In re Zais Investment Grade Ltd. VII1 is the latest in a recent line of bankruptcy cases challenging bedrock assumptions regarding securitization special purpose entities (SPEs) and bankruptcy considerations in securitization transactions.2 Zais establishes precedent allowing a senior noteholder of a collateralized debt obligation (CDO) to place the CDO issuer in an involuntary chapter 11 bankruptcy in order to advance an asset management plan that would otherwise require supermajority approval of all noteholders (including all junior classes) under the related indenture.
On May 26, Lehman Brothers Holdings Inc. (LBHI) filed a motion requesting the U.S. Bankruptcy Court for the Southern District of New York to establish August 24 as the deadline for filing proofs of claim against LBHI and its affiliates, and to establish a procedure for such filing, including a required form to be completed online relating to derivatives claims, and a new proof of claim form specific to this case.
The scenario has become all too familiar in recent years: a borrower defaults on a loan and, when the lender pursues the loan collateral through foreclosure or other proceedings, the borrower files for bankruptcy protection. More often than not, when the lender appears in bankruptcy court to pursue its interest in the collateral, the borrower counterattacks with a host of state law lender liability claims.
On April 16, General Growth Properties, Inc. and certain of its affiliates (“GGP”) filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York. GGP operates a national network of approximately 200 shopping centers. To the surprise of many, most of GGP’s property-specific SPE subsidiaries (“SPE Debtors”) also filed for bankruptcy.
On June 28, 2011, the United States Court of Appeals for the Seventh Circuit became the latest circuit to weigh in on the hotly contested question of whether a debtor can deny a secured creditor the right to credit bid as part of a Chapter 11 plan providing for the sale of assets encumbered by the secured creditor’s liens. InIn re River Road Hotel Partners, LLC,1 the Seventh Circuit upheld the right of secured creditors to credit bid, a decision that runs directly contrary to recent opinions in the Third and Fifth Circuits.
The United States Bankruptcy Court for the Middle District of Pennsylvania recently found that a bankruptcy trustee could not either pierce the corporate veil of a limited liability company to reach the owners of the LLC, nor could the trustee “reverse-pierce” the corporate veil of the owners of the LLC to reach a separate restaurant business that they owned.
Reversing a controversial decision and judgment of the bankruptcy court, the United States District Court for the Southern District of Florida has held that a group of lenders who received payment in settlement of their defaulted debt from the proceeds of new loans secured by the assets of certain subsidiaries of TOUSA, Inc. which were not themselves liable on that debt, did not receive fraudulent transfers.
On November 13, 2008, Lehman Brothers Holdings Inc. and its U.S. affiliates in bankruptcy, including Lehman Brothers Special Financing and Lehman Brothers Commercial Paper (collectively, “Lehman”) filed a motion asking that certain expedited procedures be put in place to allow Lehman to assume, assign or terminate the thousands of executory derivative contracts to which they are a party.
Kitchin Associates LLC is a Pennsylvania limited liability company that is no longer in business. Richard Kitchin and his son were the members of Kitchin LLC and each held a 50% ownership interest in the entity. In a bankruptcy court proceeding, the Joan I. Glisson Trust asserted a claim against Mr. Kitchin in the amount of $257,047.63, arising from an unsatisfied mortgage loan to Kitchin LLC, the proceeds of which were used to purchase a property in Pennsylvania. Mr.
With the possibility of a major stock brokerage liquidation appearing more likely than it has been in recent periods, the effect of a liquidation on customers and financial counterparties has become of great interest to many of our clients and others.