On September 12, 2013, the U.S. Court of Appeals for the Second Circuit (the Second Circuit) affirmed the rulings of the U.S. Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) in the bankruptcy cases of American Airlines and related debtors (the Debtors) holding that the Debtors do not have to pay a make-whole premium when repaying certain of their outstanding financings (the Indentures).
On November 15, 2013, the United States Bankruptcy Court for the Southern District of New York (Glenn, J.) issued a lengthy decision1 in the Chapter 11 case of Residential Capital, LLC (“ResCap”). An important holding contained in this decision is that the bankruptcy claims of holders of notes issued with original issue discount (or OID) for tax and accounting purposes in a “fair value” exchange (an exchange for notes with a lower face amount) need not be reduced by any unaccreted OID.2
A Michigan bankruptcy judge ruled yesterday that Detroit is eligible for protection under Chapter 9 of the U.S. Bankruptcy Code, overruling numerous objections filed by labor unions, pension funds and other interested parties. Almost immediately following the ruling, a notice of appeal was filed by Counsel 25 of the American Federation of State, County & Municipal Employees (“AFSCME”).
On October 7, 2013, the United States Supreme Court refused to review a Seventh Circuit decision1 in the Castleton Plaza, LP case, which held that a new value plan proposed by the debtor in which an equity-holder’s spouse would provide a cash infusion to the debtor in exchange for 100 percent of the reorganiz
Upon learning that its borrower has filed a case under chapter 11 of the Bankruptcy Code, a secured lender may decide not to participate in that case. The lender may want to ignore the bankruptcy case in order to avoid the expense of retaining bankruptcy counsel, or, relying on the general rule that liens pass through bankruptcy unaffected, may simply prefer to wait until the chapter 11 case ends and then enforce its lien. In a recent Fifth Circuit Court of Appeals decision, Acceptance Loan Company, Incorporated v.
On November 15, 2013, Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York held that original issue discount (“OID”) created in a prepetition “fair market value” debt exchange is not disallowable in bankruptcy.1 This noteworthy ruling provides important and long-awaited guidance for the investing community on the question left open by the Second Circuit’s 1992 ruling in LTV Corp. v. Valley Fidelity Bank & Trust Co. (In re Chateaugay Corp.).2
BACKGROUND
In a recent advisory, we reported on an apparently favorable decision to secured creditors from the Fifth Circuit Court of Appeals that held that a secured creditor’s claim survives bankruptcy where the secured creditor received notice of the case and was found to have not actively participated in it.
This week, the U.S. House of Representatives passed the Asbestos Bankruptcy Trust Transparency Bill. The legislation would, if enacted into law, require bankruptcy trusts to file quarterly reports with bankruptcy courts disclosing the names, asbestos-related exposure history, and basis of the victim’s claims for each claimant. These reports would be made available on the courts’ public dockets. Confidential medical records or social security information would not be disclosed.
In an adversary proceeding filed in the American Home Mortgage Holdings, Inc. bankruptcy case, the Delaware bankruptcy court affirmed that triangular setoffs are not allowed under the Bankruptcy Code and cannot be modified by contract or under the Bankruptcy Code’s safe harbor provision. In re American Home Mortgage Holdings, Inc., et al., Adv. Proc. No. 11-51851 (Bankr. D. Del. Nov. 8, 2013). Two contracts were at issue – a swap agreement between a bank and American Home Mortgage Investment Corp.