Recently, several courts have added to the growing body of decisions construing intercreditor agreements in bankruptcy cases.
STAMAT v. NEARY (March 24, 2011)
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A senior creditor can obtain significant leverage over a chapter 11 debtor if it is able to vote not only its claim but the claims of junior creditors in connection with the solicitation of a plan of reorganization. Obtaining such leverage, however, has proven problematic in the past. Among other things, courts have been reluctant to enforce pre-bankruptcy assignments or waivers of voting rights contained in intercreditor agreements, holding that such assignments or waivers may violate the Bankruptcy Code and rules. In Avondale Gateway Center Entitlement, LLC v.
The Delaware Chancery Court has found the recapitalization of a media production company entirely fair. Faced with the possibility of bankruptcy and unable to service its debt, the company's board of directors (acting through its special committee) approved a revised recapitalization plan proposed by the company's majority stockholder and primary debt holder. The special committee retained independent legal counsel and a financial advisor. The special committee, after engaging in extensive due diligence, determined to negotiate the recapitalization proposal.
Island One, Inc. to Emerge from Bankruptcy
An ongoing development in bankruptcy practice makes it important for credit managers to determine exactly which entity in a corporate group is actually the customer purchasing and paying for goods or services.
On 7 January 2011, the IRS published fi nal regulations intended to clarify when and how a debt instrument should be retested for debt vs. equity status, and when its terms have been signifi cantly modifi ed. The fi nal regulations generally apply to alterations of the terms of a debt instrument on or after 7 January 2011. Upon a signifi cant modifi cation there is a deemed retirement of the existing debt instrument and a deemed issuance of a new instrument (which may or may not be debt).
Make whole premiums sound simple; they are prepayment premiums that are supposed to “make you whole.” More precisely, make whole premiums are intended to protect noteholders (or other debt holders) from the loss of future fixed coupon interest payments due to the early repayment of debt if market interest rates have declined in the interim.