As part of the German government’s costs savings package, a change in the German Insolvency Code may be implemented which will grant to the German fiscal authorities a preferred creditor status.

In a market study, called “The market for corporate insolvency practitioners,” published on 24 June 2010 The Office of Fair Trading (OFT), proposed extensive reforms of the current corporate insolvency regulatory regime. After an eight-month study the OFT believes that reforms are needed to build market trust and create a regime that works in the best interests of creditors as a whole.

In Ogle v. Fidelity & Deposit Co. of Maryland, 586 F.3d 143 (2d Cir. 2009), the Second Circuit has now become the second circuit court of appeals to recently conclude that general unsecured creditors may include postpetition attorneys’ fees as part of their claim when attorneys’ fees are permitted by contract or applicable state law.11

In a recently published opinion, Judge John K. Olson of the United States Bankruptcy Court for the Southern District of Florida permitted the bankruptcy estates of TOUSA, Inc. and its debtor subsidiaries to avoid and recover more than $1 billion of liens and cash that the debtors had transferred to secured lenders in a transaction entered into six months prior to the debtors’ chapter 11 bankruptcy filing. Official Committee of Unsecured Creditors of TOUSA, Inc. v. Citicorp North America, Inc., 2009 Bankr. LEXIS 3311 (Bankr. S.D. Fla. Oct. 13, 2009).

In a recent order entered in In re SemCrude, L.P., Case No. 08-11525, the Delaware bankruptcy court (1) clarified the application of Bankruptcy Code section 503(b)(9) to creditors’ priority claims arising from the delivery of goods in the 20 days before a bankruptcy filing and (2) amended a previously entered procedures order to allow for the resolution of disputed “Twenty Day Claims” on their merits.

The October 15, 2009 decision of the US Bankruptcy Court for the District of Delaware in In re Pillowtex opens the door for creditors in the Third Circuit to increase their "new value" preference defense under the "subsequent advance" approach.In re Pillowtex, No. 03-12339 (Bankr. D. Del. filed Oct. 15, 2009).

A trustee’s power to avoid preference payments is circumscribed by the statutory defenses set forth in section 547(c) of the Bankruptcy Code. The "subsequent new value" defense set forth in section 547(c)(4) has three well-established elements:

An opinion issued earlier this year by the Delaware Bankruptcy Court in In re SemCrude, L.P., et al. (Bankr. Del., No. 08-11525; January 9, 2009) may end much of the practice of so-called “triangular setoffs” by creditors in bankruptcy cases. The Court in SemCrude found that creditors violate section 553 of the Bankruptcy Code by setting off amounts among multiple debtors, even when exercising contractual assignment rights. This ruling is likely to have far-reaching impact given the dearth of case law on this fairly common contractual provision.

In the fourth quarter of 2008, global credit markets were virtually frozen, leading many distressed businesses and their constituents to take measures to avoid bankruptcy filings at almost all costs. Without access to debtor-in-possession (DIP) financing, bankruptcy most often results in liquidation – and with lenders reluctant to provide new money, even in exchange for superpriority and/or priming liens, total collapse became an increasingly common result.

During the bankruptcy cycle following the recession of 2001, numerous debtors – notably airlines such as US Airways and United Air Lines, Inc. – undertook “distress terminations” of their ERISA-qualified defined benefit pension plans, which are insured by the Pension Benefit Guaranty Corporation (PBGC). The PBGC found itself holding large general unsecured claims arising from significant underfunding of pension plans insured by the PBGC as a result of these terminations. Efforts by the PBGC to obtain either administrative priority or secured status for these claims invariably failed.1

Introduction

This article addresses bankruptcy issues commonly arising in connection with intercreditor agreements, and is intended to provide a general examination of provisions that relate specifically to bankruptcy or other insolvency proceedings. By reviewing variations of these provisions that have appeared in negotiated second lien financings, the discussion provides a checklist that will be useful at the front end of deals of this kind.