Bankruptcy courts typically rely on three valuation methods to determine a debtor’s enterprise value: comparable company analysis, precedent transaction analysis, and discounted cash flow analysis.

Recently, the Bankruptcy Court for the Eastern District of Louisiana stayed its own judgment pending an appeal to resolve doubt over the bankruptcy court’s authority to enter judgment on counterclaims related to a management agreement among Highsteppin’ Productions, L.L.C.

This morning, the Supreme Court issued its hotly anticipated decision in Executive Benefits Insurance Agency v.

Courts Begin to Wrestle with the Impact of on a Debtor’s Ability to Recover Estate Property

In the March/April 2014 edition of the Business Restructuring Review, we discussed an important ruling from a Delaware bankruptcy court restricting a creditor’s right to credit bid an acquired claim in bankruptcy sale of the underlying collateral. In In re Fisker Automotive Holdings, Inc., 2014 BL 13998 (Bankr. D. Del. Jan. 17, 2014), leave to app. denied, 2014 BL 33749 (D. Del. Feb. 7, 2014), certification denied, 2014 BL 37766 (D. Del. Feb. 12, 2014), the bankruptcy court limited the amount of the credit bid to the discounted purchase price actually paid for the debt.

Recent Developments

The U.S. Court of Appeals for the Tenth Circuit―in Rajala v. Gardner, 709 F.3d 1031 (10th Cir. 2013)―has joined the Second Circuit and departed from the Fifth Circuit by holding that an allegedly fraudulently transferred asset is not property of the estate until recovered pursuant to section 550 of the Bankruptcy Code and therefore is not covered by the automatic stay. According to the court, its decision “gives Congress’s chosen language its ordinary meaning, and abides by a rule against surplusage.”

Until 2013, no circuit court of appeals had weighed in on the implications of the U.S. Supreme Court’s pronouncement in the 203 North LaSalle case that property retained by a junior stakeholder under a cram-down chapter 11 plan in exchange for new value “without benefit of market valuation” violates the “absolute priority rule.” See Bank of Amer. Nat’l Trust & Savings Ass’n v. 203 North LaSalle Street P’ship, 526 U.S. 434 (1999), reversing Matter of 203 North LaSalle Street P’ship, 126 F.3d 955 (7th Cir. 1997).

As the seventh anniversary of the enactment of chapter 15 of the Bankruptcy Code draws near, the volume of chapter 15 cases commenced in U.S. bankruptcy courts on behalf of foreign debtors has increased rapidly. During that period, there has also (understandably) been a marked uptick in litigation concerning various aspects of the comparatively new legislative regime governing cross-border bankruptcy cases patterned on the Model Law on Cross-Border Insolvency. One such issue was the subject of a ruling recently handed down by a Texas district court. In In re Vitro, S.A.B. de C.V., 470 B.R.

In Official Committee of Unsecured Creditors v. Baldwin (In re Lemington Home for the Aged), 659 F.3d 282 (3d Cir. 2011), the Third Circuit Court of Appeals held, among other things, that the “deepening insolvency” cause of action, which the Third Circuit previously recognized in Official Committee of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340 (3d Cir. 2001), remains an independent cause of action under Pennsylvania law.

Background