On November 14, 2008, a letter was sent to derivatives counterparties of Lehman Brothers Holdings Inc. and its affiliates (collectively, “Lehman”) notifying them of Lehman’s Motion to Settle or Assign Derivative Contracts. The letter concerns a motion filed in the bankruptcy court by Lehman Brothers Debtors on November 13, 2008, which seeks to establish two procedures relating to its pre-petition derivative contracts with counterparties.
While some states have mandated delays to the foreclosure process, curbing the number of foreclosure filings in recent months, many report that such legislation is only a temporary cure. Foreclosure filings include default notices, auction sale notices and bank repossessions. According to James J. Saccacio, chief executive officer of RealtyTrac, October marked the 34th consecutive month where U.S. foreclosure activity increased compared to the prior year. RealtyTrac U.S.
Sellers should be proactive in taking steps to protect themselves from a distressed buyer’s non-payment.
In the current economic downturn, sellers are dealing with many formerly good customers whose financial health is deteriorating. To protect their interests, sellers should assess their rights under applicable contracts and law and develop a strategy to minimize their exposure.
Step 1 – Assess the Parties’ Contractual Rights
As our economy slides into what could be a long and severe recession, retail bankruptcies are expected to increase. Landlords are presented with a myriad of problems when one of their tenants files for bankruptcy. Although many of the obligations and rights of landlords are well established by current bankruptcy law, a novel question arises when a tenant files for bankruptcy while a landlord is in the process of constructing tenant improvements or is on the verge of providing a tenant allowance. Given the tenant’s right to reject its lease, a landlord is faced with a difficult decision.
Beginning on September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI”) and 16 of its affiliates (the “Debtors”) filed voluntary Chapter 11 bankruptcy petitions with the United States Bankruptcy Court for the Southern District of New York. The resulting bankruptcy cases are jointly administered by the bankruptcy court for procedural purposes (collectively, the “Chapter 11 Proceeding”), but to date, the Debtors remain separate legal entities.
The Court of Appeals of Tennessee confirmed that an equipment lessor is entitled to enforce the “hell or high water” provision of an equipment lease.
The Ninth Circuit Bankruptcy Appellate Panel has held that a finance company did not have a perfected security interest in equipment lease payment pools assigned to it because neither the assignee, nor the assignor with which it had contracted, filed the appropriate UCC financing statements.
The collapse of Lehman Brothers was a major test of the procedures developed by market participants to address counterparty credit risk and has uncovered deficiencies in risk management policies and their application.
Introduction:
In the insurance industry, title insurance is known as a “long-tailed” liability risk, which means that it is common for claims to be made many years after policies are issued. For this reason, owners of real estate, their lenders and their counsel have long scrutinized the financial health of title insurance underwriters.