One of the key protections afforded to secured creditors under the Bankruptcy Code is the right of a holder of a secured claim to credit bid the allowed amount of its claim as part of a sale process under section 363 of the Bankruptcy Code. Specifically, section 363(k) of the Bankruptcy Code provides that:

If an international airline that is a member of the International Air Transport Association (“IATA”) goes into insolvent external administration under the Australian Corporations Act 2001 (Cth) (the “Act”), will the IATA Clearing House Regulations (effective January 1, 2006) (the “CH Regulations”) continue to govern the relationship between IATA, the insolvent airline, and the other members of IATA? A recent judgment of Australia’s High Court clarifies these issues.

2002 was a seminal year for restructuring and insolvency professionals in the U.K. In November of that year, the eagerly anticipated Enterprise Act of 2002, which was intended to lay the statutory foundations for the “rescue culture,” received royal assent. Six months earlier, with considerably less fanfare, the EC Regulation on Insolvency Proceedings (EC No. 1346/2000) (the “Regulation”) was introduced throughout the EU (except Denmark). A clear understanding of how these twin pieces of law operate is crucial when reviewing a stakeholder’s options once a company becomes distressed.

The implementation of restrictions on stock and/or claims trading has become almost routine in large chapter 11 cases involving public companies on the basis that such restrictions are vital to prevent forfeiture of favorable tax attributes that can be triggered by a change in control. Continued reliance on stock trading injunctions as a means of preserving net operating loss carry forwards, however, may be problematic, after the controversial ruling handed down in 2005 by the Seventh Circuit Court of Appeals in In re UAL Corp.

Debt exchanges have long been utilized by distressed companies to address liquidity concerns and to take advantage of beneficial market conditions. A company saddled with burdensome debt obligations, for example, may seek to exchange existing notes for new notes with the same outstanding principal but with borrower-favorable terms, like delayed payment or extended maturation dates (a "Face Value Exchange"). Or the company might seek to exchange existing notes for new notes with a lower face amount, motivated by discounted trading values for the existing notes (a "Fair Value Exchange").

Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 28 countries that comprise the European Union, as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments regarding insolvency, restructuring, and related issues in the EU.

The ability of a bankruptcy court to reorder the priority of claims or interests by means of equitable subordination or recharacterization of debt as equity is generally recognized. Even so, the Bankruptcy Code itself expressly authorizes only the former of these two remedies. Although common law uniformly acknowledges the power of a court to recast a claim asserted by a creditor as an equity interest in an appropriate case, the Bankruptcy Code is silent upon the availability of the remedy in a bankruptcy case.

Despite the increasing prominence of pre-packaged or pre-negotiated chapter 11 cases in recent years, not every bankruptcy filing by or against a company is a carefully planned event orchestrated over a period of months or even years to achieve a workable reorganization, sale, or liquidation strategy. Sometimes, unanticipated circumstances precipitate a bankruptcy filing.

In 1984, the Third Circuit was the first court of appeals to examine the Bankruptcy Code’s new definition of “claim” in Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984). Focusing on the “right to payment” language in that definition, the court decided that a claim arises when a claimant’s right to payment accrues under applicable nonbankruptcy law. This “accrual” test was widely criticized by other circuit courts as contradicting the broad definition of “claim” envisioned by Congress and the Bankruptcy Code.

On April 23, 2012, the U.S. Supreme Court approved amendments to the Federal Rules of Bankruptcy Procedure. The amended rules automatically become effective on December 1, 2012, unless Congress acts before then to reject, modify, or delay the rule changes. Several of the amendments involve technical and conforming changes to eliminate inconsistencies within the existing Bankruptcy Rules, as well as changes designed to make the bankruptcy rules consistent with the Federal Rules of Civil Procedure and the Federal Rules of Appellate Procedure.