On April 8, 2009, the Second Circuit Court of Appeals issued a ruling that creates an additional hurdle for companies providing single-employer pension funds when seeking to reorganize through a bankruptcy. In general, the termination of a pension plan can give rise to a per-employee termination premium (a “Termination Premium”) owed by the company terminating the plan to the Pension Benefit Guaranty Corporation (“PBGC”), the quasi-governmental entity that insures pension plans.

In a recent decision, the Bankruptcy Court for the District of Delaware allowed the collateral agent for senior lenders to credit bid for the debtors’ assets even though all of the senior lenders had not authorized the bid. One of the senior lenders had objected to the group’s acquisition of the debtors’ assets by the credit bid. In re GWLS Holdings, Inc., 2009 WL 453110 (Bankr. D. Del. Feb. 23, 2009) (Walsh, J.).

A bankruptcy filing by a property owner may not be the only action that prevents foreclosure of a security interest in that property held by a secured creditor. In a growing list of cases, courts also have held the bankruptcy of a junior secured creditor with a lien on the property invokes the automatic stay against such action.

Yesterday, in a bankruptcy court hearing held for Chrysler LLC (and 24 of its wholly owned subsidiaries), which filed for Chapter 11 bankruptcy protection last Thursday, U.S.

Chrysler's bankruptcy filing, which occurred on April 30, has generated considerable activity already. Baker Hostetler has been monitoring closely the Chrysler activity for our supplier clients. We attended the hearing on the first day filings, which were generally ministerial in nature. The court approved joint administration, maintenance of cash management/business forms, enforcement of automatic stay, payment of wages, and honoring of all warranties.

The U.S. Court of Appeals for the Seventh Circuit held on May 5, 2009, that a group of secured lenders were fully secured and “entitled to a full recovery” from the debtor despite the bankruptcy court’s improper valuation of the collateral (improved airport terminal space) securing the lenders’ underlying $60 million loan. In re United Airlines, Inc., ___ F.3d ___, 2009 U.S. App. LEXIS 9648 (7th Cir. 5/5/09) (Easterbrook, Ch. J.). The lower courts had valued the lenders’ collateral at $35 million, leaving them with a $25 million unsecured claim.

The following is a list of some recent larger U.S. bankruptcy filings in various industries. To the extent you are a creditor to any of these debtors, or other entities which may have filed for bankruptcy protection, you as a creditor are entitled to certain protections under the Bankruptcy Code.  

AUTOMOTIVE

Mark IV Industries, affiliates file Chapter 11; reach “agreement in principle” with lenders.  

GAMING  

Following several weeks of speculation about how pending cash collateral, cash management, and debtor-in-possession financing motions might affect basic principles of structured finance, the bankruptcy court deferred a final ruling on the motions and extended the interim cash collateral order. In so doing, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York suggested that CMBS lenders organize themselves so that common issues can be identified and resolution expedited.

As previously reported (3/17/08 post), this case involves the interpretation of the terms of a reinsurance contract and the duties of the parties under that contract. In the most recent development, the Eighth Circuit affirmed the Bankruptcy Appellate Panel’s judgment affirming in part, and reversing in part, a prior decision of the bankruptcy court regarding the reinsurance contract at issue.

Judge Arthur J. Gonzalez presided over hearings May 20, 2009, in this mega bankruptcy case. There were 21 matters on the agenda, as well as an emergency motion, that were heard or adjourned to a later date, in approximately two and a half hours of hearings (click here for a link to the audio file provided by the Clerk of the U.S. Bankruptcy Court for the Southern District of New York; it may take a moment to load before playing).