The U.S. Court of Appeals for the Sixth Circuit has held that as the assignee of a debtors’ mortgage loan, a bank’s security interest was superior to the Chapter 13 Trustee’s interest as a judicial lien creditor. The ruling in Rogan v. Bank One, National Association (In re Cook), 457 F.3d 561 (6th Cir. 2006) affirmed the holdings of two lower courts. In December 2000, the debtors entered into a loan transaction with NCS Mortgage Lending Company (“NCS”), which was secured by a properly recorded mortgage.

I. In re Iridium Operating LLC

A company’s failure to meaningfully market its assets led to the dismissal of its attempted chapter 11 reorganization. As a result, a Massachusetts court held in a detailed opinion that an acquiring company was the successor to the company it acquired, and therefore liable for an $8.8 million debt.

The arrival of private equity and hedge funds into the US restructuring and insolvency markets is last year’s news. How these funds are transforming the restructuring markets in the United States and exporting these transformations to Europe is what’s of interest now. Keen on making higher and higher profits in a low interest rate environment, funds are directing vast amounts of their liquidity into purchasing and trading distressed bond debt, bank debt and trade debt in restructurings and in insolvency proceedings in the United States.

Lenders make secured loans expecting to recover the collateral in the event of a default. The collateral is sold to satisfy the debt. Experienced secured lenders understand that the automatic stay in bankruptcy stops recovery of collateral recovery without permission of the court. However, many secured lenders do not understand rights related to the statement of intention every debtor is required to send to each secured creditor.

The claim of an insider lender (“L”) who invested “in a venture with substantial risk” and who loaned it additional funds on a secured basis to salvage its business should not be recharacterized as equity or subordinated on equitable grounds, held the U.S. Court of Appeals for the Tenth Circuit on June 12, 2015. In re Alternate Fuels, Inc., 2015 WL 3635366 (10th Cir. June 12, 2015) (2-1) (“AFI”).

Summary: A recent Tennessee case requires secured lenders to verify the debtor's receipt of the notice of a foreclosure sale of personal property.

The U.S. Court of Appeals for the Second Circuit, on July 9, 2007, decisively affirmed a bankruptcy court's dismissal of an equitable subordination complaint filed by a creditors' committee against eight investment fund lenders. Official Committee of Unsecured Creditors of Applied Theory Corporation v. Halifax Fund, L.P., et al. (In re Applied Theory Corporation), ___ F.3d ___, 2007 U.S. App. LEXIS 16180 (2d Cir. July 9, 2007).

In In re Calpine Corporation, 2007 WL 685595 (Bankr. S.D.N.Y. 2007), the Bankruptcy Court for the Southern District of New York considered the issue of whether secured creditors whose debt was being paid prior to its original maturity date were entitled to a prepayment premium.

In Official Committee of Unsecured Creditors v. Halifax Fund, L.P. (In re Applied Theory Corp.),1 the Second Circuit, in a per curiam opinion, held that an official committee of unsecured creditors (the "Committee"), under the circumstances, did not have the right to commence an adversary proceeding seeking the equitable subordination of claims held by insiders of a Chapter 11 debtor. The Applied Theory court rebuffed the Committee's characterization of its claim as a direct claim that the Committee could prosecute without the bankruptcy court's permission.