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.

On August 11, 2009, in one of the most significant rulings to date in the GGP bankruptcy proceeding, the Bankruptcy Court denied motions to dismiss as bad faith filings the bankruptcy cases of 20 GGP property-level subsidiaries. In denying the motions, the court stated that the fundamental creditor protections negotiated in the special purpose entity structures at the property level are in place and will remain in place during the pendency of the chapter 11 cases.

In light of the possibility that several hundred FDIC-insured banks and thrifts may fail in the next two- to three-year period, many clients and friends of the firm have requested a summary of the legal concerns that arise for officers and directors immediately following the seizure of an institution by the FDIC, as well as steps that may be taken to be better prepared before a failure.

On July 2, 2009 the United States Bankruptcy Court for the Southern District of New York issued an order establishing September 22, 2009 as the deadline for filing proofs of claims against Lehman Brothers Holdings Inc. or any of its debtor affiliates (the “Order”). The Order provides that any holder of a claim against the Debtors who fails to file a proof of claim before the September 22, 2009 deadline will be forever barred from asserting such claim thereafter.

The Illinois Mortgage Foreclosure Law has been amended effective as of October 29, 2009, by adding new protections for occupants of dwelling units1 in properties that are in foreclosure. These protections will apply to projects which were rental housing from the outset, and to for-sale housing projects in which units are being rented pending sale or which have been converted to rental housing.  

Notice to Occupants by Receivers and Mortgagees in Possession

In a recently filed motion in the United States Bankruptcy Court Southern District of New York (the “Motion”), Lehman Brothers Holdings Inc. (“LBHI”) is seeking to compel Metavante Corporation (“Metavante”) to perform its obligations under a swap agreement between Metavante and Lehman Brothers Special Financing Inc.

Summary

Introduction

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

In the past two days, AIG has announced the sale of its Hong Kong Financial branch and the sale of additional energy and infrastructure investment assets.