In a ruling yesterday, Judge Christopher Sontchi of the United State Bankruptcy Court for the District of Delaware denied a motion by a bond trustee to transfer venue of the Dallas-based Energy Future Holdings from Wilmington, Delaware to the Northern District of Texas, citing broad support from many creditors for keeping the case before the Delaware court.
A recent decision by the U.S. District Court for the Western District of Washington found that certain distressed debt funds were not “financial institutions” under the definition of “Eligible Assignee” in the applicable loan agreement and thus were not entitled to vote on the debtor’s chapter 11 plan of reorganization. The District Court decision affirmed a bankruptcy court decision enjoining loan assignments to the funds and recently denied the funds’ motion to vacate the decision.”1
A nightmare scenario for a lender: you lend $1.2 million to a debtor to purchase equipment; you take a first priority security interest in the equipment; one day another company calls to tell you it purchased the equipment at a bankruptcy auction you never knew about, for 10-20% of what you’re owed; you try to overturn the sale, but cannot, because the sale is consummated and your appeal is now “statutorily moot.” Could this happen? It happened in a recent Oregon case.
On May 23, 2014, the Federal Trade Commission announced that the FTC’s Bureau of Consumer Protection sent a letter to the court overseeing the bankruptcy proceedings for ConnectEDU Inc. (“ConnectEDU”), an education technology company, warning that the proposed sale of the company’s assets raises privacy concerns.
INTRODUCTION
On Monday, May 29, 2014, the United States Bankruptcy Court for the Southern District of New York approved Sbarro LLC’s plan of reorganization, paving the way for the pizza restaurant chain to exit bankruptcy. Sbarro filed for chapter 11 protection earlier this year with a prepackaged plan that allowed its prepetition secured lenders to swap over $148 million in debt for control of the reorganized business if higher or otherwise better purchasers for Sbarro’s business did not overbid. When no alternative purchasers materialized, Sbarro moved forward with its debt-for-equity swap
The U.S. District Court for the Southern District of New York, on April 27, 2014, issued a decision directing the bankruptcy court to dismiss fraudulent transfer complaints brought by the Madoff Securities Investor Protection Act of 1970 (“SIPA”) trustee against investment funds, their customers and individuals when the trustee failed “plausibly [to] allege that defendant[s] did not act in good faith.” SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2014 WL 1651952, at *5 (S.D.N.Y. April 27, 2014).
Can a foreign person exclude foreign-situs assets in determining insolvency exception to cancellation of indebtedness income?
Once again, those of us in the commercial finance world are reminded of the age-old adage caveat emptor. This time the warning is directed at hedge funds and other investors with a penchant for purchasing distressed debt from bank syndicates.