In Henderson v. Powermate Holding Corp. (In re Powermate Holding Corp.)1, the United States Bankruptcy Court for the District of Delaware became the second bankruptcy court to address the status of WARN Act claims after the 2005 amendments to section 503 of the Bankruptcy Code.

In ABN Amro Bank N.V. v. Parmalat Finanziara S.p.A. (In re Parmalat Finanziara S.p.A.),1 the United States District Court for the Southern District of New York affirmed the Bankruptcy Court’s entry of an injunction pursuant to former section 304 of the Bankruptcy Code (the precursor to current chapter 15, applicable in crossborder insolvency proceedings), which prevented the beneficiary of a guaranty governed by New York law from asserting its guaranty claim against Italian debtor (and guarantor) Parmalat S.p.A. (“Parmalat”) in the United States.

AUTOMOTIVE

EZ Lube LLC, Express Lube Inc. filed for Chapter 11 protection in Delaware.  

Key Plastics files prepackaged Chapter 11 petition; secured $20M in DIP financing.  

Precision Parts International filed Chapter 11 petition; commences winding down operations.  

BROADCASTING

Equity Media Holdings, Corp. filed for Chapter 11; secured lender seeks conversion to Chapter 7  

ENERGY  

On December 18, 2008, in connection with the bankruptcy of the Steve & Barry’s retail chain, the United States Bankruptcy Court for the Southern District of New York held that under Section 365(d)(3) of the U.S. Bankruptcy Code (the “Code”), landlords are entitled to pro-rata postpetition rental payments for the monthly “stub” period following the filing of the debtor-tenant’s bankruptcy petition provided that the debtor-tenant continues to enjoy the right to use and occupy the leased property.

As a result of the meltdown of the financial markets, lenders are severely constricting new credit facilities and refusing to renew expiring facilities. The Bankruptcy Code's chapter 11 provides a powerful mechanism for an otherwise viable business to restructure and extend its outstanding debt and in many cases, reduce interest rates on loan facilities.

On January 8, Senator Richard Durbin (D-IL), Senator Christopher Dodd (D-CT), Senator Charles Schumer (D-NY) and Representative John Conyers (D-MI) announced an agreement with Citigroup on legislation that would allow homeowners in bankruptcy to alter the terms of their mortgages. Citigroup has agreed to support the "Helping Families Save Their Homes in Bankruptcy Act," introduced by Senator Durbin on January 6, along with a companion bill that was introduced on the same day in the House of Representatives by Representative Conyers.

On January 6, 2009, Senator Richard Durbin (D-IL) re-introduced H.R. 200, “Helping Families Save Their Homes in Bankruptcy Act.” First introduced in the fall of 2007 by Durbin in the Senate and by Rep. John Conyers (D-MI) in the House, this bill has been the subject of three hearings, but faces opposition primarily from Republicans and representatives of the mortgage industry.

A recent decision of the Court of Appeals for the Seventh Circuit appears to have further raised the hurdle to equitably subordinate claims. Continuing what appears to be a move toward a narrower interpretation of equitable subordination, the Seventh Circuit held that misconduct alone does not provide sufficient justification to equitably subordinate a claim; injury to the interests of other creditors is required as well.

On January 6, 2009, the United States Court of Appeals for the Second Circuit rendered a decision in the case of Riker, Danzig, Scherer, Hyland & Perretti v. Official Comm. of Unsecured Creditors (In re: Smart World Tech., LLC) that clarifies the implications of a bankruptcy court's "pre-approval" of the terms of a professional's retention by the bankruptcy estate under Sections 327 and 328 of the Bankruptcy Code.

The decision in In re SemCrude, L.P., et al. prohibiting parties from contracting around Bankruptcy Code section 553’s mutuality requirement may disrupt customary business practices, including those widely used in the energy, natural gas and crude oil markets, because it rules that contracting for cross affiliate netting does not “create” the mutuality required for setoff.