In a majority opinion dated December 15, 2009, the Ninth Circuit Bankruptcy Appellate Panel held that a chapter 11 debtor may not equitably subordinate a creditor's claim and transfer the lien securing that claim, when such creditor is, itself, in bankruptcy, before first obtaining relief from the automatic stay under section 362 of the U.S. Bankruptcy Code in such creditor's bankruptcy case. Lehman Commercial Paper v. Palmdale Hills Prop. (In re Palmdale Hills Prop., LLC), 2009 Bankr. LEXIS 4294 (B.A.P. 9th Cir. Dec. 15, 2009).

Lehman Brothers Holdings Inc. (“LBHI”) and its affiliate and subsidiary debtors (collectively, “Lehman”) filed their proposed chapter 11 plan of reorganization in their jointly administered chapter 11 proceedings on Monday, March 15, 2010 (Docket No. 7572). Monday was the last day for Lehman to file a plan pursuant to section 1121(d) of the Bankruptcy Code in order for Lehman to maintain the exclusive right to file and obtain confirmation of a plan.¹

While 90 percent of life may be just showing up, showing up late may be just as bad as never showing up at all. Just ask two creditors who were told for the second time they cannot file claims in the Lehman Brothers bankruptcy case because they filed their claims too late.

The insolvency administrators (hereinafter, “the Plaintiff”) of the company Santa Teresa Materiales de Construcción S.L. (hereinafter “the Company”) sought the declaration of invalidity of the transaction undertaken by the Banco Santander S.A. (hereinafter, “the Bank”) classified by the Plaintiff as debt offset.

In a blow to administrators that will surely impact on the timings of any administration, most particularly those involving a large property portfolio, HHJ Purle, sitting in the High Court, has handed down a decision that will have ramifications potentially as serious as those of Re Trident Fashions for administrators in considering how long to remain in office, or indeed whether to accept an appointment at all.

Re Powerhouse Limited: Prudential Assurance Company Limited v PRG Powerhouse Limited [2007] EWHC 1002 Ch Guarantees are widely used in commercial transactions to provide assurance to creditors that debts or other obligations owed to them are discharged fully in the event the principal debtor fails to perform. This assurance was shaken by the steps taken in early 2006 by PRG Powerhouse Limited (Powerhouse) to enter into a company voluntary arrangement (CVA) that contained proposals to release certain parent company guarantees given to landlords of premises being vacated by Powerhouse.

In a decision that will have important repercussions for creditors with the benefit of guarantees, the High Court this week has held that a company in financial difficulties may not propose a voluntary arrangement which is unfairly prejudicial on its terms to certain creditors.

Re Powerhouse

In relation to insolvent liquidations under U.K. law, one of the primary objectives will be the implementation of an efficient process to preserve and recover assets for the benefit of the creditors. This is particularly so where there is a need to instigate costly litigation or cross-border recognition proceedings and where the liquidator will want increased assurances as to the likelihood that those steps will generate positive returns.

In the last edition of Real Estate Update, we considered the position of a landlord wishing to keep the lease of premises to a company in administration ongoing and in what circumstances he will receive the full rent (ie 100 pence in the pound). If, however, the tenant is in administration and the landlord would like to bring the lease to an end, he would only be entitled to forfeit the lease if the administrator consents or the court grants an order giving him permission to do so.1

(judgment 22/2009)

This case concerned whether the English Court of Appeal decision in Re Bayoil S.A. (the “Bayoil Case”) would be persuasive in Guernsey and how the Royal Court of Guernsey should exercise its discretion under section 406 of the Companies (Guernsey) Law 2008 (the “Law”).