Corporate Chapter 11 filings remained relatively low in 2014, down slightly from 2013, due to a robust capital market environment, low interest rates and easy access to financing. These and other factors allowed highly leveraged borrowers that might otherwise have been Chapter 11 restructuring candidates to refinance or pursue other nonjudicial restructuring alternatives. Among those companies that filed corporate bankruptcies, the District of Delaware and the Southern District of New York continued to capture the lion's share of cases.

In this installment of the Bankruptcy Blog’s series on the ABI Commission to Study the Reform of Chapter 11, we turn our attention to the recommendations and findings on the trustee’s avoiding powers (section V.C.), the standard for reviewing settlements and compromises (section V.G.), and the in pari delicto doctrine (section V.H.).

Avoiding Powers

On January 21, 2015, the United States Court of Appeals for the Second Circuit entered an opinion holding that an authorized UCC-3 termination statement is effective, for purposes of Delaware’s Uniform Commercial Code (the “UCC”), to terminate the perfection of the underlying security interest even though the secured lender never intended to extinguish the security interest and mistakenly authorized the filing.¹

Background

n re Sterling Bluff Investors, LLC, 515 B.R. 902 (Bankr. S.D. Ga. 2014) –

A mortgagee moved to dismiss a real estate debtor’s chapter 11 case, or in the alternative for relief from the automatic stay.  It contended that the debtor filed bankruptcy in bad faith, and that this was a “single asset real estate” case subject to special provisions regarding its entitlement to relief from the stay.

This is a continuation of Part 1, discussing a number of published and unpublished decisions by the United States Court of Appeals for the Eighth Circuit and the United States Bankruptcy Appellate Panel for the Eighth Circuit (the “BAP”) that impact both consumer and business bankruptcy practice throughout the circuit.

In two recent decisions, the United States District Court for the Southern District of New York adopted an interpretation of Section 316(b) of the Trust Indenture Act of 1939 (the “TIA”) that may complicate future exchange offers and, in some cases, force bond restructurings that might otherwise have been completed out-of-court to be effectuated through a bankruptcy filing.1  In Marblegate Asset Management v.

As a part of our continuing coverage of the 2012-2014 Final Report and Recommendations of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11, we’ve reported on a number of the Commission’s proposed revisions and reforms to the Bankruptcy Code, many of which (i.e., systemically important financial institutions, cross-border cases, DIP financing, etc.) primarily impact the traditional big players i

Changes to Ohio's receivership statute will go into effect as of March 23, 2015. The changes include, among other things:

• Expansion of the circumstances under which a receiver may be appointed
• "Priority consideration" for the candidate proposed by the party seeking the appointment of a receiver
• Certain clarifications with respect to exercising the equity of redemption

The revised statute also expressly authorizes "free and clear" sales - perhaps the most anticipated change to Ohio's receivership statute.

For the past several years, low interest rates and higher commodity prices have resulted in generally favorable financial conditions in the energy sector, keeping energy bankruptcy activity to a minimum. With the recent sharp decline of prices in numerous commodities and forecasts of higher interest rates in the near future, there is a likelihood that the financial condition of some companies in the energy and commodities sectors could deteriorate significantly.

The Bankruptcy Code authorizes a bankruptcy trustee to avoid (i.e., obtain the return of) certain types of prepetition property transfers so that the bankrupt estate can be divided among creditors fairly. For example, a trustee may bring actions to set aside transfers made within a specified period before the bankruptcy (preferences) and transfers made deliberately to defraud creditors (fraudulent transfers).