Introduction

Oftentimes in bankruptcy, when one entity files for bankruptcy relief, the subsidiaries or affiliates also file. Sometimes these entities are "substantively consolidated" for bankruptcy purposes, thus combining the assets and liabilities into a single pool and attributing them to a single entity. Substantive consolidation has been permitted when, for example, debtors have abused corporate formalities or creditors have treated the separate entities as a single economic unit and their affairs were hopelessly entangled.

On March 28th, the House Oversight and Investigations Subcommittee held hearings on MF Global, whose October 2011 collapse has raised questions concerning the protection of customer money. In her prepared remarks MF Global's general counsel Laurie Ferber described the days and hours preceding the firm's bankruptcy filing, including the two wire transfers that some have seen as evidence that the firm improperly used customer money, and about which JP Morgan (the ultimate recipient of the funds), had questions.

In Industrial Enterprises of America v. Burtis (In re Pitt Penn Holding Co., Inc.), 2012 WL 204095 (Bankr. D. Del. Jan.

AFA Investment Inc. and its affiliates, including AFA Foods, American Foodservice Corporation, United Food Group, LLC, and American Fresh Foods (together "AFA"), one of the largest ground beef processors in the United States, have filed for Chapter 11 bankruptcy protection.

Introduction

Secured lenders have had long-held expectations of certain protections in the event the borrower files for bankruptcy.

Recently, in In re Longview Aluminum, LLC,1 the Seventh Circuit Court of Appeals held that members of a limited liability company (“LLC”) are insiders for preferential transfer purposes under the Bankruptcy Code.

The United States Bankruptcy Court for the Western District of Louisiana has held that an insured versus insured exclusion does not apply to preclude coverage for claims brought by a duly appointed bankruptcy trustee against an insolvent corporation’s directors and officers.  Central Louisiana Grain Cooperative v. Vanderlick, 2012 WL 293173 (Bankr. W.D. La. Jan. 31, 2012).

Introduction

On March 5, 2012, Pemco World Air Services ("Pemco"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  According to the Declaration of Pemco's CFO (the "Declaration"), Pemco describes itself as "an industry leader in maintenance, repair and overhaul for wide and narrow body aircraft and regional jets from around the world."  Decl. at *2.  In addition to maintenance and repair, Pemco also is one of the leading providers of narrow body aircraft cargo conversions. Id.