Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York recently ruled that Borders gift card holders did not qualify as “known creditors.” The Court concluded that the gift card holders were entitled only to publication notice rather than actual notice of the bar date for filing bankruptcy claims in Borders’ chapter 11 case.

In In re SNTL Corp.,1 the United States Bankruptcy Appellate Panel of the Ninth Circuit recently decided that if a creditor is required in another proceeding to disgorge as a preference a payment that had been guaranteed by the debtor, the debtor’s liability as guarantor may be revived, provided that the agreement releasing the debtor from its guarantee obligation to the creditor explicitly permits such revival.

Background

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

In a recent decision, the United States Bankruptcy Court for the Southern District of New York (the “U.S. Court”) exercised its abstention powers and dismissed an involuntary chapter 11 petition filed against an Argentine company, Compania de Alimentos Fargo, SA (“Fargo”).1 Fargo, a debtor in an insolvency proceeding in Argentina, had moved to dismiss the involuntary petition principally because its Argentine bankruptcy case was still pending.

Earlier this year, the U.S. Court of Appeals for the Second Circuit held that a proposed “gifting” plan distributing value from the second lien lenders to the prepetition equity holder violated the absolute priority rule and was confirmed in error.2 This decision, by a 2-1 panel vote,3 reversed the decisions of the Bankruptcy and District Courts for the Southern District of New York. The Second Circuit also affirmed unanimously the designation of the vote of an indirect competitor of the debtor that held no claims prior to the petition date.

Creditors have recently made some headway in collecting the full amount to which they are contractually entitled pursuant to various debt instruments. In In re Calpine Corp.,1 reported in our summer 2007 newsletter, the Bankruptcy Court for the Southern District of New York permitted a secured creditor to collect damages (albeit in the form of an unsecured claim) caused by dashed expectations due to the early repayment of its debt.

The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc.

In Motorola, Inc. v. Official Committee of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452 (2d Cir. 2007), the Official Committee of Unsecured Creditors (the “Committee”) and the debtors’ lenders sought approval of a settlement prior to confirmation of a plan of reorganization. While the Court concluded that many aspects of the settlement might otherwise be approved, it found that a provision that distributed funds in violation of the absolute priority rule lacked sufficient justification.

The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc. ("Champion") against more than 100 prepetition lenders to Champion (collectively, the "Defendants")1.

In In re Calpine Corporation, 2007 WL 685595 (Bankr. S.D.N.Y. 2007), the Bankruptcy Court for the Southern District of New York considered the issue of whether secured creditors whose debt was being paid prior to its original maturity date were entitled to a prepayment premium.