In In re Entringer Bakeries, Inc.,1 the United States Court of Appeals for the Fifth Circuit affirmed the viability of the “earmarking doctrine” as a judicially-created defense to a preference action under section 547(b) of the Bankruptcy Code.
Creditors have recently made some headway in collecting the full amount to which they are contractually entitled pursuant to various debt instruments. In In re Calpine Corp.,1 reported in our summer 2007 newsletter, the Bankruptcy Court for the Southern District of New York permitted a secured creditor to collect damages (albeit in the form of an unsecured claim) caused by dashed expectations due to the early repayment of its debt.
In two recent decisions in the General Growth Properties, Inc., et al. chapter 11 cases, the United States Bankruptcy Court for the Southern District of New York upheld certain loan provisions which provided for an automatic event of default and imposition of a default rate of interest upon the commencement of a bankruptcy case, and held that certain creditors were entitled to receive postpetition interest at the contractual default rate. General Growth Properties, Inc. and its affiliated debtors own, develop, and operate regional shopping malls across the United States.
Introduction
Late last year, government responses to the subprime mortgage crisis proliferated but most attention focused on those measures that could be, and in some cases were, rapidly implemented — measures like the Treasury Department’s urging holders of certain subprime adjustable rate mortgages (ARMs) to freeze interest rates temporarily or the Federal Reserve’s proposed tightening of lending requirements.
On July 22, 2011, Bankruptcy Judge Craig A.
Introduction
In In re Calpine Corporation, 2007 WL 685595 (Bankr. S.D.N.Y. 2007), the Bankruptcy Court for the Southern District of New York considered the issue of whether secured creditors whose debt was being paid prior to its original maturity date were entitled to a prepayment premium.
Earlier this year, the U.S. Court of Appeals for the Second Circuit held that a proposed “gifting” plan distributing value from the second lien lenders to the prepetition equity holder violated the absolute priority rule and was confirmed in error.2 This decision, by a 2-1 panel vote,3 reversed the decisions of the Bankruptcy and District Courts for the Southern District of New York. The Second Circuit also affirmed unanimously the designation of the vote of an indirect competitor of the debtor that held no claims prior to the petition date.
In the March 2008 issue, we discussed a decision from the In re Urban Communicators PCS, Ltd. Partnership1 case. In that decision, the United States Bankruptcy Court for the Southern District of New York held that under section 506(b) of the Bankruptcy Code, the Bankruptcy Court could limit the rate of postpetition interest to be paid to an over-secured creditor to an amount less than the contract interest rate.