Seeking to have an independent examiner investigate a debtor or its management can be a powerful tool available to creditors and other interested parties in a bankruptcy case. Typically, a party might request that an examiner be appointed if the debtor or its management is suspected of fraud or other misconduct. The low cost associated with making the request, together with recent positive outcomes for requesting creditors, may help to increasingly popularize the use of examiner requests by parties seeking leverage in bankruptcy plan negotiations.
The Third Circuit Court of Appeals dealt a blow to secured creditors in its recent decision holding that a debtor may prohibit a lender from credit bidding on its collateral in connection with a sale of assets under a plan of reorganization. In the case of In re Philadelphia Newspapers, LLC, No. 09-4266 (3d Cir. Mar. 22, 2010), the court, in a 2-1 decision, determined that a plan that provides secured lenders with the “indubitable equivalent” of their secured interest in an asset is not required to permit credit bidding when that asset is sold.
Many bankruptcy practitioners are familiar with the general tenet that an obligation secured only by a mortgage on the Debtor’s principal residence is immune from modification or avoidance by the Debtor. Sections 1123(b)(5) and 1322(b)(2) of the Bankruptcy Code protect residential mortgages from being “stripped-down” to the value of the subject real estate or subjecting the terms of the underlying obligation to modification.
On May 5, 2010, the United States Bankruptcy Court for the Southern District of New York issued a decision declaring that a party’s right to setoff in an ISDA Master Agreement is unenforceable in bankruptcy unless strict mutuality exists. (Decision and Order).
On May 5, 2009, Judge James Peck, the Bankruptcy Judge in the Lehman Brothers bankruptcy cases, held that the safe harbor provisions of the Bankruptcy Code do not override the mutuality requirements for setoff under section 553(a) of the Bankruptcy Code. As a consequence, the Bankruptcy Court prohibited Swedbank, a non-debtor counter party to a swap agreement, from setting off pre-petition claims against Lehman against funds collected for Lehman’s account postpetition. See In re Lehman Bros. Holdings Inc., Bankr. Case No. 08-13555 (JMP) (Bankr. S.D.N.Y.
These are tough times in the hotel business. The recession has squeezed room rates and net operating income. The credit crunch means new borrowing is available only at lower loan to value ratios near 50%, on already beaten down values. At the same time, many tens of billions of dollars of existing hotel loans are maturing or otherwise in default, leaving the owners with little ability to sell or refinance at for amounts sufficient to pay off existing debt.
The U.S. Bankruptcy Court for the Southern District of New York recently issued an opinion in the case of In re Lehman Brothers Holdings Inc. that significantly restricts the scope of setoff rights for energy traders and other participants in derivatives and forward commodity markets. Traditionally, bankruptcy law has required mutuality between the debtor and a creditor as a prerequisite for the exercise of setoff rights by the creditor.
On May 5, the judge overseeing the bankruptcy case of Lehman Brothers Holdings Inc issued an opinion refusing Swedbank AB's request to keep several million dollars in post-bankruptcy Lehman deposits as a setoff against pre-bankruptcy swap termination claims.
Introduction
On May 18th, the Second Circuit, addressing the 2005 amendments to the Bankruptcy Code, held that a lender with a purchase-money security interest in a car is entitled to an unsecured claim with regard to a deficiency it incurred upon the surrender and sale of the car. The deficiency claim derives from the contract between the parties and background state law. In the absence of a Bankruptcy Code provision expressly disallowing it, such an unsecured claim may be maintained.