The U.S. Bankruptcy Court in Delaware recently issued an opinion that appears to alter, in part, its earlier decision regarding the administrative status of stub rent.
A fundamental component in the commercial mortgage-backed securities ("CMBS") market is the lender's reliance that the loan is made to a "bankruptcy remote" special purpose entity ("SPE"). The loan documents and operating agreements relating to an SPE typically require that the SPE maintain separate existence and contain restrictions that limit the SPE's debt and ensure separateness.
In a decision with potentially broad implications, the U.S. Court of Appeals for the Sixth Circuit recently determined that payments made to former shareholders of a privately held company in a leveraged buyout transaction are protected as "settlement payments" pursuant to section 546(e) of the Bankruptcy Code.
In an area of the law that continues to be active, the federal bankruptcy court in Delaware has once again issued a detailed ruling on the actions of directors and officers leading up to a company's insolvency. Among the notable conclusions are: (1) failure to conduct due diligence before obtaining a loan may support a claim for breach of duty of care; and (2) there is no cause of action for "improvident lending" in Delaware or New Jersey. Official Comm. of Unsecured Creditors of Fedders N. Am., Inc. v. Goldman Sachs Credit Partners L.P. (In re Fedders N. Am., Inc.), 405 B.R.
The U.S. Bankruptcy Court for the Southern District of New York recently prohibited insurers from terminating debtors' insurance contracts based on so-called "cesser" clauses, which provided for the automatic termination of insurance coverage upon the commencement of proceedings under any bankruptcy or insolvency law. LaMonica v. N. of Eng. Protecting & Indem. Ass'n Ltd. (In re Probulk Inc.), 407 B.R. 56 (Bankr. S.D.N.Y. 2009).
The U.S. Court of Appeals for the Ninth Circuit has held that a creditor trustee could not recover claims under a Director & Officer insurance policy because of the policy's "insured v. insured" exclusion. Biltmore Assocs., LLC v. Twin City Fire Ins. Co., Ad. No. 07-16036, 2009 US App. LEXIS 15322 (9th Cir. July 10, 2009).
The U.S. Supreme Court has issued a long-awaited decision that many practitioners had hoped would provide insight into the permissible breadth of third-party releases and injunctions often contained in confirmed chapter 11 plans. The high court, however, narrowly resolved the issue presented in Travelers Indem. Co. v. Bailey, 129 S.Ct. 2195 (2009), and left open that ultimate question.
It seems safe to assume that no lender would extend high-dollar credit without first having a deep knowledge of the party accepting the funds. Certainly, such deep knowledge would include the precise legal name of that borrower. Nevertheless, recent cases continue to demonstrate the prevalence of filing UCC-1 financing statements that may be deemed “seriously misleading” as to the name of the debtor and, therefore, ineffective to fix the secured creditor’s place in the chain of priority.
On October 13, 2009, a Florida bankruptcy judge in the TOUSA, Inc.
The October 15, 2009 decision of the US Bankruptcy Court for the District of Delaware in In re Pillowtex opens the door for creditors in the Third Circuit to increase their "new value" preference defense under the "subsequent advance" approach.In re Pillowtex, No. 03-12339 (Bankr. D. Del. filed Oct. 15, 2009).
A trustee’s power to avoid preference payments is circumscribed by the statutory defenses set forth in section 547(c) of the Bankruptcy Code. The "subsequent new value" defense set forth in section 547(c)(4) has three well-established elements: