Since the financial crisis, sales under Section 363 of the Bankruptcy Code have provided an increasingly popular way for secured creditors of distressed businesses to recover their loans. However, despite the advantages of Section 363 sales, the significant expense and time required to conduct a Bankruptcy sale has caused secured creditors to pursue less comprehensive solutions. One alternative for recouping value from a troubled loan is an Article 9 foreclosure sale under the Uniform Commercial Code (UCC).
The Bottom Line:
In re Investors Lending Group, LLC, 489 B.R. 307 (Bankr. S.D. Ga. 2013)
CASE SNAPSHOT
The secured lender was judicially estopped from objecting to the valuation of parcels of land that the debtor proposed to surrender to the secured creditor through its plan of reorganization because the debtor used the valuations provided by the secured lender’s appraiser.
FACTUAL BACKGROUND
In re WL Holmes LLC, ___ Fed. Appx. ___, 2013 WL 4019397 (3rd Cir 2013)
CASE SNAPSHOT
In an opinion that will have a significant impact on the viability of debt for debt exchanges and out of court restructurings, Judge Martin Glenn of the U.S.
The US Court of Appeals for the Sixth Circuit has ruled that a lender’s security interest in accounts was not perfected because a reference to “proceeds” in the lender’s UCC financing statement did not expressly refer to “accounts.” The Sixth Circuit surprisingly interpreted the definition of “proceeds”1 in Article 9 of the Uniform Commercial Code to exclude “accounts”2 (despite and without reference to provisions of UCC Article 9 to the contrary).
On October 30th, the Commodity Futures Trading Commission ("CFTC") adopted new final rules imposing requirements on swap dealers and major swap participants with respect to the treatment of collateral posted by their counterparties to margin, guarantee, or secure uncleared swaps.
Can a secured creditor decide not to participate in a bankruptcy proceeding and thereby avoid any impact the bankruptcy may have on its lien? According to a recent decision by the United States Court of Appeals for the Fifth Circuit in S. White Transp., Inc. v. Acceptance Loan Co., 2013 WL 3983343 (5th Cir. Aug. 5, 2013), the answer appears to be that at least in the Fifth Circuit, the secured creditor can avoid the impact a bankruptcy plan has on its lien by simply declining to participate in the bankruptcy proceeding.
The Bottom Line
In an adversary proceeding arising out of the Chapter 11 case of Residential Capital, LLC (“ResCap”), the bankruptcy court denied in part and granted in part a secured lenders’ motion to dismiss certain claims in the case. Official Comm. Of Unsecured Creds. V. UMB Bank, N.A. (In re Residential Capital, LLC), Adv. P. No. 13-01277, -- B.R. --, 2013 WL 4069512 (Bankr. S.D.N.Y. Aug. 13, 2013). At issue was certain collateral, which was part of the secured lenders’ collateral, that the lenders released to enable ResCap to pledge it to different third parties.