Introduction

Earlier this year, the United States Bankruptcy Court for the District of Delaware ruled that a nondebtor cannot effect a “triangular” setoff of the amounts owed between it and three affiliated debtors, even if the parties had entered into pre-petition contracts that expressly contemplated multiparty setoff.1 In reaching its decision, the Court relied principally on the plain language of section 553(a) of the United States Bankruptcy Code, which limits setoff to “mutual” obligations — i.e., direct obligations between a single obligor and obligee.

As the Madoff Securities and Stanford Financial schemes have unraveled in recent months, financial industry participants have had to scrutinize closely their involvement with these entities. A key issue in each of these cases will be the extent to which the trustee (or similar representative) can “claw back” payments made as part of the Ponzi and related fraudulent schemes. The U.S. Bankruptcy Court for the Southern District of New York recently considered similar facts in Bayou Accredited Fund, LLC v. Redwood Growth Partners, L.P.

During the present downturn in the U.S. economy, opportunities exist for investors in global distressed asset markets. Purchasers and sellers involved in these markets should be aware of the various mechanisms that are available to transfer assets of distressed companies. Historically, asset sales under s. 363 of the Bankruptcy Code1 have proven to be cheaper and faster than purchasing distressed assets through a Chapter 11 reorganization. Recent cases have shown that s.

The devastating consequences of an enduring global recession for businesses and individuals alike have been writ large in headlines worldwide, as governments around the globe scramble to implement assistance programs designed to jumpstart stalled economies. Less visible amid the carnage wrought among the financial institutions, automakers, airlines, retailers, newspapers, homebuilders, homeowners, and suddenly laid-off workers is the plight of the nation's cities, towns, and other municipalities.

The following is a list of some recent larger U.S. bankruptcy filings in various industries. To the extent you are a creditor to any of these debtors, or other entities which may have filed for bankruptcy protection, you as a creditor are entitled to certain protections under the Bankruptcy Code.  

ENERGY  

Ethanol maker Aventine Renewable Energy Holdings Inc. files Chapter 11; operations to continue.  

INFORMATION TECHNOLOGY

Chapter 15 of the United States Bankruptcy Code, 11 U.S.C § 101 et seq., which incorporates most of the provisions of the United Nations’ Model Law on Cross-Border Insolvency,[1] was enacted as part of the Bankruptcy Abuse and Consumer Protection Act of 2005. Chapter 15 replaced former 11 U.S.C. § 304, which was been enacted in 1978 to provide specific procedures by which a representative in a foreign bankruptcy proceeding could obtain relief in U.S. courts to facilitate the foreign bankruptcy proceeding.

Companies that terminate pension plans before filing for bankruptcy may no longer escape paying significant claims to the PBGC.

In Pension Benefit Guaranty Corporation v. Oneida, Ltd. dated April 8, 2009, the U.S. Court of Appeals for the Second Circuit reversed a ruling by the U.S. Bankruptcy Court for the Southern District of New York characterizing certain “termination premiums” owed to the Pension Benefit Guaranty Corporation (PBGC) pursuant to the Deficit Reduction Act of 2005 as contingent, pre-petition claims and thus dischargeable in bankruptcy.

On April 8, the Second Circuit Court of Appeals reversed the Bankruptcy Court and concluded that special ERISA “termination premiums” due PBGC are not contingent prepetition claims subject to discharge in a chapter 11 reorganization. Pension Benefit Guar. Corp. v. Oneida, Ltd., 2009 WL 929528 (2d Cir. April 8, 2009), rev’g Oneida Ltd. v. Pension Benefit Guar. Corp., 383 B.R. 29 (Bankr. S.D.N.Y., 2008).

Whether you are interested in purchasing assets or a going concern, bankruptcy court can be a land of opportunity. Assets may be sold by a trustee, or someone the trustee retains, in a Chapter 7 liquidation, or by a Debtor-in-Possession (a “DIP”) in a Chapter 11 reorganization case. In either case, you should expect a competitive bidding process. Going concerns are typically sold in Chapter 11 cases where the debtor determines, often after trying to reorganize, that it lacks the resources to reorganize and continue operating.