Bankruptcy Code Section 503(b)(9) litigations have sometimes yield "shocking results". There is no pun intended here. This article discusses a recent case where the United States Bankruptcy Court for the District of Montana waded into the spine tingling issue of whether electricity is a good that is subject to Section 503(b)(9) administrative priority status.
Large businesses and organizations that self-insure their legally mandated insurance requirements often use “fronting” policies in which the policyholder must reimburse insurers for all losses and expenses paid on the policyholder’s behalf. These policyholders must furnish substantial collateral to secure repayment, typically, enough to pay many years’ worth of actual and anticipated claims. This can amount to hundreds of millions of dollars, and typically exacerbates cash flow and balance sheet problems for policyholders under financial stress.
In two recent decisions,2 the United States Bankruptcy Court for the Southern District of New York denied motions by large chapter 11 debtors to approve executive bonus plans designated as key employee incentive plans ("KEIP"), finding that the proposed KEIPs actually were disguised and impermissible retention or "pay to stay" bonus plans for insiders. These are the first opinions to reject so-called KEIPs following a recent line of cases that have approved KEIPs for insiders.
On July 2, 2012, the Illinois Department of Insurance (IDOI) entered an Agreed Order of Rehabilitation against Lumbermens Mutual Casualty Company and American Manufacturers Mutual Insurance Company, which is the part of the Lumbermens Mutual Group formerly known as Kemper (collectively, “Lumbermens”). Under the order, IDOI’s Director will serve as Lumbermens’ Rehabilitator with powers to restructure Lumbermens’ insurance business. From this point forward, Lumbermens will no longer take on any new insurance obligations, issue any new policies, or renew any existing policies.
In a recent decision1 involving Global Aviation Holdings, Inc.
Given the spate of bankruptcies filed over the last few years, including by large-scale tenants such as Borders, Linens 'n Things, and Circuit City, and the tenuous financial condition of big-box retailers such as Best Buy, it is important for both landlords and tenants to understand the benefits and limitations of bankruptcy protection as it relates to the status of a bankrupt tenant’s leasehold interest.
In somewhat related news, in two recent New York Supreme Court rulings, judges upheld the validity of “bad boy” guarantees that included as non-recourse exceptions or “bad boy” acts under the guarantee a voluntary bankruptcy filing by the borrower.
On September 13, 2011, the Federal Deposit Insurance Corporation approved a final rule requiring certain financial institutions to prepare a plan for their dismantling in the event of material financial distress or failure.
In a recent decision1 involving TerreStar Networks, Inc., and its affiliates (“TerreStar” or the “Debtors”), the United States Bankruptcy Court for the Southern District of New York held that the Debtors’ noteholders held a valid lien on the economic value of a license granted to TerreStar by the Federal Communications Commission (“FCC”) and that nothing in Article 9 of the New York Uniform Commercial Code (the “NYUCC”) or Section 552 of the Bankruptcy Code invalidated that lien.
Debtors operating under Chapter 11 bankruptcy protection routinely sell some or all of their assets during the course of their bankruptcy case. As part of a bankruptcy court approved sale process, debtors often request that the court exempt such transfers from stamp taxes1 pursuant to Bankruptcy Code § 1146(a). The exemption generally reduces obligations encumbering a debtor’s property and allows for a greater portion of sale proceeds to be available for distribution to creditors.