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    Purchasers of bankruptcy claims beware: "disabilities" of purchased claims could limit your recovery
    2012-08-02

    Recently, a Delaware bankruptcy court denied a purchaser of claims its recovery because of judgments against the original holders of the claims from whom the claims were purchased. The case,In re KB Toys, Inc., et al., 470 B.R. 331 (Bankr. D. Del.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Blank Rome LLP, Bankruptcy, Enron, United States bankruptcy court
    Authors:
    Josef W. Mintz
    Location:
    USA
    Firm:
    Blank Rome LLP
    KB Toys: hobgoblins return to haunt bankruptcy claims traders
    2012-08-01

    Participants in the multibillion-dollar market for distressed claims and securities have had ample reason to keep a watchful eye on developments in the bankruptcy courts during the last decade. That vigil appeared to have been over five years ago, after a federal district court ruled in the Enron chapter 11 cases that sold claims are generally not subject to equitable subordination or disallowance on the basis of the seller's misconduct or receipt of a voidable transfer. A ruling recently handed down by a Delaware bankruptcy court, however, has reignited the debate.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Jones Day, Bankruptcy, Enron, United States bankruptcy court
    Authors:
    Charles M. Oellermann , Mark G. Douglas
    Location:
    USA
    Firm:
    Jones Day
    What are the scope and limitations of a rule 2004 examination?
    2012-07-23

    Federal Rule of Bankruptcy Procedure 2004(a) states that "[o]n motion of any party in interest, the court may order the examination of any entity."  Courts construing Rule 2004(a) have found its scope "unfettered and broad."  In re Washington Mutual, Inc., 408 B.R. 45, 49 (Bankr. D. Del. 2009), citing In re Bennett Funding Group, Inc., 203 B.R. 24, 28 (Bankr. N. D. N.Y. 1996).  Federal Rule of Bankruptcy Procedure 2004(b) establishes some of the parameters of what is commonly referred to as a "Rule 2004 Examination":

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Fox Rothschild LLP, Enron
    Authors:
    L. Jason Cornell
    Location:
    USA
    Firm:
    Fox Rothschild LLP
    Can a claims purchaser acquire claims free of defects?
    2012-06-22

    The Delaware bankruptcy court in the KB Toys, Inc. cases recently held that a claims purchaser takes a claim subject to certain disabilities of the claim as held by the seller, regardless of whether the claim transfer is deemed a “sale” or an “assignment.” SeeIn re KB Toys, Inc., Case No. 04-10120 (KJC) (Bankr. Del. May 4, 2012). In so ruling, the Delaware court’s decision is somewhat at odds with the decision issued by the District Court for the Southern District of New York in the Enron bankruptcy cases. See Enron Corp. v.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Chadbourne & Parke LLP, Bankruptcy, Good faith, Enron, US District Court for the Southern District of New York
    Authors:
    Christy L. Rivera
    Location:
    USA
    Firm:
    Chadbourne & Parke LLP
    In re KB Toys, Inc.: “disabilities attach to and travel with the claim"
    2012-05-17

    On May 4, 2012, the Delaware bankruptcy court inIn re KB Toys, Inc., et al. (KB Toys), handed down a thoughtful decision addressing the issue of whether impairments attach to a claim or remain with its seller. The KB Toys court held that “a claim in the hands of a transferee has the same rights and disabilities as the claim had in the hands of the original claimant. Disabilities attach to and travel with the claim.”

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Mayer Brown, Disability, Enron, United States bankruptcy court
    Authors:
    Frederick D. Hyman , Monique J. Mulcare
    Location:
    USA
    Firm:
    Mayer Brown
    Buyers beware: Delaware bankruptcy court finds that avoidance risk travels with debt purchases
    2012-05-16

    According to a recent Delaware bankruptcy court decision, avoidance and disallowance risk travel with a distressed claim. This decision highlights the importance of diligence and the benefits provided by purchasing distressed debt on “distressed” documents.

    The debt of a troubled company is trading in the secondary market at a significant discount because the company is highly levered and is at risk of default.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Richards Kibbe & Orbe LLP, Debt, Good faith, Distressed securities, Enron, United States bankruptcy court, US District Court for the Southern District of New York
    Authors:
    Paul B. Haskel
    Location:
    USA
    Firm:
    Richards Kibbe & Orbe LLP
    Five common 409A design errors: #4 No six-month delay for public company terminations
    2012-03-20

    Code Section 409A is, in part, a response to perceived deferred compensation abuses at companies like Enron and WorldCom. The story of Code Section 409A’s six month delay provision is inextricably tied to the Enron and WorldCom bankruptcies.

    Filed under:
    USA, Company & Commercial, Employee Benefits & Pensions, Insolvency & Restructuring, Tax, Bryan Cave Leighton Paisner (Bryan Cave), Public company, Bankruptcy, Deferred compensation, Internal Revenue Service (USA), Enron, Bitly
    Authors:
    Brian W. Berglund
    Location:
    USA
    Firm:
    Bryan Cave Leighton Paisner (Bryan Cave)
    Decisions in Enron and Madoff cases confirm safe harbor protections
    2012-02-29

    Active participants in the derivatives market rely on the Bankruptcy Code safe harbor set forth in section 546(e) in pricing their securities. That provision restricts a debtor’s power to recover payments made in connection with certain securities transactions that might otherwise be avoidable under the Bankruptcy Code. Two high profile cases decided in 2011 addressed challenges to the application of section 546(e). The more widely reported decision (at least outside the bankruptcy arena) was in connection with the Madoff insolvency case. See Picard v.

    Filed under:
    USA, Derivatives, Insolvency & Restructuring, Litigation, Chadbourne & Parke LLP, Bankruptcy, Debtor, Security (finance), Derivatives market, Enron
    Authors:
    Robert J. Gayda
    Location:
    USA
    Firm:
    Chadbourne & Parke LLP
    Second Circuit denies Enron’s petition for rehearing on commercial paper settlement payment decision
    2011-12-06

    The U.S. Court of Appeals for the Second Circuit, on Dec. 2, 2011, ruled in favor of SRZ client Alfa, S.A.B. de C.V., denying Enron’s petition for rehearing in Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329 (2d Cir. 2011). The court had previously ruled against Enron more than five months ago, holding that its redemptions of commercial paper were “settlement payments” and thus not voidable as preferential or fraudulent transfers under Bankruptcy Code § 546(e), one of the code’s so-called “safe harbor” provisions.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Commercial paper, Enron, Second Circuit, US District Court for the Southern District of New York
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Delaware Bankruptcy Court applies Section 1129(a)(10) on a per debtor basis in the tribune Chapter 11 cases
    2011-11-15

    On October 31, 2011, the Honorable Kevin J. Carey, Bankruptcy Judge of the United States Bankruptcy Court for the District of Delaware, issued an opinion denying confirmation of two competing proposed plans of reorganization in the chapter 11 cases of In re Tribune Company, et al.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Bankruptcy, Debtor, Unsecured debt, Limited liability company, Consideration, Liability (financial accounting), Voting, JPMorgan Chase, Enron, United States bankruptcy court, US District Court for District of Delaware
    Authors:
    Brad Eric Scheler , Jean E. Hanson , Gary L. Kaplan , Jennifer L. Rodburg , Shannon Lowry Nagle
    Location:
    USA
    Firm:
    Fried Frank Harris Shriver & Jacobson LLP

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