The City Once Dubbed “New England's Rising Star” Has Fallen on Hard Times
On Tuesday, two leading credit-rating agencies again downgraded the city of Hartford: Moody’s Investors Service now rates the struggling city at Caa3, while S&P Global Ratings has lowered its rating to CC. They attribute the junk classification to the increasing likelihood of a default by Hartford on its debt service obligations to bondholders.
The Sixth Circuit affirms the bankruptcy court’s interpretation of the creditor’s settlement agreement with the debtor. The agreement provided that the creditor released his claims against the city and the individual officers. The plan only provided for a small percentage to be paid on the claim, but stated claims against individual officers were not discharged by the plan. The creditor argued the settlement agreement should not be held to have released claims against the individual officers, but the court finds the plain language of the agreement makes clear such claims were released.
Debtors in Chapter 11 proceedings rarely pay unsecured creditors a meaningful dividend on prepetition accounts receivable balances, much less pay them in full. In an era of aggressive lending to place capital in the market, loan to value ratios are high. When a company experiences financial distress or insolvency, unsecured creditors may be “out of the money” from the get-go.
On September 18, in an en banc review, the Court of Appeals for the Eleventh Circuit overruled, in part, seminal casesBarger v. City of Cartersville, 348 F.3d 1289 (11th Cir. 2003) and Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002), adopting a totality-of-the-circumstances analysis when facing questions of judicial estoppel.
Avoiding a fraudulent transfer to the Internal Revenue Service (“IRS”) in bankruptcy has become easier, or at least clearer, as a result of a recent unanimous decision by a panel of the Court of Appeals for the Ninth Circuit, Zazzali v. United States (In re DBSI, Inc.), 2017 U.S. App. LEXIS 16817 (9th Cir. Aug. 31, 2017).
The U.S. Court of Appeals for the Ninth Circuit recently affirmed final judgments against corporate borrowers and guarantors in three separate cases, holding that:
(a) the Nevada statute limiting the amount of the deficiency recoverable in a foreclosure action was preempted by federal law as applied to transferees of the Federal Deposit Insurance Corporation (FDIC);
(b) the plaintiff bank had standing to enforce the loans it acquired from the FDIC;
(c) the bank was not issue-precluded from showing that the subject loans had been transferred to it;
In In re Hungry Horse, LLC, Adversary Proceeding No. 16-11222 (Bankr. D. N.M. September 20, 2017) (“Hungry Horse”), the New Mexico Bankruptcy Court reminded us that many U.S. Supreme Court opinions can be limited in scope and do not necessarily dispose of all potential remedies to an issue.