The well known travails of Fred Wilpon, the principal owner of the New York Mets, have all converged this past week. He, his partner Saul Katz and their families and affiliated enterprises (the “Wilpon/Katz Group”) lost several hundred million dollars when Bernard Madoff’s long running Ponzi scheme finally unraveled at the height of the financial crisis in 2008.

Agricole Corporate and Investment Bank New York Branch, f.k.a. Calyon New York Branch v. American Home Mortgage Holdings, Inc. (In re American Home Mortgage Holdings, Inc.), No. 09- 4295, 2011 WL 522945 (3d Cir. February 16, 2011)

CASE SNAPSHOT

In re LTAP US, LLLP, Case No. 10-14125 (KG) (Bankr. D. Del. Feb. 18, 2011)

CASE SNAPSHOT

In bankruptcy, cramdown is one of the biggest risks that a secured creditor faces. Through the power of cramdown, a debtor (or other plan proponent) can effectively restructure the claim of a secured creditor including to extend the maturity date, reduce the interest rate or alter the timing of repayment.

On October 31, the MF Global enterprise collapsed into bankruptcy and a number of related insolvency proceedings. Amid allegations of improper commingling of customer accounts and rumors of misbegotten proprietary Eurobond trades, two unregulated entities – MF Global Finance USA Inc. and MF Global Holdings Ltd. (the Unregulated Debtors) – filed voluntary bankruptcy petitions on October 31, 2011. Later the same day, the Securities Investor Protection Corporation filed a complaint in the U.S.

In re Zais Investment Grade Ltd. VII1 is the latest in a recent line of bankruptcy cases challenging bedrock assumptions regarding securitization special purpose entities (SPEs) and bankruptcy considerations in securitization transactions.2 Zais establishes precedent allowing a senior noteholder of a collateralized debt obligation (CDO) to place the CDO issuer in an involuntary chapter 11 bankruptcy in order to advance an asset management plan that would otherwise require supermajority approval of all noteholders (including all junior classes) under the related indenture.

In a case of first impression, the Third Circuit Court of Appeals in In re American Home Mortg. Holdings, Inc., 637 F.3d 246 (3d Cir. 2011), held that, for purposes of section 562 of the Bankruptcy Code, a discounted cash flow analysis was a “commercially reasonable determinant” of value for the liquidation of mortgage loans in a repurchase transaction.  

In 2013 yieldcos began their exponential climb as a financing vehicle for energy projects. Yieldcos were touted as a transformational vehicle for unlocking value in electric generation assets and reducing capital costs. In 2015 the yieldco market crashed down to earth, dropping 43 percent in average value. The tailspin has continued into 2016.

On the Friday before Labor Day, Judge James Peck of the United States Bankruptcy Court for the Southern District of New York shocked the distressed bond market by dismissing the preference and fraudulent transfer counts of Iridium LLC Creditors Committee’s $3.7 billion adversary proceeding against Motorola, Inc. Judge Peck found that the Committee had failed to prove that Iridium was insolvent at any time—even the day before bankruptcy. Iridium’s $1.6 billion in bonds dropped from the mid-20s to low single digits in days.

In a recent decision, the United States Bankruptcy Court for the Southern District of New York found that the Statutory Committee of Unsecured Creditors (the “Committee”) of Iridium, a failed Motorola spin-off venture, was unable to prove that Iridium was insolvent or had unreasonably small capital during the four-year period prior to commencement of its bankruptcy case.