A New York bankruptcy court recently considered the effects of Bankruptcy Code section 552 on a lender’s security interest in the proceeds of an FCC broadcast license and held that a prepetition security interest extended to proceeds received from a post-petition transfer of the debtors’ FCC license. Sprint Nextel Corp. v. U.S. Bank. N.A. (In re Terrestar Networks, Inc.), Case No. 10-15446, Adv. Pro. No. 10-05461 (Bankr. S.D.N.Y. Aug. 18, 2011). This result directly conflicts with Spectrum Scan LLC v. Valley Bank and Trust Co. (In re Tracy Broadcasting Corp.), 438 B.R.
On September 19th, the Ninth Circuit considered whether the exception to Chapter 7 bankruptcy discharge for debts resulting from a violation of state or federal securities laws applies when the debtor himself is not culpable for the securities violation that caused the debt. The case involved an attorney who was required by court order to return the unearned retainer paid by a company that engaged in securities fraud. The attorney filed a petition for Chapter 7 bankruptcy before he was technically required to return the money.
The US Court of Appeals for the Ninth Circuit recently resolved a split within the circuit when it held that a bankruptcy court has the power to recharacterize debt as equity.
California’s AB 506 process was intended to help a municipality in restructuring its debt obligations and avoid bankruptcy. However, the lessons of the bankruptcies of the City of Stockton, the Town of Mammoth Lakes and the City of San Bernardino support the reality that a meaningful restructure requires material involvement by the major stakeholders. California’s recent wave of municipal bankruptcies tend to show that the AB 506 process has not changed this reality, but rather made a difficult process longer and more arduous.
The United States Bankruptcy Court for the Southern District of New York (the Court), has held that section 553(a) of the Bankruptcy Code prohibits a swap counterparty from setting off amounts owed to the debtor against amounts owed by the debtor to affiliates of the counterparty, notwithstanding the safe harbor provision in section 561 of the Bankruptcy Code and language in the ISDA Master Agreement permitting the swap counterparty to effect “triangular” setoffs. In re Lehman Brothers Inc., Case No. 08-01420 (JMP)(SIPA) (Bankr. S.D.N.Y. October 4, 2011).
In re Zais Investment Grade Ltd. VII1 is the latest in a recent line of bankruptcy cases challenging bedrock assumptions regarding securitization special purpose entities (SPEs) and bankruptcy considerations in securitization transactions.2 Zais establishes precedent allowing a senior noteholder of a collateralized debt obligation (CDO) to place the CDO issuer in an involuntary chapter 11 bankruptcy in order to advance an asset management plan that would otherwise require supermajority approval of all noteholders (including all junior classes) under the related indenture.
Reversing a controversial decision and judgment of the bankruptcy court, the United States District Court for the Southern District of Florida has held that a group of lenders who received payment in settlement of their defaulted debt from the proceeds of new loans secured by the assets of certain subsidiaries of TOUSA, Inc. which were not themselves liable on that debt, did not receive fraudulent transfers.
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) voted on December 18 to approve an interim final rule clarifying how the agency will treat certain creditor claims under the new orderly liquidation authority established under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Kitchin Associates LLC is a Pennsylvania limited liability company that is no longer in business. Richard Kitchin and his son were the members of Kitchin LLC and each held a 50% ownership interest in the entity. In a bankruptcy court proceeding, the Joan I. Glisson Trust asserted a claim against Mr. Kitchin in the amount of $257,047.63, arising from an unsatisfied mortgage loan to Kitchin LLC, the proceeds of which were used to purchase a property in Pennsylvania. Mr.
On May 5, the judge overseeing the bankruptcy case of Lehman Brothers Holdings Inc issued an opinion refusing Swedbank AB's request to keep several million dollars in post-bankruptcy Lehman deposits as a setoff against pre-bankruptcy swap termination claims.