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    New disclosure requirements for ad hoc groups and committees
    2012-04-26

    Revised Bankruptcy Rule 2019, which governs disclosure requirements for groups and committees in Chapter 9 and 11 bankruptcy cases, went into effect on Dec. 1, 2011. The following is a summary of a few key facets of the new rule.

    Who?

    Filed under:
    USA, Insolvency & Restructuring, Schulte Roth & Zabel LLP, Interest
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Oversecured creditor wins default interest issue
    2008-07-16

    The Ninth Circuit held on July 3, 2008, that an oversecured creditor’s claim for payment was entitled to a “presumption in favor of the loan agreement’s default rate (an additional 2% interest), subject only to reduction based upon any equities involved.” General Elec. Capt’l Corp. v. Future Media Productions, Inc., 2008 WL2610459, *2 (9th Cir. 7/3/08). Reversing the lower courts, the Court of Appeals held that the bankruptcy court had improperly applied a questionable Ninth Circuit precedent when denying the lender a default rate of interest. Id., at *4.

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Costs in English law, Debtor, Interest, Federal Reporter, Remand (court procedure), Default (finance), Substantive law, Secured loan, Ninth Circuit, United States bankruptcy court, Fifth Circuit
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    First Circuit holds that junior creditors could be paid before senior creditors received post-petition interest
    2011-07-06

    The U.S. Court of Appeals for the First Circuit held on June 23, 2011, that junior creditors could receive a distribution over the objection of senior creditors who claimed they were entitled to post-petition interest under contractual subordination provisions. In re Bank of New England Corporation, ___ F.3d ___, 2011 WL 2476470 (1st Cir. June 23, 2011). In reaching its decision, based on the bankruptcy court's fact findings, the court stressed "that the parties did not intend to subordinate the Junior Noteholders to post-petition interest."Id. at *5.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Debtor, Interest, Federal Reporter, Debt, Remand (court procedure), American Bar Association, Second Circuit, United States bankruptcy court, Eleventh Circuit, First Circuit, Trustee
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Oversecured lender awarded post-petition interest at contractual default rate plus compounded interest
    2008-01-23

    The United States Bankruptcy Court for the Southern District of New York recently awarded an oversecured lender post-petition interest on the full amount of its secured claim at the default rate set forth in the lender’s contract (19%) plus compound (PIK) interest up to the aggregate rate of 25% (the maximum rate allowable under New York State usury laws). In re Urban Communicators PCS Limited Partnership, et al., 2007 Bankr. LEXIS 4062 (Bankr. S.D.N.Y. 12/11/07) (Gerber, B.J.).

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Shareholder, Debtor, Collateral (finance), Interest, Federal Reporter, Default (finance), Accrued interest, Secured loan, Federal Communications Commission (USA), United States bankruptcy court, US District Court for SDNY
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Seventh Circuit denies fees to breaching DIP lender in re Arlington Hospitality, Inc.
    2011-04-13

    The Seventh Circuit affirmed a district court’s ruling that a debtor-in-possession (“DIP”) lender had breached its financing agreement, barring its claim for commitment and funding fees from the DIP. Arlington LF, LLC v. Arlington Hospitality, Inc., No. 09-3560, 2011 WL 727981, *9 (7th Cir. March 3, 2011), aff’g No. 08 C 5098, 2011 WL 3055350 (N.D. Ill. Sept. 18, 2009). Although the DIP itself had also breached the agreement, that breach was not, in the court’s view, effective until after the lender had already “walked away.” Id. at *6.

    Filed under:
    USA, Insolvency & Restructuring, Leisure & Tourism, Litigation, Schulte Roth & Zabel LLP, Condition precedent, Debtor, Interim order, Breach of contract, Interest, Investment banking, Default (finance), Line of credit, Subsidiary, United States bankruptcy court, Seventh Circuit
    Authors:
    Michael L. Cook , Karen S. Park
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Appeals court orders immediate payment of DIP lender's commitment and facility funding fees
    2007-11-28

    District Judge James D. Zagel of the United States District Court for the Northern District of Illinois on Nov. 9, 2007, ordered a Chapter 11 debtor-in-possession ("DIP") to "immediately" pay its so-called "commitment" and "DIP Facility Funding" fees. ("Loan Fees"). Arlington LF, LLC, v. Arlington Hospitality, Inc., 2007 WL 3334499 (N.D. Ill. 11/9/07). Reversing the bankruptcy court, the district court held that the DIP was not excused from paying the fees despite the lender's earlier refusal to advance further funds on its $6 million revolving loan agreement ("Revolver"). Id. at 5.

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Debtor, Interim order, Breach of contract, Interest, Investment banking, Default (finance), Attorney's fee, United States bankruptcy court
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    District court reverses bankruptcy court’s controversial fraudulent transfer TOUSA decision
    2011-02-15

    United States District Court Judge Alan S. Gold, on February 11, 2011, reversed a Florida bankruptcy court’s controversial October 2009 fraudulent transfer judgment1 against a group of lenders based on their receipt of a $421 million loan repayment in July 2007. 3V Capital Master Fund, et al., v. Official Committee of Unsecured Creditors of Tousa, Inc., et al, Case No. 10-60017-CIV (S.D. Fla. Feb.

    Filed under:
    USA, Florida, Corporate Finance/M&A, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Debtor, Interest, Debt, Joint venture, Duty of care, Subsidiary, United States bankruptcy court
    Authors:
    Michael L. Cook , David M. Hillman
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Oversecured lender's contractual prepayment penalty held enforceable as unsecured claim against solvent debtor
    2007-11-16

    The Court of Appeals for the First Circuit recently held that an oversecured lender holds at least an unsecured claim for contractual prepayment penalties against a solvent debtor. UPS Capital Business Credit v. Gencarelli (In re Gencarelli), 2007 BL 91656 (1st Cir., Aug. 30, 2007). As the court explained, "[t]his is a difficult question that has significant ramifications for the commercial lending industry." Id. at 16.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Shareholder, Debtor, Unsecured debt, Statutory interpretation, Interest, Federal Reporter, Remand (court procedure), Secured creditor, Secured loan, Sixth Circuit, First Circuit
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Second Circuit holds that senior creditors’ “gifting” of value to existing shareholder under reorganization plan violates absolute priority rule
    2011-02-10

    The U.S. Court of Appeals for the Second Circuit, on Feb. 7, 2011, held that senior creditors could not “gift” part of their reorganization plan recovery to existing shareholders of the debtor.In re DBSD N. Am., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. Feb. 7, 2011) (2-1) (Lynch, J.) (explainingIn re DBSD N. Am., Inc., 627 F.3d 496 (2d Cir. 2010) (summary opinion)). Its extensive 62-page opinion explained the court’s previous two-page summary ruling of Dec.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Share (finance), Bankruptcy, Shareholder, Debtor, Unsecured debt, Interest, Debt, Standing (law), Unsecured creditor, Sprint Corporation, Second Circuit, United States bankruptcy court, US District Court for SDNY
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Second Circuit affirms dismissal of employees' lender liability WARN Act suit
    2007-09-28

    The United States Court of Appeals for the Second Circuit on Aug. 30, 2007, affirmed the dismissal of a lender liability class action brought by employees of a defunct originator and seller of mortgages and home equity loans. 2007 U.S. App. LEXIS 20791 (2d Cir. August 30, 2007). Agreeing with the district court, the Second Circuit held that the lender was not an "employer" within the meaning of the Worker Adjustment & Retraining Notification Act ("WARN Act"), and thus was not liable to the employees for the sudden loss of their jobs. Id., at *2.

    Filed under:
    USA, Banking, Employment & Labor, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Debtor, Fraud, Class action, Interest, Default (finance), Line of credit, US Code, Worker Adjustment and Retraining Notification Act 1988 (USA), Second Circuit, Ninth Circuit
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP

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