CASE SNAPSHOT

The United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) recently issued a memorandum decision in the American Airlines, Inc.

Given the commonality in today’s marketplace of complex corporate capital structures that employ multiple layers of secured debt, existing and potential creditors need to be increasingly aware of the rights and limitations provided for in subordination or intercreditor agreements. These agreements are often entered into between the existing lender or debt holder and a new lender. They often restrict the actions of subordinated lenders upon the debtor’s filing for bankruptcy protection, including denying their right to vote on the debtor’s plan of reorganization.

Appellate courts continue to agree on the vitality and breadth of the safe harbor defense contained in Bankruptcy Code ("Code") § 546(e) (insulating from the trustee's fraudulent transfer or preference attack "settlement payment" or "margin payment" on a "securities contract," "commodity contract" or "forward contract" except when the debtor's payment is made with "actual intent to hinder, delay, or defraud" creditors). In re Quebecor World (USA) Inc., 2013 WL2460726, *1 (2d Cir.

Unsecured creditors in chapter 11 cases face the prospect of two financial blows: the possibility of not receiving full payment of their claims and the cost of attorney's fees for defending their interests. But these creditors may be able to take comfort in a small but growing trend -- the ability to have the attorney's fees paid from the debtor's assets under the debtor's chapter 11 plan. This outcome occurs in only a small number of cases, and unsecured creditors would be advised to not assume their attorney's fees will be reimbursed by the debtor.

In these days of continued integration of the world economy, it is not unusual for a foreign-based business enterprise to own assets of substantial value in the United States either directly or through an affiliate. If the foreign enterprise commences an insolvency proceeding in its home country, there is substantial risk that local American creditors of the insolvent company may seek to attach these assets to satisfy their own claims to the prejudice of non-U.S. creditors.

In the Matter of: Village at Camp Bowie I, L.P., No. 12-10271 (5th Cir., Feb. 26, 2013)

CASE SNAPSHOT

In re Indianapolis Downs, LLC, et al., 486 B.R. 286 (Bankr. D. Del. 2013)

CASE SNAPSHOT

In re Maharaj, 681 F.3d 558 (4th Cir. 2012)

CASE SNAPSHOT

The Court of Appeals for the Fourth Circuit is the first court of appeals to determine whether the absolute priority rule continues to apply to individual chapter 11 debtors. Taking the "narrow view" adopted by certain courts, the Fourth Circuit held that the rule was not abrogated by the amendments of the Bankruptcy Abuse Prevention and Consumer Protection Act, and therefore affirmed the bankruptcy court’s order denying confirmation of the proposed plan.

In many Chapter 11 business bank - ruptcies, the office of the U.S. Trustee (the “UST”) will appoint a representative body of unsecured creditors (the “Com mittee”) to represent the interests of all unsecured creditors. The Committee is selected from unsecured creditors of the debtor who generally hold the largest unsecured claims against the debtor, are not “insiders” of the debtor and are willing to serve. A potential Committee member’s willingness to serve is demon strated through returning the creditor questionnaire to the UST and/or attending the formation meeting when scheduled.