Briefings

The latest victims of the prolonged downturn in the offshore, marine and oil and gas sectors, Singapore-based Ezra Holdings and EMAS, have sought Chapter 11 protection with the US bankruptcy courts. Whilst it is as yet unclear whether these companies will “go under”, this briefing sets out the latest events and key issues affecting operators who may find themselves dealing with counterparties in similar insolvency proceedings and financial difficulties.

Background

Traditional DIP Order Carve Outs Do Not Cap the Administrative Claims of Committee Professionals

We have written in the past about the doctrine of equitable mootness. A March 30, 2017 per curiam affirmance by the Eleventh Circuit Court of Appeals in Beem v. Ferguson (In re Ferguson) explores the concept and limitations of equitable mootness and distinguishes it from the related doctrine of constitutional mootness.

In Pacifica L 51 LLC v. New Investments, Inc. (In re New Investments, Inc.), 840 F.3d 1137 (9th Cir. 2016), the Ninth Circuit Court of Appeals held that Section 1123(d) of the Bankruptcy Code provides that a cure amount may include a post-default rate of interest if the underlying loan documents and applicable non-bankruptcy law provide for the payment of post-default rate interest upon a default.

Two recent cases analyzed the misrepresentations of a debtor regarding a single asset and held a written misrepresented value of a single scheduled estate asset would result in nondischargeability under Section 727, and that a verbal misrepresentation of a pre-petition asset to a creditor did not result in an exception to discharge under Section 523.

U.S. Bank N.A. v. Village at Lakeridge, LLC, No. 15-1509

The U.S. Supreme Court ruled on March 22, 2017, in Czyzewski v. Jevic Holding Corp., that without the consent of affected creditors, bankruptcy courts may not approve "structured dismissals" providing for distributions that "deviate from the basic priority rules that apply under the primary mechanisms the [Bankruptcy] Code establishes for final distributions of estate value in business bankruptcies."

The UK Court of Appeal recently considered the liability of issuers to secondary market investors under the Misrepresentation Act 1967 (the “1967 Act”) in the case of Taberna Europe CDO II Plc v Selskabet (formerly Roskilde Bank A/S) (In bankruptcy) [2016] EWCA Civ 1262. The Court found that primary and secondary investors could potentially be entitled to rely on online content, such as product presentations, which have been published in a deliberate manner, particularly if the issuer directs investors to the content.

(Bankr. E.D. Ky. Mar. 24, 2017)

The bankruptcy court grants in part and denies in part the defendant’s motion to dismiss in this fraudulent and preferential transfer avoidance action. The trustee’s amended complaint failed to state claims based on certain transfers, but did state a preferential transfer claim.

Judge: Wise

Attorneys for Trustee: Bingham Greenebaum Doll LLP, Claude R.Bowles, Jr., Daniel J. Donnellon, Alex S. Rodger

Attorneys for Defendant: Ross M. Bagley, Gideon Cashman, Eric M. Fishman, Adam R. Kegley

The filing of a bankruptcy case puts in place an automatic injunction, or stay, that halts most actions by creditors against a debtor. But can a creditor violate the automatic stay by not acting? The Tenth Circuit recently addressed the issue in WD Equipment, LLC v. Cowen (In re Cowen), adding to the split of authority on the issue.