Perhaps surprisingly given the rarity of such cases, a handful of high-profile court rulings recently have addressed whether a solvent chapter 11 debtor is obligated to pay postpetition, pre-effective date interest ("pendency interest") to unsecured creditors to render their claims "unimpaired" under a chapter 11 plan and, if so, at what rate.

In yet another chapter in the tortured saga of the fallout from the failed 2007 leveraged buyout ("LBO") of media giant The Tribune Co. ("Tribune") in a transaction orchestrated by real-estate mogul Sam Zell, the U.S. Court of Appeals for the Second Circuit largely upheld lower court dismissals of claims asserted by Tribune's chapter 11 liquidation trustee against various shareholders, officers, directors, employees, and financial advisors for, among other things, avoidance and recovery of fraudulent and preferential transfers, breach of fiduciary duties, and professional malpractice.

In Stream TV Networks, Inc. v. SeeCubic, Inc., 2020 WL 7230419 (Del. Ch. Dec. 8, 2020), the Delaware Court of Chancery held that the assets of Stream TV Networks, Inc. ("Stream"), an insolvent Delaware-incorporated 3-D television technology company, could be transferred to an affiliate of two of Stream's secured creditors in lieu of foreclosure without seeking the approval of Stream's shareholders under section 271 of the General Corporation Law of Delaware ("DGCL") or Stream's certificate of incorporation.

Postpetition financing provided by pre-bankruptcy shareholders or other "insiders" is not uncommon in chapter 11 cases as a way to fund a plan of reorganization and allow old shareholders to retain an ownership interest in the reorganized entity. The practice is typically sanctioned by bankruptcy courts under an exception—the "new value" exception—to the "absolute priority rule," which prohibits shareholders and junior creditors from receiving any distribution under a plan on account of their interests or claims unless senior creditors are paid in full or agree otherwise.

In Short

The Situation: In Australia, the Takeovers Panel ("Panel") is the primary forum for hearing disputes in relation to takeover bids and other corporate control transactions involving public companies. In light of the current COVID-19-led financial distress being experienced by many companies, understanding when the Panel will be the appropriate forum to consider disputes in relation to a company in administration is important. This question arose in the course of the current Virgin Australia Group administration.

The Situation: In the past few weeks, due to the severe impact of the COVID-19 crisis on non-essential businesses forced to close and terminate employees after filing for chapter 11 protection, bankruptcy courts have been confronted with requests by debtors to temporarily suspend their bankruptcy cases using the courts' equitable powers and a seldom-used provision of the Bankruptcy Code: 11 U.S.C. § 305(a).

Proposed U.S. Treasury and IRS Regulations Limiting Use of NOLs

In In re Tribune Co. Fraudulent Conveyance Litig., 2019 WL 1771786 (S.D.N.Y. Apr. 23, 2019), the U.S. District Court for the Southern District of New York denied a litigation trustee’s motion to amend a complaint seeking to avoid alleged fraudulent transfers made to selling shareholders as part of a 2007 leveraged buyout ("LBO") of the Tribune Co. ("Tribune"), ruling that the safe harbor in section 546(e) of the Bankruptcy Code continues to bar such claims notwithstanding the U.S. Supreme Court’s February 2018 decision in Merit Management Group v. FTI Consulting.

The Executive Summary provided a short version of the facts. The next few paragraphs provide a longer version, or you can skip to the next section.

In a recent decision, the United States District Court for the Southern District of New York upheld a bankruptcy court order that enjoined a plaintiff holding an asbestos claim from pursuing a state court products liability claim against the successor to Manville Forest Products Corporate (“MFP”). Notably, the Court reaffirmed that a claim relating to prepetition exposure to asbestos is a prepetition claim, even though the injury may not have manifested itself until after the petition date.