On January 14, 2014, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York in Weisfelner v. Fund 1. (In re Lyondell Chemical Co.), Adv. Proc. No. 10-4609 (REG), 2014 WL 118036 (Bankr. S.D.N.Y. Jan.

On Nov. 28, 2012, the U.S. Court of Appeals for the Fifth Circuit in In re Vitro S.A.B. de C.V. issued a groundbreaking decision under Chapter 15 of the Bankruptcy Code, which provides the mechanics for U.S. bankruptcy courts to deal with cross-border insolvency proceedings. Although deference to judgments of foreign courts is the norm under Chapter 15, in this instance the Fifth Circuit refused to enforce a court-approved Mexican plan of reorganization on the ground that it contained non-consensual non-debtor releases of noteholders’ claims against the debtor’s non-debtor subsidiaries.

On August 2, 2012, the United States Court of Appeals for the Fifth Circuit held that a requirements contract for electricity is a forward contract for purposes of section 546(e) of the Bankruptcy Code and, therefore, settlement payments made under the contract are exempt from avoidance as preferences. Claude Lightfoot v.

We recently commented here on the standard for reviewing key employee incentive plans (KEIPs) and the approval of the KEIP in the Velo Holdings chapter 11 cases pending in the Southern District of New York.  On July 24, Bankruptcy Judge Carla Craig of the Eastern District of New York approved a KERP (a key employee retention plan) in the Global Aviation bankruptcy cases aimed at retaining five employees deemed critical to the conso

On May 14, 2012, the United States Court of Appeals for the Third Circuit upheld a ruling by the Bankruptcy Court for the District of New Jersey that the fair market value of a creditor’s collateral as of the plan’s confirmation date is the proper method of valuing a secured creditor’s claim pursuant to section 506(a) of the Bankruptcy Code.  The Third Circuit also adopted a “burden-shifting framework,” finding that a secured creditor will bear the ultimate burden of proving the extent to which its claims are secured pursuant to section 506(a).

Background

On February 16, 2011, the United States Court of Appeals for the Third Circuit ruled that a discounted cash flow analysis constituted “a commercially reasonable determinant[] of value” for purposes of section 562(a) of the United States Bankruptcy Code.1 In so doing, the court upheld the United States Bankruptcy Court for the District of Delaware decision sustaining the objection of American Home Mortgage Holdings, Inc.

Introduction

Earlier this year, Courts from the Bankruptcy Courts for the Southern District of New York to the United States Supreme Court issued a number of rulings approving the asset sales by Chrysler and General Motors. Although popular and industry media have been replete with stories regarding the facts of these cases, this article provides an in-depth analysis of the Courts’ rulings on several key issues of interest to debtors and creditors in future bankruptcies.

Summary of Key Rulings

Following several weeks of speculation about how pending cash collateral, cash management, and debtor-in-possession financing motions might affect basic principles of structured finance, the bankruptcy court deferred a final ruling on the motions and extended the interim cash collateral order. In so doing, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York suggested that CMBS lenders organize themselves so that common issues can be identified and resolution expedited.

In In re Arch Wireless,1 the United States Court of Appeals for the First Circuit held that a creditor who asserted claims against the debtor in various correspondence between the parties was a “known” claimant of the debtor’s estate entitled to direct notice of the bar date by which it must file a proof of claim. The Court of Appeals concluded that publication notice was insufficient to inform the creditor of the bar date or of the terms of the confirmed plan, even though the creditor was generally aware of the debtor’s bankruptcy filing.