The US District Court for the Western District of Washington (the "District Court") recently affirmed a bankruptcy court decision that prohibited a transferee of a secured lender's interest in a loan from voting on a debtor's plan of reorganization on the grounds that such transferee, a distressed debt investor, was not an Eligible Assignee under the applicable loan agreement.Meridian Sunrise Village, LLC v. NB Distressed Debt Investment Fund Ltd., et al., No. 13-5503 (W.D. Wash. March 6, 2014) (In re Meridian Sunrise Village, LLC).
Background
In a recent decision that has captured the attention of the U.S. secondary loan market, the United States District Court for the Western District of Washington starkly concluded that hedge funds “that acquire distressed debt and engage in predatory lending” were not eligible buyers of a loan under a loan agreement because they were not “financial institutions” within the Court’s understanding of the phrase.
Lender Had Duty To Investigate Claim to Promissory Note
In a harsh decision for the lender, the U.S. Court of Appeals for the Tenth Circuit has determined that a debtor’s loan may be discharged in chapter 7 bankruptcy— despite the borrower’s admission that his personal financial statement contained materially false representations about his financial condition.
Yesterday, the California Department of Financial Institutions closed United Commercial Bank, headquartered in San Francisco, California, and the FDIC was named as receiver.
On Friday, the Georgia Department of Banking and Finance closed RockBridge Commercial Bank, headquartered in Atlanta, Georgia, and the FDIC was named as receiver.
On Friday, the OCC closed First National Bank of Georgia , headquartered in Carrollton, Georgia, and the FDIC was named receiver.
On Friday, the Office of Thrift Supervision closed Mainstreet Savings Bank, FSB, headquartered in Hastings Michigan, and appointed the FDIC [http://www.fdic.gov/bank/individual/failed/mainstsvgs.html] as receiver for the bank.