As of November 1, 2021, dealers in security-based swaps (“SBS”) whose dealing activity exceeds certain de minimis thresholds (e.g., gross notional amount of $3 billion for credit default SBS, $150 million for other SBS, and $25 million for SBS where the counterparty is a special entity) are required to register with the SEC as a security-based swap dealer (“SBSD”) and to comply with the SEC’s regulations applicable to SBS.

This update summarises the latest jurisprudence on insolvent schemes of arrangement (schemes) and restructuring plans (RPs), and provides an overview of the key themes that are emerging in this area.

Key Concepts and Notes

On October 31, 2021, PWM Property Management LLC, along with several affiliates that own premium commercial space in New York and Chicago, filed a petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware (Case No. 21-11445). The company reports $1 to 10 billion in assets and liabilities.

A person in possession of a debtor’s property upon a bankruptcy filing now has more guidance from the Supreme Court as to the effect of the automatic stay. In City of Chicago, Illinois v. Fulton, 141 S. Ct. 585 (2021), handed down on January 14 of 2021, the Court was faced with the issue of whether the City of Chicago (the “City”) was liable for violation of the automatic stay for refusing to return vehicles it impounded pre-petition. Issuing a narrow decision under Section 362(a)(3) of the Bankruptcy Code, the Court held that it was not.

Maryland Legal Alert for Financial Services

The Bankruptcy Court for the District of Maryland recently proposed a new local rule in response to the U.S. Supreme Court decision that mere retention of bankruptcy estate property by a creditor post-petition does not amount to an exercise of control over estate property in violation of the automatic stay.

On October 26, 2021, Grupo Posadas S.A.B. de C.V., a Mexico City-based hospitality company, filed a petition under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of New York (Lead Case No. 21-11831). Grupo Posadas owns, leases, operates, and manages resorts, hotels, and villas in urban and coastal areas of Mexico under several owned brands.

On October 19, the U.S. District Court for the Middle District of Florida denied a defendant’s motion for judgment without prejudice concerning allegations that it knowingly ignored cease-and-desist letters sent by an individual while the individual had a pending bankruptcy petition.

On October 12, 2021, the U.S. Supreme Court denied, without comment, a petition for a writ of certiorari in a case challenging the doctrine of equitable mootness. Equitable mootness has been described as a “narrow doctrine by which an appellate court deems it prudent for practical reasons to forbear deciding an appeal when to grant the relief requested will undermine the finality and reliability of consummated plans of reorganization.”1 By his petition, David Hargreaves—an unsecured noteholder of debtor Nuverra Environmental Solutions Inc.

In a chapter 13 case, which typically lasts from 3 to 5 years while a debtor makes payments according to a plan, the value of the debtor’s property can fluctuate. In a time like the present, when home prices are rising, sometimes dramatically, that could mean an increase in the value of a debtor’s home during the life of the chapter 13 which changes the financial dynamics in the case.

Highlights