The United States Bankruptcy Court for the Middle District of Pennsylvania recently found that a bankruptcy trustee could not either pierce the corporate veil of a limited liability company to reach the owners of the LLC, nor could the trustee “reverse-pierce” the corporate veil of the owners of the LLC to reach a separate restaurant business that they owned.
On October 30, 2013, Brazilian oil company OGX Petróleo e Gas Participações SA (OGX) filed for bankruptcy protection (or “judicial reorganization”) in Rio de Janeiro after restructuring discussions between the company and its major creditors ended without agreement. With nearly $5 billion of debt, OGX is the largest and most complex bankruptcy proceeding to be conducted in Latin America and will not only test Brazil’s nascent bankruptcy law, but also presents itself as the latest potential opportunity for distressed investors focused on Latin American emerging markets.
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.
Puerto Rico is in the midst of a financial crisis. Over the past few years, its public debt skyrocketed while its government revenue sharply declined. In order to address its economic problems and to avoid mass public-worker layoffs and cuts in public services, the unincorporated U.S. territory issued billions of dollars in face value of municipal bonds. These bonds were readily saleable to investors in the United States due to their tax-exempt status and comparatively high yields.
Pursuant to Section 727 of the U.S. Bankruptcy Code, an individual Chapter 7 debtor may receive a discharge "from all debts that arose before the date of the order for relief under this chapter." A Chapter 11 or Chapter 13 debtor may receive similar relief pursuant to Sections 1141 and 1328(b), respectively. Under any chapter, this discharge serves the Bankruptcy Code's principal goal of relieving a debtor from his or her prepetition obligations and providing the debtor with a "fresh start" on emergence from bankruptcy.
Although business bankruptcy filings have trended down in recent months, the lingering legacy of litigation prompted by the surge in filings at the outset of the U.S. financial crisis remains with us and continues to strike many general counsel with unexpected actions for recovery of payments made by the debtor in the run-up to a Chapter 11 case.
Adjustments to certain dollar amounts in the Bankruptcy Code may affect your decision and strategy to either file a bankruptcy or in defending certain actions filed against you or your company. The automatic adjustments to the dollar amounts in various provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq. went into effect on April 1, 2013. You may access the official forms by clicking the following link to the United States Courts: