A recent Delaware bankruptcy court decision1 on the ability of “bankruptcy remote” single-purpose entities emphasizes the complicated nature of the bankruptcy process and the issues that need to be considered when using “bankruptcy remote” entities in funding structures. Given the prevalence of such entities, this is an important decision for all participants in the structured fi nance industry.
1. Do your best; work as hard as you can.
2. Fighting with the regulators is, at best, useless and, at worst, damaging to the institution. If the bank is going to fail, don’t blame the regulators.
3. Search hard for solutions. Short of buying out the bad loans with personal funds, be as aggressive as reasonably practicable. Prove to the regulators you know what is at stake: the insured deposits.
4. Cooperate with the bidders in any assisted transaction.
There are a number of ways directors and officers can get ready personally for potential FDIC litigation.
1. Take steps to understand the bank’s D&O insurance policies before the bank is closed. Determine whether policy coverage is offset by the fees for defense of claims. If so, understand the FDIC wants recovery, not protracted litigation.
In two recent decisions, ASARCO LLC v. Goodwin, 756 F.3d 191 (2d Cir. 2014) and ASARCO LLC v. Union Pacific Railroad Co., 755 F.3d 1183 (10th Cir. 2014), the Second Circuit and the Tenth Circuit each held that a reorganized bankruptcy debtor's direct contribution claims against other potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.
In In re Residential Capital, LLC, the U.S. Bankruptcy Court for the Southern District of New York recently granted an oversecured creditor's request for postpetition interest at the contractual default rate, even though the debtor was insolvent. In doing so, the Bankruptcy Court rejected an argument that awarding postpetition interest at the default rate (which was 4% higher than the non-default rate) would provide an undue windfall to the oversecured creditor and harm unsecured creditors.
Why This Decision Is Important
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).
The United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) recently issued a memorandum decision in the American Airlines, Inc.
The uncertain economic times and high leverage multiples on many loan transactions have combined to create distress in many commercial loan portfolios. An understanding of commercial loan workouts is integral to loan officers, portfolio managers and internal lenders’ counsel.
Vedder Price Wins Reversal in Second Circuit Court of Appeals
When the Office of the Comptroller of the Currency placed the $1.9 billion asset-sized ANB Financial, National Association in receivership with the Federal Deposit Insurance Corporation (FDIC) on May 9, 2008, it was one of the largest bank insolvencies in recent years. In a matter of days, plaintiffs’ attorneys were actively seeking future clients. Attorneys ran newspaper advertisements soliciting former employees, depositors and shareholders of the failed Bentonville, Arkansas bank and its holding company.