In Nortel Network’s (“Nortel”) chapter 11 case, In re: Nortel Networks Inc., et al., United States Bankruptcy Court for the District of Delaware, Case No. 09-10138(KG), Bankruptcy Judge Kevin Gross recently reduced the Indenture Trustee’s counsel fees by $913,936.00 in response to heavily litigated objections to the fees by noteholders, Solus Alternative Asset Management LP (“Solus”) and PointState Capital LP (“PointState”) (collectively the “Objecting Noteholders”).

Background: Professionals’ Fees in Chapter 11 cases

A recent decision by the U.S. District Court for the Southern District of New York in Cumulus Media Holdings Inc. v. JP Morgan Chase Bank, N.A. (SDNY Feb. 24, 2017) found that a proposed refinancing that was consented to by the company’s revolving credit lenders nevertheless violated the negative covenants in the company’s Credit Agreement.

The Proceedings

In a much anticipated decision issued on March 22, 2017, the United States Supreme Court determined in Czyzewski v. Jevic Holding Corp. (Jevic) that a “structured dismissal” of a bankruptcy case cannot include a distribution scheme to creditors that does not comply with the priorities provided for under the Bankruptcy Code. The decision looks at the policy underlying “basic priority rules” in bankruptcy cases and, in doing so, throws into question the future use of negotiated settlements in bankruptcy cases where some, but not all, creditors receive a benefit.

When faced with a recalcitrant debtor, clients sometimes move too quickly to put the debtor into an involuntary bankruptcy, especially when fraudulent transfers and other creditor avoidance attempts become apparent. But creditors considering filing or joining in the filing of an involuntary bankruptcy petition, and the attorneys that represent them, have much to deliberate before becoming involved in an involuntary bankruptcy filing.

Briefings

The latest victims of the prolonged downturn in the offshore, marine and oil and gas sectors, Singapore-based Ezra Holdings and EMAS, have sought Chapter 11 protection with the US bankruptcy courts. Whilst it is as yet unclear whether these companies will “go under”, this briefing sets out the latest events and key issues affecting operators who may find themselves dealing with counterparties in similar insolvency proceedings and financial difficulties.

Background

Traditional DIP Order Carve Outs Do Not Cap the Administrative Claims of Committee Professionals

The UK Court of Appeal recently considered the liability of issuers to secondary market investors under the Misrepresentation Act 1967 (the “1967 Act”) in the case of Taberna Europe CDO II Plc v Selskabet (formerly Roskilde Bank A/S) (In bankruptcy) [2016] EWCA Civ 1262. The Court found that primary and secondary investors could potentially be entitled to rely on online content, such as product presentations, which have been published in a deliberate manner, particularly if the issuer directs investors to the content.

(Bankr. E.D. Ky. Mar. 24, 2017)

The bankruptcy court grants in part and denies in part the defendant’s motion to dismiss in this fraudulent and preferential transfer avoidance action. The trustee’s amended complaint failed to state claims based on certain transfers, but did state a preferential transfer claim.

Judge: Wise

Attorneys for Trustee: Bingham Greenebaum Doll LLP, Claude R.Bowles, Jr., Daniel J. Donnellon, Alex S. Rodger

Attorneys for Defendant: Ross M. Bagley, Gideon Cashman, Eric M. Fishman, Adam R. Kegley

The filing of a bankruptcy case puts in place an automatic injunction, or stay, that halts most actions by creditors against a debtor. But can a creditor violate the automatic stay by not acting? The Tenth Circuit recently addressed the issue in WD Equipment, LLC v. Cowen (In re Cowen), adding to the split of authority on the issue.