In Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd.,1 the United States Bankruptcy Court for the Southern District of New York refused to allow the foreign representatives of two Bear Stearns funds2 to institute ancillary proceedings under new chapter 15 of the United States Bankruptcy Code. There, Judge Lifland held that, even though the Funds were in liquidation proceedings in the Cayman Islands, those proceedings constituted neither “foreign main” nor “foreign non-main” proceedings for purposes of the U.S.

On July 13, 2010, a three-judge panel of the United States Court of Appeals for the Third Circuit unanimously held that auto-parts supplier Visteon Corporation could not terminate health and life insurance benefits for approximately 2,100 retirees during its chapter 11 bankruptcy unless Visteon followed the specific requirements laid out in section 1114 of the Bankruptcy Code, even if Visteon would have had the unilateral right to terminate these benefits outside bankruptcy.1 The Court found that a debtor may terminate any retiree benefits in bankruptcy only if,inter alia, the debt

Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“WSRCPA”) represents Congress’ attempt to address companies considered “too big to fail.” The statute creates a new “orderly liquidation authority” (“OLA”), which allows the Federal Deposit Insurance Corporation (“FDIC”) to seize control of a financial company1 whose imminent collapse is determined to threaten the financial system as a whole. Commencement of a receivership under the OLA would preempt any proceedings under the Bankruptcy Code.

A “roll-up” is a form of postpetition financing which has the effect of elevating the priority of prepetition debt. In a roll-up, the prepetition debt of the postpetition, new money lenders is rolled into the debtor in possession financing, thus affording the prepetition debt superpriority status and, in many circumstances, ensuring the rolled-up debt is paid in full on the effective date of the plan of reorganization, (unless the lender consents to different treatment under the plan).1

The comprehensive financial reform bill recently passed by the Senate1 creates a new “orderly liquidation authority” (“OLA”) that would allow the Federal Deposit Insurance Corporation (“FDIC”) to seize control of a financial company2 whose imminent collapse is determined to threaten the financial system as a whole.

Just in time for the fifth anniversary of the enactment of chapter 15 of the Bankruptcy Code, which allows foreign debtors to administer assets located in the U.S. or stay the actions of U.S. creditors – Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York has issued a decision reaffirming the broad utility and scope of chapter 15.

Introduction

The United States Bankruptcy Court for the Southern District of New York ruled recently on the validity of “gift plans” – plans of reorganization under which a senior creditor “gifts” assets to a junior creditor or equity holder.1 In In re Journal Register Co.,2 Bankruptcy Judge Alan L. Gropper approved a plan in which secured lenders gifted a portion of their recovery to certain trade creditors, and detailed some of the important limitations on gift plans.

Evolution of the Gift Plan Doctrine

Earlier this year, Courts from the Bankruptcy Courts for the Southern District of New York to the United States Supreme Court issued a number of rulings approving the asset sales by Chrysler and General Motors. Although popular and industry media have been replete with stories regarding the facts of these cases, this article provides an in-depth analysis of the Courts’ rulings on several key issues of interest to debtors and creditors in future bankruptcies.

Summary of Key Rulings

In a recently filed motion in the United States Bankruptcy Court Southern District of New York (the “Motion”), Lehman Brothers Holdings Inc. (“LBHI”) is seeking to compel Metavante Corporation (“Metavante”) to perform its obligations under a swap agreement between Metavante and Lehman Brothers Special Financing Inc.

Historically, the United Kingdom has not had a specialised bankruptcy regime for dealing with the failures of financial institutions. Rather, these were handled under the same rules that applied to ordinary corporations.