Key Takeaways

The Government published its Corporate Insolvency and Governance Bill on 20 May 2020, which will implement the most significant reform to the UK’s insolvency framework in decades. In addition to permanent landmark changes, including introducing a business rescue moratorium and new restructuring plan, the Bill contains a number of temporary measures to help businesses respond to the COVID-19 crisis.

A recent decision out of the District Court for the Southern District of New York may bring greater certainty to the interpretation of what constitutes a “financial institution” in connection with the safe harbor in section 546(e) of the bankruptcy code. The decision, In re Tribune Fraudulent Conveyance Litig., 2019 U.S. Dist. Lexis 69081 (S.D.N.Y. Apr.

Recently, the United States Bankruptcy Court for the District of Connecticut held that while a bankrupt licensor may reject a trademark licensing agreement, the trademark licensee may elect to retain its rights to the debtor’s trademark. The Bankruptcy Court noted that its ruling disagrees with a contrary decision issued by the First Circuit only a few months earlier.

Executory Contracts and the IP Exception

The Worker Adjustment and Retraining Notification (WARN) Act in the U.S. requires that employers give sixty days’ notice to its employees before effecting a mass layoff.

The European Commission (EC) announced proposals on 22 November 2016, which are intended to harmonise national insolvency laws across the EU through a proposed directive “on preventative restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures” (Directive). The Directive will need to be passed by the European Council and European Parliament. Then, EU Member States would be required to adopt the Directive’s provisions into their respective national laws within two years from the date of its entry into force.

A recent decision by the U.S. Court of Appeals for the Second Circuit, In re Tribune Company Fraudulent Conveyance Litigation,¹ represents a significant victory for shareholders who may get cashed out in connection with a leveraged transaction that precedes a company bankruptcy.

Several recent legal and regulatory developments in the U.S. will likely alter the makeup of the group of arrangers and financiers willing to arrange and provide financing for certain highly leveraged transactions, and also provide guidance to those considering a loan-to-own or related acquisition strategy, in order to help avoid potential pitfalls. 

Revised Leveraged Lending Guidance

In the last several months, there have been some significant legal developments that could impact acquisition finance. This article will survey some of the more notable ones.

In a case with implications for buyers of assets in a bankruptcy court-ordered sale under section 363(b) of the Bankruptcy Code, the Bankruptcy Court for the Southern District of New York recently issued a decision limiting the ability of manufacturers that are debtors in a bankruptcy case to sell assets free and clear of future liabilities.

Industry observers have been waiting to see when bank failures arising out of the recent financial crisis would produce a wave of Federal Deposit Insurance Corporation (“FDIC”) litigation similar to that seen in the early 1990s after the savings and loan crisis. With its second suit in recent months, the FDIC has shown that it will aggressively pursue claims against directors and officers in connection with failed depository institutions.