In the wake of recent bankruptcy filings by several prominent financial institutions, there’s a growing interest in changing standard credit documentation to address the risks of defaulting lenders and nonperforming administrative agents. Here are credit agreement provisions that financial institutions, acting as swingline lenders and letter of credit issuers, can require to protect themselves against the risk of a defaulting lender.

Yesterday, in a filing with the Securities and Exchange Commission, General Motors announced that it is currently attempting to restructure debt held by the U.S. Treasury Department. Under a current proposal, GM would convert at least 50% of its debt held by the U.S. Treasury Department into common shares. As a result of the conversion Treasury would hold greater than 50% of GM’s common shares.

Today, the Office of the Comptroller of the Currency closed Citizens National Bank, headquartered in Macomb, Illinois, and the FDIC was appointed receiver.

Today, after an extended auction, the OTS closed BankUnited, FSB, headquartered in Coral Gables, Florida and named theFDIC as receiver.

On August 30, 2008, the United States District Court for the District of Northern Texas issued its ruling on whether Americas Mining Corporation (“AMC”) (and its parent Grupo Mexico) had caused ASARCO LLC (“ASARCO”), a wholly owned subsidiary of Grupo Mexico, to fraudulently transfer stock of Southern Peru Copper Company (“SPCC”) from ASARCO to AMC. The Court determined that AMC was liable for (1) intentional fraudulent transfer, (2) aiding and abetting breach of fiduciary duty under New Jersey law; and (3) civil conspiracy under Arizona law. See ASARCO LLC v.

It is not surprising that within an economic outlook which seems permanently set to "gloomy" many companies are having to think about reorganising their operations or restructuring their holding structures This article highlights some of the tax and other considerations which must be borne in mind when considering such reorganisations or restructurings with reference to some recent (and less recent) cases and changes in the law and points which have come to the fore in the current climate.

Recapitalisations

Earlier today, the FDIC was appointed as receiver of three banks: Southern Community Bank, Cooperative Bank and First National Bank of Anthony, bringing the total number of bank failures in the nation this year to 40.

As a general rule, a debtor realizes taxable income upon the partial or total cancellation of its debt. Special rules may apply, however, when the debtor is a “pass-through” entity—e.g., a partnership, a limited liability company (LLC) that is treated as a partnership for United States federal income tax purposes or a subchapter S corporation. Cancellation of debt (COD) income realized by a pass-through entity generally passes through to the entity’s owners, with each owner being required to report its allocable share of such income on its own income tax return.

Two US federal appeals courts recently held that a provision of the Bankruptcy Code can protect private company sellers in the event that the company they sold later goes bankrupt and a fraudulent transfer claim is brought against them to recover the sale proceeds. The courts found that this protection applies when a financial institution is used to handle the transfer of consideration in the sale.

Today, Guaranty Bank, headquartered in Austin, Texas, was closed by theOTS and the FDIC was named as receiver.