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    U.S. Supreme Court upholds right of secured creditors to credit bid under Chapter 11 plan
    2012-06-04

    On May 29, 2012, the U.S. Supreme Court, in a unanimous decision, resolved a high-profile circuit split regarding the right of secured creditors to credit bid in an asset sale under a chapter 11 plan. In RadLAX Gateway Hotel, LLC v. Amalgamated Bank,1 the Court held that a debtor cannot deny a secured creditor the right to credit bid as part of a chapter 11 plan providing for the sale of assets free and clear of the secured creditor’s liens on those assets.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Katten Muchin Rosenman LLP, Credit (finance), Debtor, Collateral (finance), Secured creditor, Title 11 of the US Code
    Location:
    USA
    Firm:
    Katten Muchin Rosenman LLP
    The Supreme Court affirms the secured creditor’s right to credit bid under a Chapter 11 “cram-down” plan providing for the sale of collateral
    2012-06-04

    On May 29, 2012, the Supreme Court of the United States, in the chapter 11 cases of RadLAX Gateway Hotel, LLC, and RadLAX Gateway Deck, LLC (the “RadLAX Cases”)1 held by a vote of 8-02 that a chapter 11 plan cannot be confirmed if the plan (i) is rejected by a class of secured claims, (ii) provides for the sale of collateral free and clear of liens securing such claims, and (iii) deprives the holders of such claims of the right to credit bid at the sale of collateral.  

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Debtor, Collateral (finance), Secured creditor, Title 11 of the US Code, Seventh Circuit
    Authors:
    Brad Eric Scheler , Gary L. Kaplan , Shannon Lowry Nagle , Alan N. Resnick , Jennifer L. Rodburg
    Location:
    USA
    Firm:
    Fried Frank Harris Shriver & Jacobson LLP
    Supreme Court upholds secured party’s right to credit bid at a sale of property under a reorganization plan
    2012-06-04

    On May 29, 2012 the United States Supreme Court ruled that a plan of reorganization may not be confirmed over the objection of a secured creditor if the plan provides for the sale of collateral free and clear of the creditor’s lien, but does not permit the creditor to credit bid at the sale. The ruling resolved a conflict between a decision from Seventh Circuit Court of Appeals, which denied confirmation of such a plan, and decisions from the Third and Fifth Circuit Courts of Appeal, which approved such plans.

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Dykema Gossett PLLC, Debtor, Collateral (finance), Secured creditor, Supreme Court of the United States
    Authors:
    Richard M. Bendix, Jr.
    Location:
    USA
    Firm:
    Dykema Gossett PLLC
    Supreme Court upholds secured creditor’s right to credit bid in a bankruptcy case
    2012-06-04

    The United States Supreme Court emphatically upheld a secured creditor’s right to credit bid in bankruptcy cases. In RadLAX Gateway Hotel, et al. v. Amalgamated Bank, 566 U.S.___ (May 29, 2012), the Court found the case an "easy" one to resolve: when a secured creditor is denied the right to credit bid its debt in the sale of its collateral as a part of a bankruptcy plan, it will not receive the "indubitable equivalent" of its secured claim in the form of cash generated from the sale. The Court's unanimous decision should help restore certainty in lending.

    Filed under:
    USA, Banking, Derivatives, Insolvency & Restructuring, Litigation, Reed Smith LLP, Bankruptcy, Collateral (finance), Secured creditor, Supreme Court of the United States
    Authors:
    Bernard P. Simons
    Location:
    USA
    Firm:
    Reed Smith LLP
    Rescap seeks automatic bankruptcy stay of 27 MBS suits
    2012-06-04

    On May 25, 2012, Residential Capital LLC (“ResCap”) filed a complaint in United States Bankruptcy Court for the Southern District of New York seeking declaratory and injunctive relief to extend the automatic stay over 27 MBS lawsuits against it, its affiliates, and its executives while it undergoes bankruptcy restructuring.  ResCap alleges that all of the lawsuits against its non-debtor affiliates are inextricably connected to the debtor affiliates, and that such lawsuits will drain the debtors’ estates by forcing those entities to undergo extensive discovery and face significant indem

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Orrick, Herrington & Sutcliffe LLP, Injunction, United States bankruptcy court
    Location:
    USA
    Firm:
    Orrick, Herrington & Sutcliffe LLP
    Update of NAIC separate account initiatives
    2012-06-05

    Concerned about the use of separate accounts to fund products with general account guarantees, the NAIC continues to examine these products and to consider how these products and the underlying assets should be regulated and treated for insolvency purposes.

    Filed under:
    USA, Insolvency & Restructuring, Insurance, Jorden Burt LLP, National Association of Insurance Commissioners
    Authors:
    Ann Black , Jo Cicchetti
    Location:
    USA
    Firm:
    Jorden Burt LLP
    Supreme Court upholds secured creditors’ right to credit-bid
    2012-06-05

    The Court’s unanimous decision in RadLAX Gateway Hotel LLC v. Amalgamated Banksettles dispute over the credit-bid right, retaining this important creditor protection.

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Morgan, Lewis & Bockius LLP, Debtor, Collateral (finance), Secured creditor
    Location:
    USA
    Firm:
    Morgan, Lewis & Bockius LLP
    Frenville – gone but not forgotten: Third Circuit prohibits retroactive application of Grossman’s
    2012-06-01

    The ability to discharge debts (i.e., liability on a claim) is essential to the fundamental goal of chapter 11 of the Bankruptcy Code – providing debtors with a fresh start by resolving all claims that arose before confirmation of the debtor’s plan of reorganization.  In determining the universe of debts eligible for discharge, Third Circuit courts labored for many years underAvellino v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332 (3d Cir.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Debtor, Ex post facto law, Debt, Title 11 of the US Code, Third Circuit
    Location:
    USA
    Firm:
    Cadwalader Wickersham & Taft LLP
    30-year Treasury bonds not “indubitable equivalent” of electing secured creditor’s mortgage lien
    2012-06-01

    In In re River East Plaza, LLC, 669 F.3d 826 (7th Cir. 2012), the Seventh Circuit Court of Appeals affirmed a bankruptcy court's ruling that a debtor could not "cram down" a chapter 11 plan over the objection of an undersecured creditor which had made a section 1111(b) election by substituting a lien on 30-year U.S. Treasury bonds as the "indubitable equivalent" of the creditor's mortgage lien on the property.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Jones Day, Debtor, Collateral (finance), Federal Reporter, Title 11 of the US Code, United States bankruptcy court, Seventh Circuit
    Authors:
    Paul M. Green , Mark G. Douglas
    Location:
    USA
    Firm:
    Jones Day
    Giving credit when due -- Supreme Court denied confirmation of Chapter 11 plan that precludes credit bidding
    2012-06-01

    The Bottom Line:

    In a unanimous decision (with Justice Kennedy not participating), the Supreme Court issued a decision in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 2012 WL 1912197 (U.S. May 29, 2012), (“RadLAX”) in which it held that section 1129(b)(2)(A) of the Bankruptcy Code does not permit a debtor to “cram down” a plan of reorganization that provides for the sale of encumbered assets free and clear of liens at auction without permitting the lienholder to credit bid at such auction.

    Filed under:
    USA, Banking, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Debtor, Secured creditor, Title 11 of the US Code, Seventh Circuit
    Authors:
    Benjamin C. Wolf
    Location:
    USA
    Firm:
    Kramer Levin Naftalis & Frankel LLP

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