involve hundreds of millions of dollars and investors’ expectations that the SPVs will not be dragged into a potential bankruptcy filing of their non-SPV affiliates.

Bankruptcy

On March 5, 2012, new rules came into force for credit cooperatives in bankruptcy proceedings; the new rules feature:

The Bankruptcy Court for the District of Delaware recently held in In re Woodbridge Group of Companies, LLC that while Rule 3001 of the Bankruptcy Code provides a mechanism for transfers of claims, Rule 3001 is not a substantive provision allowing claims trading for notes with legally valid anti-assignment provisions.

Background

In its recent decision in Meruelo Maddux Properties, Inc.,¹ the Court of Appeals for the Ninth Circuit held that an entity that meets the definition of a “single real estate” debtor under the Bankruptcy Code may not escape the consequences of such designation simply because it is a subsidiary of a group of companies with integrated and intertwined relationships among them. The decision may provide powerful rights not only to lenders to such entities in general, but could significantly enhance the rights of creditors of real estate owning single purpose entities.

Recently, the United States Bankruptcy Court for the District of Connecticut held that while a bankrupt licensor may reject a trademark licensing agreement, the trademark licensee may elect to retain its rights to the debtor’s trademark. The Bankruptcy Court noted that its ruling disagrees with a contrary decision issued by the First Circuit only a few months earlier.

Executory Contracts and the IP Exception

The Delaware Bankruptcy Court has confirmed that in multiple-debtor chapter 11 cases, the cramdown rules set forth in section 1129(a)(10) of the Bankruptcy Code must be applied on a per debtor basis as opposed to a per plan basis. See In re JER/Jameson Mezz Borrower II, LLC, No. 11-13338 (MFW), 2011 WL 6749058 (Bankr. D. Del. Dec. 22, 2011) (“Jameson”) and In re Tribune Co., No. 08-13141 (KJC), 2011 WL 5142420 (Bankr. D. Del. Oct. 31, 2011) (“Tribune”).

The U.S. Bankruptcy Court for the Southern District of Florida recently held that a bankruptcy debtor’s Chapter 11 proceeding should not be dismissed as filed in bad faith to delay or avoid foreclosure, but could not confirm the debtor’s proposed plan to lease its commercial property asset to a business that generates income from medical marijuana.

The U.S. District Court for the Eastern District of New York recently held that a confirmable Chapter 13 plan cannot both “vest” title to real property and “surrender” that property to a secured lender, and that the secured lender may refuse to accept the vesting in satisfaction of its claim.

Thus, the Court held that a debtor may not force the transfer of title in collateral to a secured creditor in satisfaction of the secured creditor’s claim, without the consent of the secured creditor.

The U.S. Court of Appeals for the Sixth Circuit recently concluded that Michigan’s assignment of rents statute sufficiently deprived the assignor of the ownership of the rents such that the rents could not be included in the assignor’s bankruptcy estate.

The U.S. Bankruptcy Court for the Southern District of Florida recently denied a creditor’s motion to compel the debtor to surrender mortgaged property and also denied the debtor’s motion to stay the case, holding that a chapter 7 debtor who indicates surrender of real property in his statement of intention is not obligated to surrender that property to the lienholder, whether or not the property is administered by the chapter 7 trustee.