There have been some important recent legal developments that will likely impact acquisition finance. This article will survey some of the more notable ones.
The Eleventh Circuit Court of Appeals, on May 15, 2012, overturned1 a prior District Court decision stemming from the bankruptcy case of Tousa, Inc., affirming a bankruptcy court’s earlier 2009 decision that had ordered the return, on fraudulent transfer grounds, of over $400 million that had been repaid to prior lenders of the Tousa parent company in connection with a secured financing to the parent and its subsidiaries.
The recent decision of the United States Bankruptcy Court for the District of Delaware in Friedman’s Inc. v. Roth Staffing Cos., L.P. (In re Friedman’s Inc.)1 should be a reminder of the preference risk that exists for creditors, such as critical vendors, whose pre-petition claims are paid by court order. This article discusses various ways in which this preference risk can be eliminated or minimized.
On June 22, 2012, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York granted the U.S. Trustee’s motion to transfer the chapter 11 cases of Houghton Mifflin Harcourt Publishing Company and its affiliates to a different venue, notwithstanding the fact that the debtor’s prepackaged plan had been confirmed with unanimous support from its creditors, the cases were projected to conclude within 30 days of filing, and the debtors’ primary creditor constituencies supported venue in New York.
On July 9, 2012, Judge Peter J. Walsh of the United States Bankruptcy Court for the District of Delaware issued a memorandum opinion (the "Opinion"), in the Blitz U.S.A. bankruptcy proceeding addressing whether an employee bonus plan is a transaction made in the ordinary course of business under 11 U.S.C.
In June, Northstar Aerospace and various related entities (collectively, "Northstar") filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Northstar describes itself as a supplier of "components and assemblies for the commercial and military aerospace markets." The company also provides machining, repair and overhaul services for the aerospace industry. See Northstar's Declaration in Support of First Day Motions
On June 28, 2012, Judge Allan Gropper of the United States Bankruptcy Court for the Southern District of New York declined to appoint an official committee of equity holders in Kodak’s chapter 11 cases. The bankruptcy court determined that the appointment of an official committee was not warranted at that time, given that the costs to the bankruptcy estates would be substantial and equity’s interests were already represented by other constituencies seeking to maximize value and by a sophisticatedad hoc group of shareholders. In re Eastman Kodak Company, Case No
On June 22, 2012, Ritz Camera & Image, LLC, and various related entities (collectively, the "Debtors" or "Ritz II"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Those familiar with Ritz Camera know that the company's predecessor, Ritz Camera Centers, Inc.
On May 30, 2012, RG Steel, LLC and various related entities (collectively "RG Steel" or "Debtors") filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to the Declaration of the company's CFO (the "Decl."), RG Steel enters bankruptcy as the fourth largest flat-rolled steel company in the United States. At full capacity, the company can produce 8.2 million tons of steel per year. Decl. at 2.
Given the spate of bankruptcies filed over the last few years, including by large-scale tenants such as Borders, Linens 'n Things, and Circuit City, and the tenuous financial condition of big-box retailers such as Best Buy, it is important for both landlords and tenants to understand the benefits and limitations of bankruptcy protection as it relates to the status of a bankrupt tenant’s leasehold interest.
On May 25, 2012, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York approved a motion to compel the production of certain documents under section 1521 of the Bankruptcy Code. In his decision, Judge Gropper also suggested that the broad discovery provisions of Bankruptcy Rule 2004 may apply to chapter 15 discovery requests, but stopped short of making such a ruling. In re Millennium Global Emerging Credit Master Fund Limited, Case No. 11-13171 (ALG), (Bankr. S.D.N.Y May 25, 2012).