The United States Bankruptcy Court for the District of Delaware has approved a settlement agreement between three Sea Containers companies, their unsecured creditors and the trustees of the two pension schemes belonging to the UK subsidiary Sea Containers Services Limited.

A creditor’s ability in a bankruptcy case to exercise rights that it has under applicable law to set off an obligation it owes to the debtor against amounts owed by the debtor to it, thereby converting its unsecured claim to a secured claim to the extent of the setoff, is an important entitlement.

Landlord's Rights when a Tenant files:

Creditors often consider filing an involuntary bankruptcy petition against their financially distressed debtors. Before using this extraordinary remedy, a creditor should evaluate whether it will achieve a valid business objective. Additionally, each creditor should evaluate whether there is a valid basis to support the filing. When the debtor's bankruptcy is appropriate, it can be a valuable step in maximizing a creditor's recovery. But the stakes are high.

Plaintiff, the trustee of the Chapter 7 estate of Security Asset Capital Corporation (SACC), a corporate debtor, brought an action against the debtor’s officers and directors, alleging that they breached their fiduciary duties by failing to commence Chapter 7 liquidation once SACC became insolvent.

There has been no shortage of victims in this financial crisis. Pensions and retirement savings have been severely reduced, jobs have been lost and once powerful financial institutions have failed. But, there is, perhaps, another victim that has largely gone unnoticed: the rule of law.

In his Evil Empire speech before the British House of Commons in June 1982, President Ronald Reagan refocused American political values on the rule of law.

While the current outlook may be grim for the economy at large, the prospects of individual companies vary significantly, and some companies will continue to perform well despite the larger trends. For example, the designer retailer’s loss may become Walmart’s gain as consumers shop more closely for bargains. As the car manufacturers frequently say, “your mileage may vary.”

Attention holiday shoppers. Not sure what to buy Aunt Matilda or cousin George? A gift card allows them to buy whatever they like? Maybe. Large retailers such as Sharper Image, Bombay Company and Linens ‘N Things have filed for bankruptcy or gone out of business, leaving behind millions of dollars in unused gift cards. In bankruptcy, money left on a gift card is treated as a debt, which the bankruptcy court can decide if it is to be repaid, and how. If the retailer stays in business, the court may allow it to continue to honor its cards, but even then consumers may not get the full value.

AUTOMOTIVE

EZ Lube LLC, Express Lube Inc. filed for Chapter 11 protection in Delaware.  

Key Plastics files prepackaged Chapter 11 petition; secured $20M in DIP financing.  

Precision Parts International filed Chapter 11 petition; commences winding down operations.  

BROADCASTING

Equity Media Holdings, Corp. filed for Chapter 11; secured lender seeks conversion to Chapter 7  

ENERGY  

A federal bankruptcy court, applying New York law, has dismissed an adversary proceeding brought by a bankrupt home mortgage company against its directors and officers liability insurers, holding that coverage for a pre-petition lawsuit against the mortgage company was barred by application of an “inadequate consideration” exclusion. Delta Fin. Corp. v. Westchester Surplus Lines Ins. Co., Case No. 07-11880 (CSS) (Jointly Administered) (Bankr. D. Del. Dec. 15, 2008). The court also held that the coverage dispute was a non-core proceeding.