California has seen a string of three Chapter 9 filings this year and faces a long line of distressed municipalities.  Given this backdrop, the California Public Employees’ Retirement System (“CalPERS”) figures to play a prominent role in the resolution of many of these situations (in or out of bankruptcy).  Thus, the bond‑buying public will scrutinize closely any steps that CalPERS takes to protect its claims in the Bankruptcy Court.

On August 31, 2012, the United States Court of Appeals for the Second Circuit published its first decision expressly adopting an abuse of discretion standard for reviewing equitable mootness determinations by district courts. In In re Charter Communications, Inc., the Second Circuit followed the Third and Tenth Circuits, while also reaffirming the Second Circuit’s rebuttable presumption of equitable mootness upon substantial consummation of a debtor’s plan.

On May 25, 2012, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York approved a motion to compel the production of certain documents under section 1521 of the Bankruptcy Code.  In his decision, Judge Gropper also suggested that the broad discovery provisions of Bankruptcy Rule 2004 may apply to chapter 15 discovery requests, but stopped short of making such a ruling.  In re Millennium Global Emerging Credit Master Fund Limited, Case No. 11-13171 (ALG), (Bankr. S.D.N.Y May 25, 2012).

On November 23, 2011, the Bankruptcy Court for the Middle District of Pennsylvania dismissed Harrisburg, Pennsylvania’s Chapter 9 bankruptcy petition because, shortly before the filing, the state legislature expressly prohibited Harrisburg from seeking relief under Chapter 9.

On September 21, 2010, the United States District Court for the Southern District of New York granted BNY Corporate Trustee Services Limited leave to appeal a decision of the Bankruptcy Court in the Lehman Brothers bankruptcy case.1 The Bankruptcy Court held that a key provision of certain transaction documents constituted an unenforceable ipso facto clause. The District Court granted leave to appeal the Bankruptcy Court decision even though it was interlocutory.

Despite the prevalence of first-lien/secondlien structures in the loan market over the course of the recently-ended leveraged transaction cycle, fully-litigated cases interpreting the provisions of first-lien/second-lien intercreditor agreements remain something of a rarity. As a result, cases providing guidance on the extent to which customary waivers included in such intercreditor agreements would be enforced are always welcomed by finance practitioners. It comes as no surprise then, that the decision of Judge Peck of the U.S.

Introduction

The High Court1 in England has confirmed the validity under English law of contractual provisions common in structured finance transactions which subordinate payments to a swap counterparty in circumstances where the swap counterparty has defaulted on its obligations under the terms of the relevant swap agreement.

The Judgment

Parties

This week, Representative John Conyers introduced the “Helping Families Save Their Homes Act of 2009” (H.R. 1106) (the “Act”), which has been circulated in advance of a vote by the House of Representatives anticipated as early as today. Additional amendments have been offered to the bill, but it is unclear which, if any, will be incorporated into the final text. It is not expected that the Senate will consider its version of the bill until mid-March.

In COR Route 5 Co. v. Penn Traffic Co.1 (In re Penn Traffic Co), the United States Court of Appeals for the Second Circuit held that a non-debtor party to an executory contract may not, by fulfilling its contractual obligations post-petition, deprive the debtor of its ability to reject an executory contract.

In a recent adversary proceeding brought by a chapter 7 trustee to recharacterize a creditor’s claim from a debt claim to an equity interest, the United States Bankruptcy Court for the District of South Carolina denied a creditor’s motion to dismiss for failure to state a claim where the trustee had alleged that the lender assumed control over the corporation after the date of the credit agreement.