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.
Law360, New York (May 27, 2014, 4:11 PM ET) -- The Perishable Agricultural Commodities Act has many ramifications for secured lenders who provide financing to borrowers that own goods that fall within its scope, particularly in bankruptcy. Because PACA provides its beneficiaries — unpaid suppliers and sellers of perishable agricultural commodities and products — with superior rights over other creditors through the establishment of a trust, secured lenders must be careful not to rely on the standard language in bankruptcy orders that cleanse assets of liens.
Recent Developments in Bankruptcy and Restructuring
Volume 13 l No. 3 l May–June 2014 JONES DAY
Business
Restructuring
Review
Eighth Circuit Expands Subsequent New Value
Preference Defense in Cases Involving Three-Party
Relationships
Charles M Oellermann and Mark G. Douglas
A bankruptcy trustee or chapter 11 debtor-in-possession has the power under section
547 of the Bankruptcy Code to avoid a transfer made immediately prior to
bankruptcy if the transfer unfairly prefers one or more creditors over the rest of
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.
Why it matters
The Bankruptcy Code impairs lenders’ rights in various ways. Accordingly, lenders have long attempted to devise methods of preventing borrowers from filing for bankruptcy protection. Such attempts generally have not been successful -- courts hold that as a general matter, a borrower’s pre bankruptcy waiver of the right to file bankruptcy is against public policy and is void. See, e.g., Klingman v. Levinson,831 F.2d 1292, 1296 n.3 (7th Cir.
Sadly, sometimes tragedy strikes, as it did for the Montreal Maine & Atlantic Railway Ltd. in July, 2013, when one of its trains carrying crude oil derailed and exploded, resulting in 47 deaths, significant property and environmental damage, and the bankruptcy of the Railway. The Railway had a business interruption insurance policy, a settlement was reached with the insurer and the question of who was entitled to the multi-million-dollar settlement arose in the bankruptcy. In re Montreal Maine & Atlantic Ltd., 2014 Bankr. LEXIS 1628. 59 Bankr. Ct. Dec. 101 (Bankr. D.
Over the years, clients have sought my advice after they have obtained a judgment against a limited liability company or a corporation, and after they have tried, without success, to collect on that judgment. All of the typical judgment enforcement methods have already failed. Because judgment debtors generally do not volunteer payment and sometimes will take steps to make it much more difficult for a creditor to collect, this scenario is somewhat common. In response, clients will ask what they can do. There are a number of options. These include putting the ju
It’s unfortunate, but it happens: you reach a deal with your customer and prepare to perform your side of the agreement, only to discover that your buyer is insolvent or close to it. It is essential that you having a working knowledge your rights in this situation, because time is of the essence.