In recent years, market participants have watched with interest from across the Atlantic as U.S. out-of-court liability management and restructuring transactions moved material assets out of the creditors' collateral pools, to enhance liquidity, to raise additional debt or to extend the maturity of existing debt. Many have wondered when these sort of transactions will reach European shores.

That moment has now arrived.

INTRODUCTION

Except for disastrous fires that sparked the largest bankruptcy filing of the year, liabilities arising from the opioid crisis, the fallout from price-fixing, and corporate restructuring shenanigans, economic, market, and leverage factors generally shaped the large corporate bankruptcy landscape in 2019. California electric utility PG&E Corp.

In In re Energy Future Holdings Corp., 2019 WL 2535700 (3d Cir. June 19, 2019), a panel of the U.S. Court of Appeals for the Third Circuit ruled that adequate protection payments made during a bankruptcy case and distributions under a chapter 11 plan are not distributions of collateral for purposes of a "waterfall" provision in an intercreditor agreement.

Intercreditor and Subordination Agreements

In Short:

The Situation: In Bakhshiyeva v Sberbank of Russia, a debtor sought to restructure English law-governed debts pursuant to an Azerbaijani restructuring proceeding. In order to prevent certain dissenting creditors from commencing enforcement proceedings against the debtor in the UK, the debtor asked the English court to provide an indefinite stay.

On June 4, 2018, the U.S. Supreme Court ruled in Lamar, Archer & Cofrin, LLP v. Appling, No. 16-1215, 138 S. Ct. 1752, 2018 WL 2465174 (U.S.

In In re Millennium Lab Holdings II, LLC, 2017 BL 354864 (Bankr. D. Del. Oct. 3, 2017), the U.S. Bankruptcy Court for the District of Delaware ruled that it had the constitutional authority to grant nonconsensual third-party releases in an order confirming the chapter 11 plan of laboratory testing company Millennium Lab Holdings II, LLC ("Millennium"). In so ruling, the court rejected an argument made by a group of creditors that a provision in Millennium’s plan releasing racketeering claims against the debtor’s former shareholders was prohibited by the U.S.

What Happened: The Third Circuit Court of Appeals joined five other circuits in holding that the unforeseen business circumstances exception excused WARN notice where an event outside the employer's control that would trigger layoffs was possible but not probable to occur.

The Larger Landscape: While the Fifth, Sixth, Seventh, Eighth, and Tenth Circuits have also adopted a probability standard for determining when the unforeseen business circumstances exception applies, the other circuits have not yet ruled on the issue.

On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. The Court's decision could resolve a circuit split as to whether section 546(e) of the Bankruptcy Code can shield from fraudulent conveyance attack transfers made through financial institutions where such financial institutions are merely "conduits" in the relevant transaction.

In 1994, Congress amended the Bankruptcy Code to add section 1123(d), which provides that, if a chapter 11 plan proposes to "cure" a default under a contract, the cure amount must be determined in accordance with the underlying agreement and applicable nonbankruptcy law. Since then, a substantial majority of courts, including the U.S. Court of Appeals for the Eleventh Circuit, have held that such a cure amount must include any default-rate interest required under either the contract or applicable nonbankruptcy law.

The U.S. Supreme Court has handed down two rulings thus far in 2016 (October 2015 Term) involving issues of bankruptcy law. In the first, Husky Int’l Elecs., Inc. v. Ritz, 194 L. Ed. 2d 655, 2016 BL 154812 (2016), the Court addressed the scope of section 523(a)(2)(A) of the Bankruptcy Code, which bars the discharge of any debt of an individual debtor for money, property, services, or credit to the extent obtained by "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition."