It always starts so easy. Borrower comes in and wants to borrow money. Lenders want some form of collateral to secure (potentially) a loan and the Borrower happily agrees to provide, or pledge, collateral to secure a loan. Common examples are the Borrower pledging inventory, equipment or receivables (assuming of course there is no real estate to lien with a mortgage). Lender, either internally, or with outside counsel, prepares the necessary security agreement to document the pledge of collateral. This is generally the description of a secured transaction.
Depending on the nature of its business, a debtor may encounter issues associated with the Perishable Agricultural Commodities Act (“PACA”), a statue designed to protect sellers of perishable produce. Recently, in Kingdom Fresh Produce, Inc. v.
A.BACKGROUND
The term “bad boy” guaranty is used in certain circumstances to describe a guaranty to be provided – usually by an individual, not an entity – in connection with, most often, real estate financing.
The original intent of “bad boy” guarantys was to influence the post-closing behavior of a principal of the borrower, in order to discourage bad conduct that would harm the lender’s position and collateral. Traditionally, the triggers for recourse to the borrower and/or guarantor liability were events such as:
“Some people have a way with words, and other people…oh, uh, not have way.”
The Seventh Circuit Court of Appeals recently handed down a decision with significant implications for landlords contemplating lease termination agreements with distressed tenants. Ruling on a direct appeal in the chapter 11 case In re Great Lakes Quick Lube LP, the court held that a lease termination agreement between a landlord and a financially distressed tenant can be voided as either a fraudulent conveyance or a preferential transfer in the tenant’s subsequent bankruptcy case.
A Chapter 11 debtor’s pre-bankruptcy “surrender of [two] … leases to [its landlord] could be regarded as a preferential transfer,” held the U.S. Court of Appeals for the Seventh Circuit on March 11, 2016. In re Great Lakes Quick Lube LP, 2016 WL 930298, at *2 (7th Cir. March 11, 2016).
In In re Caesars Entertainment Operating Co v BOKF, NA(1) the US Court of Appeals for the Seventh Circuit reviewed a bankruptcy court's denial of a trustee's motion for a temporary injunction staying litigation between non-debtors.
Facts
Practitioners that exclusively represent clients in large scale restructurings and chapter 11 reorganizations may be used to the debtor remaining in place with senior management continuing to oversee the day to day operations of the company and overseeing the debtor’s reorganization case. It may seem strange then to such practitioners that, unlike in chapter 11 cases, the debtor in a chapter 7 case often has only a limited role in its own bankruptcy case after the initial debtor interview and the section 341 meeting of creditors. In a chapter 7 case, a trustee is appointed and i
Today, the Second Circuit reissued the latest in a line of cases adopting an expansive reading of the safe harbor under Section 546(e) of the Bankruptcy Code. In re Tribune Co. Fraudulent Conveyance Litig., Case 13-3992, Doc. 356-1 (2d Cir. Mar. 29, 2016). (This opinion was originally issued on March 24 and withdrawn on March 28. The opinion released today contains minor, non-substantive alterations to the text on pages 8, 22, 26, and 40. In all other respects, it is identical to the opinion withdrawn last week).
Section 546(e) of the bankruptcy code bars state law constructive fraudulent conveyance claims asserted by creditors seeking to augment recoveries from a bankruptcy estate
Earlier today, the Second Circuit Court of Appeals issued a decision in In re Tribune Company Fraudulent Transfer Litigation, No. 13-3992-cv, holding that the Bankruptcy Code’s safe harbor of Section 546(e) (the Safe Harbor) prohibits clawback claims brought by creditors under state fraudulent transfer laws to the same extent that it prohibits such claims when brought by a debtor.