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    Circuit court affirms bankruptcy court’s broad discretion to re-value collateral in determining creditor’s entitlement to post-petition interest
    2014-06-12

    The First Circuit held in a recent decision that bankruptcy courts have wide discretion to apply a flexible approach when valuing (and potentially re-valuing) collateral for purposes of determining whether a secured creditor is oversecured and therefore entitled to receive postpetition interest pursuant to section 506(b) of the Bankruptcy Code.   

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Cooley LLP, Bankruptcy, Debtor, Collateral (finance), Interest, Secured creditor, United States bankruptcy court, First Circuit
    Location:
    USA
    Firm:
    Cooley LLP
    Equity begets flexibility: valuing a secured creditor’s claim in bankruptcy and allocating post-petition interest
    2014-06-13

    The First Circuit Court of Appeals in In re SW Boston Hotel Venture, LLC, 2014 U.S. App. LEXIS 6768 (1st Cir. Apr. 11, 2014) recently ruled on a number of issues critical to valuing a secured claim in bankruptcy. Specifically, the court 1) endorsed the use of a “flexible approach” to value collateral under the circumstances of this case, 2) recognized that the date collateral should be valued is the lender’s burden to prove, and 3) confirmed that the pre-petition agreement’s default interest rate should generally be used to determine the post-petition interest rate.

    Filed under:
    USA, Insolvency & Restructuring, Leisure & Tourism, Litigation, Mintz, Bankruptcy, Collateral (finance), Interest, Secured creditor, First Circuit
    Authors:
    Eric R. Blythe
    Location:
    USA
    Firm:
    Mintz
    What happens to your collateral during a bankruptcy?
    2014-06-10

    Lenders and their attorneys are conditioned to believe that being over-secured is as good as life gets for a creditor.  Lenders want to secure repayment with collateral that is valuable and liquid, while their attorneys ensure that the security interest is properly perfected.  But, post-closing confidence in a job well done can quickly evaporate if the borrower files a bankruptcy case intending to sell the collateral. 

    Filed under:
    USA, Insolvency & Restructuring, Reed Smith LLP, Bankruptcy, Debtor, Collateral (finance), United States bankruptcy court
    Authors:
    Michael J. Venditto , Sarah K. Kam
    Location:
    USA
    Firm:
    Reed Smith LLP
    Bankruptcy authorization to transfer property to secured creditor
    2014-05-23

    A brewing hot topic in bankruptcy law is how a Debtor deals with property that is collateral for a secured creditor which is surrendered but has not yet been legally foreclosed or repossessed by the creditor. The Debtor’s interest is obvious: to avoid accruing post petition obligations, such as taxes, insurance, and homeowner’s association dues.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Rogers Townsend & Thomas PC, Bankruptcy, Debtor, Collateral (finance), Injunction, Secured creditor
    Authors:
    Neil D. Jonas
    Location:
    USA
    Firm:
    Rogers Townsend & Thomas PC
    Insurance settlement proceeds: held not subject to lien on payment intangibles, but might they have been proceeds of collateral?
    2014-05-14

    Sadly, sometimes tragedy strikes, as it did for the Montreal Maine & Atlantic Railway Ltd. in July, 2013, when one of its trains carrying crude oil derailed and exploded, resulting in 47 deaths, significant property and environmental damage, and the bankruptcy of the Railway. The Railway had a business interruption insurance policy, a settlement was reached with the insurer and the question of who was entitled to the multi-million-dollar settlement arose in the bankruptcy. In re Montreal Maine & Atlantic Ltd., 2014 Bankr. LEXIS 1628. 59 Bankr. Ct. Dec. 101 (Bankr. D.

    Filed under:
    USA, Maine, Insolvency & Restructuring, Insurance, Litigation, Dykema Gossett PLLC, Collateral (finance), Intangible asset
    Authors:
    Darrell W. Pierce
    Location:
    USA
    Firm:
    Dykema Gossett PLLC
    First Circuit adopts flexible approach to determine amount of post-petition interest to be paid to oversecured creditor
    2014-05-13

    Although Section 506(b) of the Bankruptcy Code explicitly allows payment of post-petition interest to holders of oversecured claims (i.e., where the value of the collateral exceeds the amount of the claim), the Bankruptcy Code does not describe how to calculate it. No bright line rules exist dictating how to determine oversecured status, the timing of the valuation, and the rate and type of interest to be paid to oversecured creditors. Computation of post-petition interest is a frequent topic of debate among the courts.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Collateral (finance), Interest, Personal property, United States bankruptcy court, Bankruptcy Appellate Panel, First Circuit
    Location:
    USA
    Firm:
    Hunton Andrews Kurth LLP
    The Fisker case and its impact on distressed M&A
    2014-04-15

    As is well known, the right to credit bid is the entitlement of a secured lender to bid the amount of its outstanding claims at the sale of its collateral. If the secured lender places the winning bid, no money is exchanged and the purchase price is offset against the existing claims. Credit bidding provides an important right to secured lenders in ensuring that their collateral is not sold for a depressed value. If a secured lender thinks its collateral is being sold too cheaply, it has the option of taking the collateral in exchange for some or all its claims.

    Filed under:
    USA, Corporate Finance/M&A, Insolvency & Restructuring, Litigation, Dechert LLP, Credit (finance), Collateral (finance), Secured loan, US Department of Energy
    Location:
    USA
    Firm:
    Dechert LLP
    Tenth Circuit affirms order allowing Debtor to use oversecured creditor's cash collateral to pay professionals
    2014-04-14

    The Tenth Circuit Court of Appeals recently considered the question of how much protection is required for a secured creditor to be adequately protected. Banker’s Bank of Kansas, N.A. v. Bluejay Properties, LLC (In re Bluejay Properties, LLC), Bankr. No. 12-22680 (10th Cir. Mar. 12, 2014)(unpublished).

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Debtor, Collateral (finance), Secured creditor, United States bankruptcy court, Tenth Circuit
    Location:
    USA
    Firm:
    Hunton Andrews Kurth LLP
    Lenders' risk: who really owns the collateral?
    2014-04-03

    Unlike real estate transactions where a lender can obtain title insurance, secured lenders are often relying upon the representations and warranties in their loan agreement and the borrower’s audited financial statements, if and when determining whether the collateral securing their loans is owned by the borrower or another pledgor.  After default, a lender may find itself in a precarious position whereby it is unable to foreclose on the collateral because it is not owned by its borrower and it does not have a pledge from the person that actually does own the property.  According

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Real Estate, Blank Rome LLP, Debtor, Collateral (finance), Title insurance
    Authors:
    Nikolaus J. Caro
    Location:
    USA
    Firm:
    Blank Rome LLP
    Reviewing letters of credit as security for leases in bankruptcy: do you receive what you expect?
    2014-03-27

    Under section 502(b)(6) of the United States Bankruptcy Code, a landlord's claim for damages under a lease rejected during the bankruptcy proceeding is capped at the greater of rent reserved under the lease for (a) one year; or (b) 15% or the remaining lease term, not to exceed three years. Under that calculation, a lease with a remaining term of 81 months or more would be entitled to claim greater than one year's rent.

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Reinhart Boerner Van Deuren SC, Bankruptcy, Letter of credit, Debtor, Collateral (finance), Landlord, Certificate of deposit, United States bankruptcy court
    Authors:
    Peter C. Blain
    Location:
    USA
    Firm:
    Reinhart Boerner Van Deuren SC

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