The Institutional Limited Partner Association (ILPA) has published recommendations for how “GP-led fund restructurings” should be organised. These transactions occur when a fund sponsor (GP/manager) introduces a secondary purchaser to buy assets out of one of its existing funds, typically into a new fund structure where the same GP is the manager. Such transactions are complex and inevitably throw up conflict issues. Investors regularly complain that GPs are short on transparency and slapdash with timelines when trying to do one of these deals.

It always amazes me when, after more than a half-century of Uniform Commercial Code (“UCC”) jurisprudence, an issue one thinks would arise quite commonly appears never to have been decided in a reported case. Such an issue was recently decided by the U.S. Court of Appeals for the Ninth Circuit in an adversary proceeding in the Pettit Oil Co. Chapter 7 case.[1]

The phrase ipso facto is Latin for “by the fact itself.” Ipso facto clauses are sometimes included in lease and purchase contracts, and they assert that if the lessee or purchaser becomes insolvent, or files for bankruptcy protection, then the contract has been breached. In other words, under such a clause the very act of filing for bankruptcy protection constitutes a breach of contract that absolves the other party of any further contract obligations.

Junior creditors are often described as holding a “silent second” under standard intercreditor agreements, which address the relative rights of senior and junior creditors and the extent to which junior creditors can seek to enforce remedies without the consent of senior creditors. The increased complexity of capital structures has led to litigation over the degree junior creditors must remain silent after the borrower has commenced a chapter 11 case.

We now address assets sales under Bankruptcy Code section 363. The statute allows debtors to use, sell, or lease their property in the ordinary course of business without court permission. But a debtor’s use, sale, or lease of property outside the ordinary course of business requires court approval. And courts will usually approve a debtor’s disposition of property if it reflects the debtor’s reasonable business judgment and an articulated business justification.

On February 28, 2019, the United States Bankruptcy Court for the Northern District of Texas issued an opinion in In re TM Village, Ltd. (Bankr. N.D. Tex. Feb. 28, 2019), holding that an unintentional, duplicate obligation remaining under a contract can render the contract executory, even if perhaps in contravention of the plain language of the contract.

The initial stage of a Chapter 11 filing is the most crucial and debtors must be ready for the tactics of aggressive creditors and stakeholders jockeying for priority in the restructuring proceedings. As part of this phase, “first day motions” are typically filed on the first day of a case. These motions are to obtain permission to take certain actions necessary to maintain the debtor’s business operations that cannot be taken unless the court first issues an order authorizing the debtor to take the actions.

Ruling from the bench on April 4, Bankruptcy Judge Alan Koschik of the United States Bankruptcy Court for the Northern District of Ohio denied approval of a disclosure statement proposed by FirstEnergy Solutions Corp. because the plan it described was “patently unconfirmable.”[1]

In a consignment distribution model, a third party Warehouse (the consignee) takes possession of goods on behalf of a Vendor (the consignor) for sale to Customers.

On March 18, 2019, Judge Stuart M. Bernstein of the United States Bankruptcy Court for the Southern District of New York issued a decision enforcing a mortgage lender’s claim for a prepayment premium (a/k/a make-whole or yield maintenance premium) notwithstanding the lender’s prepetition acceleration of the loan due to the debtor’s default.