The State of New Jersey Appellate Court ruled that the final dividend plan (“FDP”) proposed by the liquidator for Integrity Insurance Company (“Integrity”) was invalid in part because incurred but not reported (“IBNR”) claims were improperly included in the valuation of claims by its policyholders. As background, Integrity wrote umbrella and excess liability insurance policies which covered long-tail liabilities prone to significant IBNR. These underlying policies were reinsured by various companies. In 1987, Integrity was placed into liquidation with over 26,000 policyholder claims filed.
A debtor’s exclusive right to formulate and solicit acceptances for a plan of reorganization during the initial stages of a chapter 11 case is one of the most important benefits conferred under the Bankruptcy Code as a means of facilitating the successful restructuring of an ailing enterprise. By giving a chapter 11 debtor-in-possession time to devise a solution to balance sheet and operational problems without being burdened by the competing agendas of other stakeholders in the bankruptcy case, exclusivity levels the playing field, at least temporarily.
One of the most significant considerations in a prospective chapter 11 debtor’s strategic pre-bankruptcy planning is the most favorable venue for the bankruptcy filing.
Coping with the Insolvent Business Partner
The arrival of private equity and hedge funds into the US restructuring and insolvency markets is last year’s news. How these funds are transforming the restructuring markets in the United States and exporting these transformations to Europe is what’s of interest now. Keen on making higher and higher profits in a low interest rate environment, funds are directing vast amounts of their liquidity into purchasing and trading distressed bond debt, bank debt and trade debt in restructurings and in insolvency proceedings in the United States.
Law360, New York (May 5, 2016, 12:02 PM ET) -- A core principle of bankruptcy tax litigation holds that “bankruptcy courts have universally recognized their jurisdiction to consider tax issues brought by the debtor, limited only by their discretion to abstain.” IRS v. Luongo, 259 F.3d 323, 329-330 (5th Cir. 2001) (citing In re Hunt, 95 B.R. 442, 445 (Bankr. N.D. Tex. 1989). The Second Circuit recently departed from that generally accepted principle in United States v. Bond, 762 F.3d 255 (2d Cir. 2014).
On April 22, 2016, the Superintendent of the New York Department of Financial Services ("DFS") commenced a liquidation proceeding for Health Republic Insurance of New York ("HRINY") by filing an Order to Show Cause and Verified Petition in the Supreme Court of the State of New York. HRINY has consented to the liquidation.
Most companies that file bankruptcy end up liquidating, that is, ceasing business. Some bankrupt companies, however, even though they have accumulated substantial debt, have a customer base that will produce cash flow sufficient to fund future operating expenses. Federal bankruptcy law provides a procedure for a purchaser to buy a distressed seller out of bankruptcy. The procedure is known as a motion, or request, to sell assets free and clear of liens. Basically, a seller with an ongoing business in bankruptcy has the right to sell its assets (i.e., its business) to a purchaser.
On February 17, the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC) proposed a joint rule that would govern the resolution of large broker-dealers that are designated as “covered financial companies” under the Orderly Liquidation Authority (OLA) provisions (Title II) of the Dodd-Frank Act.
Liquidation is one of those odd legal terms that has multiple meanings, some intuitive and others unexpected. In non-legal parlance, liquidation is what happens when you don’t pay your loan shark, or when you cross James Bond. Legal terminology has an analogous usage, such as liquidation of a business in bankruptcy proceedings. But it also has an entirely different meaning that is of great importance in the construction industry — liquidation of damages. Ironically, liquidation of damages is one of the ways that a contractor may prevent liquidation of its business.