All too often, a secured creditor’s negotiation and litigation of chapter 11 plan confirmation issues centers disproportionately on the amortization schedule of a secured claim and lacks focus on other issues that shift risk or otherwise have significant economic impact on the relative rights of the parties.

In re Premier Golf Properties, L.P., BAP No. SC- 11-1508-HPaJu (9th Cir. BAP, Aug. 13, 2012)

CASE SNAPSHOT

The Ninth Circuit B.A.P. affirmed the bankruptcy court decision that post-petition income from greens fees and driving range fees were not “rents, proceeds, or profits” of the secured lender’s pre-petition blanket security interest on all real and personal property (and “all proceeds thereof”) within the meaning of section 552(b), and thus were not cash collateral.

In re S. White Transp., Inc., 473 B.R. 695 (S.D. Miss. 2012)

CASE SNAPSHOT

In a decision issued yesterday, the 7th Circuit Court of Appeals held that insiders can't be given a special opportunity to invest in a bankrupt debtor under the guise of contributing "new value" unless the debtor makes the same investment opportunity available to other potential investors.

In re Sea Trail Corporation, Case No. 11-07370- 8-SWH (Bankr. E.D.N.C., Oct. 23, 2012)

CASE SNAPSHOT

The Sixth Circuit Court of Appeals recently affirmed the decisions of the courts below and held in an unpublished opinion that a secured lender’s credit bid at a Michigan foreclosure sale extinguished all of the Chapter 13 debtor’s indebtedness to the lender, thereby precluding the lender from executing on a prepetition foreclosure judgment obtained against the debtor in Wisconsin. State Bank of Florence v. Miller (In re Miller), 2013 WL 425342 (6th Cir. Feb. 5, 2013).

The chronology in many successful Chapter 11 cases is for the debtor to confirm its plan of reorganization, and then turn its attention to recovering preferential transfers of money or property made in the 90 days (or 1 year for insiders of the debtor) before the bankruptcy filing. This article explores the duty to provide information in the plan about possible preference actions, and the level of disclosure necessary to preserve them.

Can the owners of a company retain their equity interests in a Chapter 11 reorganization plan? The answer to this question is often critical in determining whether a Chapter 11 bankruptcy proceeding is a desirable option for the company's owners. If the company is unable to pay its creditors in full, then the absolute priority rule prohibits owners from retaining their interests under a reorganization plan unless the owners contribute new value to the business that is both substantial and essential to the company's reorganization efforts.

A recent Pennsylvania case, Graystone Bank v. Grove Estates, LP, upheld the enforceability of a confessed judgment provision even in light of alleged inconsistencies. In most cases, a confessed judgment is a debtor’s statement signed prior to a default that a stipulated amount is owed to a creditor and permits bypassing certain legal proceedings.

On January 7, 2013, the Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that a dispute concerning the debtors’ use of cash collateral was not subject to arbitration, notwithstanding a broad arbitration clause in the parties’ underlying agreement, because the decision to allow a debtor to use cash collateral constituted a “core” issue and was a fundamental aspect of the bankruptcy process. In re Hostess Brands, Inc., No. 12-22052 (RDD), 2013 WL 82914 (Bankr. S.D.N.Y. Jan. 7, 2013).

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