The U.S. Court of Appeals for the Fifth Circuit held on Feb. 10, 2010, that a corporate debtor’s pre-bankruptcy severance payments to its former chief executive officer (“CEO”) were fraudulent transfers. In re Transtexas Gas Corp., ____ F.3d _____, 2010 BL 28145 (5th Cir. 2/10/10). Because of its holding “that the payments were fraudulent under the Bankruptcy Code,” the court did “not consider other possible violations, including [the Texas Uniform Fraudulent Transfer Act] or [Bankruptcy Code] Section 547(b) [preferences].” Id. at *5.

In a recent decision, the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) granted protection over the U.S. assets of a Cayman Islands exempted company in liquidation. See Revised Order Recognizing Foreign Proceeding (the “Order”), In re Saad Investments Finance Company (No.5) Limited (“SIFCO5”), Case No. 09-13985 (KG) (Bankr. D. Del. Dec. 17, 2009) (Docket No. 47). The company, SIFCO5, is subject to official liquidation proceedings in the Cayman Islands, which the Bankruptcy Court found was eligible for relief under chapter 15 of the U.S.

As previously described in our Alert of Oct.

The United States Bankruptcy Court for the Southern District of New York entered an order on Sept. 17, 2009, granting a motion filed by Lehman Brothers Special Financing Inc. (“LBSF”) to compel Metavante Corporation (“Metavante”) to continue to make payments to LBSF under an ISDA Master Agreement.

The Administrators of Lehman Brothers International (Europe) (in administration) (“LBIE”), acting as LBIE’s agent and without personal liability, have advised that they will be filing an omnibus claim on behalf of LBIE and LBIE’s customers against Lehman Brothers Inc. (“LBI”) in its liquidation proceedings under the Securities Investor Protection Act of 1970 (“SIPA”).  

Financial advisors, investment bankers, lawyers and other professionals in reorganization cases should pay close attention to a decision of the U.S. Court of Appeals for the Second Circuit handed down on Jan. 6, 2009. In re Smart World Technologies, LLC, ___ F.3d ___ (2d Cir. 1/6/2009).

Lehman Brothers Holdings Inc. and its affiliated debtors (collectively, the “Debtors”) filed a motion in the bankruptcy court on Nov. 13, 2008, asking the court to approve procedures for (i) assuming (affirming) and assigning derivative contracts entered into before the Debtors commenced their bankruptcy cases, including resolving cure amounts; and (ii) entering into settlement agreements that may establish termination payments and the return of collateral under terminated derivative contracts.

Debtors’ Derivative Contracts

This week, Edward Gavin, the liquidating trustee (the "Trustee") for the Ultimate Escapes bankruptcy, filed preference complaints against several defendants.  Under the complaints, the Trustee alleges that the defendants received preferential transfers that are avoidable under 11 U.S.C. section 547 of the Bankruptcy Code.  For those unfamiliar with this bankruptcy proceeding, Ultimate Escapes ("Ultimate" or the "Debtor") filed petitions for bankruptcy in the Delaware Bankruptcy Court on September 20, 2010. 

Background

When talking about mergers, acquisitions and maybe even liquidations, retirement plans can sometimes get lost in the shuffle.  Asset purchases that result in the liquidation of the seller company, or acquisitions of assets by buyers, can create problems over legacy retirement plans.  These "orphan" plans just don't disappear and they have to be dealt with properly.