The U.S. Court of Appeals for the Fifth Circuit, on Aug. 16, 2011, affirmed the lower court’s decision authorizing reimbursement of expenses to qualified bidders for a reorganization debtor’s assets. In re Asarco, LLC, 2011 BL 213002 (5th Cir. Aug. 16, 2011). In the court’s view, the debtor provided “a compelling and sound business justification for the reimbursement authority.” Id. at *12.

Facts

A Chapter 11 debtor’s financial advisers were entitled to a “Success Fee” based on a percentage of a $50-million “debt-to-equity conversion,” held a split U.S. Court of Appeals for the Fifth Circuit on May 4, 2016. In re Valence Technology, Inc., 2016 WL 2587109, *1 (5th Cir. May 4, 2016) (2-1). Key to the opinion was the parties’ concession that the “debt-to-equity conversion qualified as a Private Placement under [their] engagement agreements.” Id., at n.1.

On June 28, 2011, the U.S. Court of Appeals for the Seventh Circuit held that secured creditors have a statutory right to credit bid1 their debt at an asset sale conducted under a "cramdown" plan. In re River Road Hotel Partners, LLC, ___ F.3d. ___, 2011 WL 2547615 (7th Cir. June 28, 2011).2 The Seventh Circuit's decision creates a split with recent decisions in the Third and Fifth Circuits regarding a lender's ability to credit bid its secured debt. See In re Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010); In re Pacific Lumber, Co., 584 F.3d 229 (5th Cir.

“Reasonably equivalent value” as a defense to a fraudulent transfer suit “can be satisfied with evidence that the transferee (1) fully performed under a lawful, arm’s-length contract for fair market value, (2) provided consideration that had objective value at the time of the transaction, and (3) made the exchange in the ordinary course of the transferee’s business,” held the Supreme Court of Texas on April 1, 2016, in response to a certified question from the U.S. Court of Appeals for the Fifth Circuit. Janvey v. Golf Channel, ___ S.W.3d ___, 2016 WL 1268188, at *2 (Tex.

The U.S. Court of Appeals for the Fifth Circuit, on Oct. 19, 2010, corrected a bankruptcy court’s calculation of a secured lender group’s superpriority administrative claim more than two years after consummation of the debtor’s Chapter 11 reorganization plan. In re SCOPAC et al., F.3d__, 2010 WL 4069525, at *2-3, *5-6 (5th Cir. Oct. 19, 2010) (Jones, Ch.J.) [“Pacific Lumber II”]; see alsoIn re Pacific Lumber Co., 584 F.3d 229, 242 (5th Cir. 2009) [“Pacific Lumber I”] (plan “substantially consummated within weeks of confirmation”).

A secured lender had to “pay the [encumbered] Property’s maintenance expenses incurred while the [bankruptcy] trustee was trying to sell the Property,” held the U.S. Court of Appeals for the Fifth Circuit on Dec. 29, 2015. In re Domistyle, Inc., 2015 WL 9487732, at *1 (5th Cir. Dec. 29, 2015).

The U.S. Court of Appeals for the Fifth Circuit held on Feb. 10, 2010, that a corporate debtor’s pre-bankruptcy severance payments to its former chief executive officer (“CEO”) were fraudulent transfers. In re Transtexas Gas Corp., ____ F.3d _____, 2010 BL 28145 (5th Cir. 2/10/10). Because of its holding “that the payments were fraudulent under the Bankruptcy Code,” the court did “not consider other possible violations, including [the Texas Uniform Fraudulent Transfer Act] or [Bankruptcy Code] Section 547(b) [preferences].” Id. at *5.

Presumed Reasonable Absent Certain Circumstances 

On March 22, 2010, in a 2-1 decision, the Court of Appeals for the Third Circuit held that a debtor may proceed with an auction sale under a Chapter 11 plan without providing a secured lender the right to credit bid for its collateral.

In its recent decision in Matter of First River Energy, LLC,¹ the Fifth Circuit resolved a priority dispute between lienholders regarding their competing claims to cash held by the debtor, First River Energ