On May 25, 2012, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York approved a motion to compel the production of certain documents under section 1521 of the Bankruptcy Code. In his decision, Judge Gropper also suggested that the broad discovery provisions of Bankruptcy Rule 2004 may apply to chapter 15 discovery requests, but stopped short of making such a ruling. In re Millennium Global Emerging Credit Master Fund Limited, Case No. 11-13171 (ALG), (Bankr. S.D.N.Y May 25, 2012).
The secured lender industry experienced a collective sigh of relief on May 29 after the Supreme Court ruled in RadLAX Gateway Hotel, LLC, et al. v. Amalgamated Bank that credit bidding remains a viable option to protect collateral in a cramdown bankruptcy plan. Expressly inscribed in Sections 363(k) and 1129(b)(2)(A) of the Bankruptcy Code, credit bidding has long been understood as a fairly uncontroversial right; until recently.
On June 13, 2012, the bankruptcy court for the Northern District of Texas in In re Vitro, S.A.B. de C.V. (“Vitro SAB”) declined to recognize and enforce an order issued by the Federal District Court for Civil and Labor Matters for the State of León, Mexico, which approved Vitro SAB’s reorganization plan in its Mexican insolvency proceeding (known as a concurso mercantil proceeding). Vitro S.A.B. v. ACP Master Fund, Ltd., et al. (In re Vitro S.A.B.), Case No. 11–33335 (HDH), 2012 WL 2138112 (Bankr. N.D. Tex. June 13, 2012).
Receiverships and assignments for the benefit of creditors (ABCs) can be important tools for banks and other lenders when a borrower is suffering financial distress. Because they are often cost-effective and efficient, receiverships are being used increasingly throughout the country, and ABCs are commonly utilized in many states. In Minnesota, however, the statutes regarding receiverships and ABCs were outdated or largely ignored; as a result, receivership practices and procedures are not uniform, and ABCs are almost never used.
It is common for lenders to require borrowers to agree to pay a higher interest rate, known as the default rate, following an event of default under a loan. Some loan agreements also require the borrower to pay a fee in the event of a late payment. If the borrower files for bankruptcy protection, the Bankruptcy Code affords special protection to secured creditors with respect to collecting interest.
The Pension Benefit Guaranty Corporation (PBGC) filed an objection on June 14, 2012, in the Delaware bankruptcy court proceedings of RG Steel ("Debtor"), challenging a recent sale by RG Steel's parent entity ("Parent") of a 25-percent ownership stake in the Debtor. If the sale is respected, Parent would fall outside of the Debtor's "controlled group" under the Employee Retirement Income Security Act (ERISA), with the result that Parent may cease to have joint liability for the Debtor's unfunded pension obligations.
It is common knowledge that the Bankruptcy Code provides a debtor with a “fresh start” by allowing it to discharge prepetition claims. Similarly, section 363 of the Bankruptcy Code allows a trustee or debtor in possession to sell property of the estate “free and clear” of prior claims. These two concepts, while relatively straightforward, raise a fundamental question — when does a creditor hold a “claim” for purposes of the Bankruptcy Code?
In the 2010 decision of In re Philadelphia Newspapers, 599 F.3d 298 (3d. Cir. 2010), the Third Circuit Court of Appeals concluded that a plan proponent could deny a secured creditor the right to credit bid on its collateral when the sale was made pursuant to a plan of reorganization. That holding was a surprise to many given that secured creditors were specifically authorized to credit bid in stand-alone sales under section 363 of the Bankruptcy Code. A year or so later, another circuit court, the Seventh Circuit Court of Appeals, came to the opposite conclusion.
On June 13, 2012, Judge Harlin D. Hale of the United States Bankruptcy Court for the Northern District of Texas refused to enforce provisions of a Mexican plan of reorganization that purported to extinguish guarantees by the debtor’s non-debtor subsidiaries. In refusing to enforce the non-debtor release, Judge Hale held both that the release of non-debtor guarantors was contrary to United States public policy and that the release did not merit enforcement under the specific criteria of chapter 15 for granting relief to a foreign debtor.
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