When a retail business becomes a debtor in bankruptcy, it often decides to trim its operations by closing some of its retail stores. This strategy inevitably leaves the debtor with unnecessary leases. Instead of simply rejecting the leases, retail debtors often assume the agreements and assign them to other entities. The assumption and assignment of the unnecessary leases may allow a debtor to avoid potentially significant rejection damage claims from landlords.

One of the most significant changes to chapter 11 of the Bankruptcy Code in the 2005 amendments was the absolute limit placed on extensions of the exclusivity periods. Courts no longer have the discretion to extend a debtor’s exclusive periods to file and solicit a plan beyond 18 months and 20 months, respectively, after the petition date. Although the legislative history contains no explanation for why this change was made, Congress presumably intended to accelerate the reorganization process or facilitate the prospects for competing plans in large, complex cases.

On March 15, 2007, with Jones Day’s assistance as bankruptcy counsel, FLYi, Inc. (“FLYi”), Independence Air, Inc. (“Independence”) and their affiliated debtors (collectively, the “Debtors”) obtained confirmation of their chapter 11 plan under the “cramdown” provisions of the Bankruptcy Code. The plan, which become effective on March 30, 2007, will distribute approximately $150 million to unsecured creditors. In ruling on confirmation of the plan, the U.S.

The ability to borrow money during the course of a bankruptcy case is an important tool available to a chapter 11 debtor-in-possession (“DIP”). Often times, the debtor’s most logical choice for a lender is one with an existing pre-bankruptcy relationship with the debtor. As a condition to making new loans, however, lenders commonly require the debtor to waive its right to pursue avoidance or lender liability actions against the lender based upon pre-bankruptcy events.

“Give ups” by senior classes of creditors to achieve confirmation of a plan have become an increasingly common feature of the chapter 11 process, as stakeholders strive to avoid disputes that can prolong the bankruptcy case and drain estate assets by driving up administrative costs.

The strategic importance of classifying claims and interests under a chapter 11 plan is sometimes an invitation for creative machinations designed to muster adequate support for confirmation of the plan. Although the Bankruptcy Code unequivocally states that only “substantially similar” claims or interests can be classified together, it neither defines “substantial similarity” nor requires that all claims or interests fitting the description be classified together.

The ability to sell assets during the course of a chapter 11 case without incurring transfer taxes customarily levied on such transactions outside of bankruptcy often figures prominently in a potential debtor’s strategic bankruptcy planning. However, the circumstances under which a sale and related transactions (e.g., recording of mortgages) qualify for the tax exemption have been a focal point of dispute for many courts, including no less than four circuit courts of appeal.

In a significant Delaware law decision regarding creditors’ ability to sue corporate fiduciaries, the Delaware Supreme Court recently addressed the issue of whether a corporate director owes fiduciary duties to the creditors of a company that is insolvent or in the “zone of insolvency.” In North American Catholic Educ. Programming Found., Inc. v. Gheewalla, the court concluded that directors of a solvent Delaware corporation that is operating in the zone of insolvency owe their fiduciary duties to the corporation and its shareholders, and not creditors.

The aggregate value of private-equity acquisitions worldwide in 2006 exceeded $660 billion. If this number seems mind-boggling, consider that this record-breaking volume of transactions appears well on the way to being eclipsed in 2007. Even with corporate financing for leveraged buyouts harder to come by as a consequence of the sub-prime mortgage fallout, there is, by some estimates, $300 billion sitting globally in private-equity funds. Already on tap or completed in 2007: a $32 billion takeover of energy company TXU Corp.

Recently, in Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co., the U.S. Supreme Court resolved a conflict among the circuit courts of appeal by overruling the Ninth Circuit’s Fobian rule, which dictated that attorneys’ fees are not recoverable in bankruptcy for litigating issues “peculiar to federal bankruptcy law.” In reaching its decision, the Supreme Court reasoned that the Fobian rule’s limitations on attorneys’ fees find no support in either section 502 of the Bankruptcy Code or elsewhere.