October 17, 2006 marked the one year anniversary of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the "Reform Act"). The Reform Act has provided some much needed relief to commercial landlords, and the reported decisions of bankruptcy courts during the first year of the Reform Act confirm the effectiveness of the new landlord-friendly provisions.
Is a landlord’s ability to recover repair costs chargeable to the lessee limited because such repair costs are included in “damages resulting from the termination of a lease of real property” pursuant to section 502(b)(6) of the Bankruptcy Code? In In re Foamex International, Inc., 2007 WL 1461954 (Bankr. D. Del. May 16, 2007), the bankruptcy judge said “Yes.”
In Aalfs v. Wirum (In re Straightline Investments, Inc.),1 the United States Court of Appeals for the Ninth Circuit considered whether a post-petition factoring of accounts receivable by the debtor was an avoidable transfer under section 549 of the Bankruptcy Code. The Court of Appeals affirmed the Bankruptcy Court, finding that the post-petition transfer had been properly avoided and that the lower court was justified in allowing the trustee both to recover the accounts receivable and their proceeds and to retain the consideration paid by the transferee.
By some accounts, there is over $300 billion of commercial real estate debt set to mature over each of the next four years. As a result of a lack of demand, a lack of liquidity and lackluster valuations, a significant portion of this debt will go into default. In many cases, bankruptcies will ensue for both the projects and their owners.
Receiverships have gained in popularity in foreclosure cases and in other types of litigation in recent years. Orders appointing receivers and setting forth the receiver’s duties frequently include a provision allowing the receiver to market and sell real estate. However, the question of whether a receiver legally has the ability to convey title to real estate, free and clear of liens and encumbrances, appears to have been answered in the negative, at least by one appellate district in Ohio.
On October 25, commercial real estate financing company Capmark Financial Group Inc., together with over 40 of its affiliates, filed a voluntary petition for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. The debtors cite among the reasons for their filing the declined values of their loan portfolio, tightening of credit markets and a heavy debt burden. Capmark, formerly a part of GMAC's residential mortgage business until 2006, listed $20.1 billion in assets and $21 billion in liabilities on its petition.
Property in oroville and susanville, california : in re gumba investors, llc (bankr. e.d. cal.) case no. 09-40571
BGM Pasadena LLC recently filed for Chapter 11 bankruptcy, and, although no sale has been announced, the Debtor’s assets may be available for acquisition under the right circumstances. The Debtor’s real property is located at 210, 244 and 248 Orange Grove Boulevard and 369 and 375 West Del Mar Boulevard in Pasadena, California, valued at $10 million. The property is described as office and apartment buildings, with one commercial lease, seven residential leases, and one vacant residential unit.
Rather than immediately commencing foreclosure proceedings, lenders and servicers (acting on behalf of the lender) are seeking the judicial appointment of receivers with greater frequency when commercial real estate workout negotiations fail to produve the desired results and the borrower is not otherwise prepared to "turn over the keys."
As we count down the days until the New Year, we are reminded of the momentous year we will leave behind us on December 31. While memorable for many things, 2009 may long be remembered as a year of record corporate insolvency. In 2009, General Motors, CIT, Chrysler, and Thornburg Mortgage filed four of the ten largest corporate bankruptcies in U.S. history. Equally notable are the number of corporate filings made in 2009.