The U.S. Supreme Court will rule this term in RadLAX Gateway Hotel Inc. v. Amalgamated Bank on whether the Bankruptcy Code permits a debtor in a chapter 11 case to sell encumbered assets without providing the secured lender an opportunity to credit bid its debt. Determination of this question will require the Court essentially to choose between two opposing approaches to statutory interpretation, and decide whether the so-called “plain meaning” of a highly formalistic reading of the Bankruptcy Code should trump decades of established commercial practice.
Section 1129(b)(2)(A)(iii) of the Bankruptcy Code allows a court to find that a chapter 11 “cramdown” plan is “fair and equitable” to an objecting class of secured creditors if the plan provides for the realization by such holders of the “indubitable equivalent” of their claims. Section 1129(b)(2)(A)(ii), through reference to Section 363(k), permits the sale of collateral free and clear of liens if secured creditors are allowed to “credit bid”—that is, to bid the value of their claim in an auction of the collateral.
A federal district court, applying Pennsylvania law, has held that the insolvency exclusion in an insurance agency’s professional liability policy excused the insurer from the duty to defend the agency in lawsuits alleging that it had caused employee benefit plans that it created to be underfunded. ACE Capital Limited v. Morgan Waldon Ins. Management, LLC, Civil Action No. 11-128, 2011 WL 5914275 (W.D. Pa. Nov. 28, 2011).
An English appellate court permitted an Australian reinsurer in liquidation to enforce a judgment entered in Australian insolvency proceedings against a Lloyd’s syndicate, which had elected not to participate in the foreign proceedings. On appeal, the syndicate argued that England’s reciprocity act did not apply to foreign judgments made in insolvency proceedings, and that England’s insolvency act, which recognizes Australian courts, should be interpreted as strictly permitting only Australian choice of law, rather than the enforcement of Australian judgments.
New bankruptcy forms and rules that took effect December 1, 2011, require secured creditors either to attach evidence of perfection of their security interest to the proof of claim form that they file, or attach a statement of why the documents are not available.
On 30 November 2011, New York Senate Bill 2713A was delivered to the desk of Governor Andrew Cuomo for signature. If signed by the Governor, the bill will add provisions to the New York Insurance Law regarding the treatment of qualified financial contracts in an insurance insolvency proceeding. “Qualified financial contracts” include derivatives, securities lending, repurchase agreements, futures contracts and other financial instruments. These contracts are typically documented under master agreements providing for netting of obligations between the parties.
On November 29, 2011, AMR Corporation, the parent company of American Airlines and American Eagle, and certain of its U.S. affiliates, including American Airlines and American Eagle, filed voluntary petitions for chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
A “fraudulent conveyance” connotes to the layperson an intentional effort to defraud someone, but in bankruptcy law this is just one type of fraudulent conveyance. Another type, sometimes referred to as constructive fraud, involves a transfer for less than “reasonably equivalent value” or, in other words, a “gift.” In bankruptcy proceedings, a trustee is chosen to administer the debtor’s estate and, to the extent feasible, to “avoid” transfers of the debtor’s assets out of the estate that place assets beyond the creditors’ reach.
Fallout from the Great Recession continues to figure prominently in world headlines, as governments around the globe struggle to implement or extend programs designed to jumpstart stalled economies and attempt to gauge the health of financial institutions deemed “too big to fail” or otherwise critical to long-term prospects for recovery.
Toledo solar firms First Solar Inc., Xunlight Corp., and Willard & Kelsey LLC are still confident their operations will survive despite predictions from the chief executive of China’s Trina Solar Ltd.