11/20/2013 - Weathering the Storm: Buyer Beware: Third Circuit’s Decision in In re KB Toys Highlights Potential Pitfalls for Purchasers of Claims from Claimants with Preference or Other Avoidance Exposure
In In re KB Toys
, a recent decision by the Third Circuit Court of Appeals, the Court held that a claim that is disallowable under § 502(d) if held by the original claimant is also disallowable in the hands of a purchaser or subsequent transferee.
03/07/2013 - Weathering the Storm: Fifth Circuit Permits Artificial Impairment of Unsecured Trade Creditors to Cram Down Plan Acceptance on Secured Lender
Bankruptcy Code § 1129(a)(10) provides that in order for a plan proponent to “cram down” - i.e., force acceptance of - a plan of reorganization on a dissenting class of creditors, at least one impaired class of creditors must vote in favor of the plan.
05/29/2012 - Law360 Guest Article: The Art Of Acquiring Distressed Natural Gas Assets
Technological innovation has changed the landscape of domestic natural gas production from shortage to surplus. The result: a glut of natural gas and historically low prices.
05/16/2012 - Acquiring Distressed Natural Gas Assets Outside of Bankruptcy: Good Deals Today May Be Fraudulent Transfers Tomorrow
Before seizing upon a deal that appears too good to be true, buyers should consider that the transaction may be challenged years later as a fraudulent transfer, leaving the bargain buyer without the assets and nothing but an unsecured claim against an insolvent seller.
11/15/2011 - Law360 Guest Article: Executory Contracts With Multiple Personalities
Rejection of a contract in bankruptcy may not always accomplish a debtor’s goal to shed ongoing contractual obligations and liabilities, especially when dealing with employee benefit plans.
11/03/2011 - Weathering the Storm: Can Executory Contracts Have Multiple Personalities? The Fifth Circuit Finds an Asset Purchase Agreement Amended an ERISA Plan
Rejection of a contract in bankruptcy may not always accomplish a debtor’s goal to shed ongoing contractual obligations and liabilities, especially when dealing with employee benefit plans. On October 13, 2011, the Fifth Circuit Court of Appeals highlighted this issue in its opinion in Evans v. Sterling Chemicals, Inc.
regarding the treatment of a pre-bankruptcy asset purchase agreement which contained a provision addressing the debtor-acquiror’s post-closing ERISA retiree benefit plan obligations to its new employees resulting from the transaction.
08/11/2011 - Weathering the Storm: Bankruptcy Court Permits Minimal Artificial Impairment and Applies Investment Band Approach to Determine the Cram-Down Rate Under Till
Bankruptcy Judge Michael Lynn of the Northern District of Texas recently issued a noteworthy opinion in In re Village at Camp Bowie I, L.P.
that addresses two important Chapter 11 confirmation issues.
02/15/2011 - Weathering the Storm: Good News For Lenders – District Court Reverses TOUSA Fraudulent Transfer Opinion
In a welcome bit of good news for lenders, U.S. District Court Judge Gold (Southern District of Florida) reversed the portion of the 2009 bankruptcy court decision in the TOUSA, Inc. bankruptcy cases that had ordered the disgorgement of $403 million plus interest based on the holding that the amounts were received by certain lenders to the TOUSA parent in connection with a pre-petition transaction that constituted a fraudulent transfer.
02/14/2011 - Weathering the Storm: Ability to Gift New Equity to Old Equity through Plan Disapproved in the Second Circuit and Ulterior Motives in Purchasing Debt Could Lead to Designation of Vote
On February 8, 2011, the Second Circuit Court of Appeals issued an opinion that will have a major impact on Chapter 11 plan confirmation.
02/02/2011 - The IP Beacon, February 2011
A Haynes and Boone Newsletter highlighting current issues in Intellectual Property Law.
10/27/2010 - Weathering the Storm: Third Circuit Concurring Opinion Supports Trademark Licensees’ Retention of Rights in Bankruptcy Cases
The concurring opinion in a recent Third Circuit Court of Appeals case suggests that trademark licensees may be able to retain their rights in bankruptcy cases, even if licensors reject the license agreements.
10/19/2010 - Weathering the Storm: Delaware Bankruptcy Court Rules Bid Procedures in Section 363 Sale Were Unfair and Unreasonable
On September 30, 2010, in In re American Safety Razor, LLC, et al.,
Case No. 10-12351 (MFW), the United States Bankruptcy Court for the District of Delaware ruled that the debtors’ proposed bid procedures for the sale of the business were unfair and unreasonable. The bid procedures, among other things, provided too much discretion to the debtors in the auction process.
10/13/2010 - Weathering the Storm: Court Ruling Won't Allow Secured Creditors To Be Shut Out by Crafty Bid Procedures
On October 5, 2010, Judge Bruce Black of the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court
”) issued a ruling in the River Road Hotel Partner LLC, et. al.
”) bankruptcy cases denying the Debtors’ bid procedures motion incident to plan confirmation.
09/28/2010 - Weathering the Storm: Third Circuit Rules Regardless of Plan Reservation of Rights Language, Bankruptcy Debtor Must Comply with the Bankruptcy Code to Amend, Modify or Eliminate Retiree Benefits
Once a company files a Chapter 11 bankruptcy petition (to sell its assets, reorganize or liquidate), Bankruptcy Code § 1114 sets forth a detailed procedure for the employer to follow to modify or terminate certain retiree benefits.
04/07/2010 - Weathering the Storm: Does the Bankruptcy Code Restrict a Liquidation Trustee’s Power after Plan Confirmation?
Reversing the decision of the United States District Court for the Northern District of Illinois, the Seventh Circuit (the “Court”) held in Grede v. Bank of New York Mellon, et al.,
No. 09-3121 (7th Cir. Mar. 18, 2010) that neither the Bankruptcy Code (the “Code”) nor the Supreme Court’s decision in Caplin v. Marine Midland Grace Trust Co.,
406 U.S. 416 (1972) apply to the activities of a post-confirmation liquidating trustee appointed in a liquidating trust created by a confirmed plan of reorganization.
03/31/2010 - Weathering the Storm: The Mervyn's Holdings Decision: A Lesson for Sellers and Equity Firms Participating in Leveraged Buyouts
The recent case of Mervyn’s LLC v. Lubert-Adler Group IV, LLC, et al.
(In re Mervyn’s Holdings, LLC), serves as a warning to sellers and equity firms participating in leveraged buyouts to be wary of the effect such buyouts will have on creditors of the target company.
03/25/2010 - Weathering the Storm: Third Circuit Ruling on Credit Bidding is Bad News for Lenders
On March 22, 2010, the Third Circuit released its long-awaited ruling in the Philadelphia Newspapers case regarding the applicability of credit bidding. In Philadelphia Newspapers, the proposed plan of reorganization provided for a sale of assets free of the liens of the secured creditors without allowing the secured creditors to credit bid on the assets.
03/11/2010 - Weathering the Storm: Single Asset Real Estate Cases
From 2010 until 2013, approximately $1.4 trillion of commercial real estate loans will mature. This alert discusses the rules governing Single Asset Real Estate (SARE) Chapter 11 cases.
02/23/2010 - Weathering the Storm: The FDIC’s Authority to Repudiate Contracts
The current economic climate has led to a dramatic increase in bank failures over the past few years. In 2009 alone, 140 banks failed, compared to 26 bank failures in 2008 and only 3 bank failures in 2007. The Federal Deposit Insurance Corporation (the “FDIC”) recently announced that it has 702 banks on its “Problem List” as of December 31, 2009, up 27 percent from 552 banks on September 30, 2009. This acute trend has heightened the awareness and interest in the role of the FDIC as receiver of a failed bank.
02/08/2010 - Weathering the Storm: Conditions Precedent in Term Sheets Matter
In a decision that is not surprising, but that should be welcomed by lenders (but perhaps not by borrowers), the Appellate Division of the New York Supreme Court held in Amcan Holdings, Inc., et al. vs. Canadian Imperial Bank of Commerce, et al.,
Case No. 603393/07, that a detailed, executed term sheet was not a binding contract to lend.
12/22/2009 - Weathering the Storm: Insurance Coverage and Insolvency: Maximizing Recovery In Bankruptcy
While memorable for many things, 2009 may long be remembered as a year of record corporate insolvency. Now more than ever, it is crucial that debtors, creditors, trustees, and, indeed, anyone with an interest in maximizing the financial resources on hand to satisfy debts, understand (1) what coverage may potentially be available; and (2) how to gain access to and maximize this important financial resource.
12/11/2009 - Weathering the Storm: Charter Communications Decision Allows Reinstatement of Debt
Many companies secured their financing several years ago when the credit market featured advantageous pricing and loose loan covenants. Because these favorable terms would be impossible for borrowers to obtain in today’s lending environment, many viable companies with highly leveraged capital structures are looking for strategies to restructure debt. Charter Communications (“Charter”), the country’s fourth largest cable television company, took a gamble during, arguably, the most challenging period in the modern era of global corporate finance. See how the company's bold moves paid off.
10/21/2009 - Weathering the Storm: Savings Clauses: Fraudulent Transfer Issues in the TOUSA Bankruptcy Case
The judge's ruling in the October 13, 2009 TOUSA, Inc. bankruptcy cases raises a number of troubling issues for commercial lenders, including but not limited to, the judge calling into question the enforceability of fraudulent conveyance “savings clauses,” common in commercial loan agreements.
08/25/2009 - Weathering the Storm: Recent Court Decision Exposes the Reach of a Corporate Family’s Financial Distress to its Bankruptcy-Remote Special Purpose Entities and Their Lenders
In the recent heyday of real estate and structured finance, the use of “bankruptcy-remote” special purpose entities (SPEs) as borrowers was a fundamental underwriting requirement by lenders in many loans, and a critical factor considered by ratings agencies, to shield lenders and their collateral from the potentially adverse impact of bankruptcy filings by their borrowers’ parents and siblings.
07/20/2009 - Weathering the Storm: Fiduciary Duties of Officers and Directors in Troubled Company Situations
Directors and officers managing corporations, especially when the corporation is insolvent or operating in insolvency situations, need to be cognizant of their fiduciary duties. This alert provides a brief overview of these fiduciary duties, including practical considerations in the exercise of these duties.
07/01/2009 - Weathering the Storm: The Appointment of an Examiner
With the economic crisis leading to the failure of many businesses, bankruptcy cases are on the rise. In many of the cases grabbing headlines, such as Lehman Brothers, Nellson Nutraceutical, New Century and SemCrude, courts have shown a willingness to appoint examiners to investigate, report on and make recommendations regarding possible issues of mismanagement, fraud or other improprieties relating to the affairs of the debtor or its former or current management.
06/25/2009 - Weathering the Storm: Top 10 Practical Things to Know about Bankruptcy
Bankruptcy is a highly specialized legal practice area that can be difficult for the non-lawyer to navigate. Bankruptcy can also present many traps for the unwary. A bankruptcy or distressed financial situation will in most cases materially affect a company’s key relationships, customers, suppliers and business partners. All company decision makers need an understanding of how to react to protect their organization’s interests. Here are ten practical considerations to recognize in this distressed environment.
06/19/2009 - Weathering the Storm: Options to Remove Liabilities for High Retiree Medical Costs from a Company’s Balance Sheet: VEBAs
High legacy costs for retiree medical benefits, along with Financial Accounting Standards Board Standard No. 158, which requires balance sheet recognition of such liability, has forced many companies to face the true size of the retiree medical obligations and to consider ways to reduce or limit costs.
06/12/2009 - Weathering the Storm: Look Out Lenders—Collecting Fees For Loaning Money May Be Considered Evil
In a recent case, a Bankruptcy Court in Montana equitably subordinated a pre-bankruptcy secured lender’s first lien claims to the claims of the DIP lender and the unsecured creditors even though the lender did not owe any fiduciary duties to the debtor or any of the debtor’s potential creditors.
05/27/2009 - Weathering the Storm: Retiree Benefits and Section 1114
Retiree benefits are often a central issue in bankruptcy cases. For many employers the high cost of retiree medical benefits has been a significant contributing factor to the Chapter 11 filing and a matter of ongoing concern if the debtor is to be able to successfully reorganize. Understandably, employees, retirees and unions are equally concerned about the status of retiree benefits. This alert discusses Section 1114 of the Bankruptcy Code.
05/21/2009 - Weathering the Storm: Are Your Deposits Insured?
The Federal Deposit Insurance Corporation (the “FDIC”) is celebrating its 75th anniversary this year, and due to the economic downturn, 2009 will pose a substantial challenge to the FDIC. FDIC Chairman Sheila C. Bair said in a recent speech that “No one has ever lost a penny of an insured deposit.” President Obama stated during his first address to a joint session of Congress, “You should also know that the money you’ve deposited in banks across the country is safe; your insurance is secure; you can rely on the continued operation of our financial system. That is not a source of concern.” These two quotes help set the tone that the Government stands behind the security of “insured” deposits.
05/07/2009 - Weathering the Storm: Modifying Your Company’s Debt: Tax Trap or Treasure?
Debtors increasingly are requesting that their creditors modify the terms of their debts because of difficulty or inability to service their debts in accordance with the debts’ existing terms. Faced with the prospect of debtor defaults and having to foreclose on property securing their loans causing the accrual of financial losses, creditors, too, often have an incentive to restructure debt to maximize their returns.
04/30/2009 - Weathering the Storm: Recent Decision Creates Additional Cash Requirements to Reorganize
On April 8, 2009, the Second Circuit Court of Appeals issued a ruling that creates an additional hurdle for companies providing single-employer pension funds when seeking to reorganize through a bankruptcy. In general, the termination of a pension plan can give rise to a per-employee termination premium (a “Termination Premium”) owed by the company terminating the plan to the Pension Benefit Guaranty Corporation (“PBGC”), the quasi-governmental entity that insures pension plans.
04/23/2009 - Weathering the Storm: Recent Decision Affects Setoff Under Netting Agreements
Companies that engage in multiple transactions with different entities of related groups often enter into contractual netting agreements that allow the setoff of obligations between entities within the groups. The effectiveness of these agreements has been called into question by a recent decision of a bankruptcy court in Delaware, which refused to allow a party to a contractual netting agreement to offset its obligations to the debtors against obligations of the debtors under the netting agreement. Parties to such netting agreements may have to reconsider how to structure such agreements and how to defend their effectiveness in court.
04/15/2009 - Weathering the Storm: Great Deals Now Available in Bankruptcy Court
Whether you are interested in purchasing assets or a going concern, bankruptcy court can be a land of opportunity. Assets may be sold by a trustee, or someone the trustee retains, in a Chapter 7 liquidation, or by a Debtor-in-Possession (a “DIP”) in a Chapter 11 reorganization case. In either case, you should expect a competitive bidding process.
04/09/2009 - Weathering the Storm: Terminations, Uncertainty, and Strategies to Reduce Workplace Liability
In the current economic state, many employers are seeking to reduce operating costs. More employees are being let go as corporate layoffs have accelerated and workers are looking to complain that they have been unfairly or improperly dismissed. The Obama administration has publicly announced that it will be more aggressive in enforcing employment laws.
04/01/2009 - Weathering the Storm: Bankruptcy - Pay Attention from the Start Because Things Happen Fast
When a company files bankruptcy, it is crucial to closely monitor the bankruptcy proceedings from the beginning. After filing its petition, the debtor will likely file numerous “first day motions” intended to stabilize the Debtor’s business and facilitate an efficient case administration. These motions can severely affect the rights of unwary creditors who may find their interests primed by the actions of the debtor in the first few days of the case.
02/18/2009 - Weathering the Storm: What Do I Do if the Counterparty to My Lease Files Bankruptcy?
If the counterparty to your real property or personal property lease files bankruptcy, you should not pursue self-help remedies available in your lease agreement. Instead, you should promptly contact your bankruptcy counsel to insure that your legal rights are protected.
02/11/2009 - Weathering the Storm: Doing Business with Struggling Customers
When customers begin struggling with liquidity issues or file for bankruptcy protection, you can continue to conduct business with them. You must simply be cautious and prudent in your dealings.
06/18/2008 - Supreme Court Rules Chapter 11 Debtor Cannot Avoid Transfer Taxes on 363 Sale
On June 16, 2008, the United States Supreme Court ruled that a debtor in a Chapter 11 case may not avoid transfer taxes associated with a sale of assets made prior to the bankruptcy court’s approval of a Chapter 11 plan of reorganization or liquidation.
12/11/2001 - Squeezing Blood From Turnips: Tax Issues in Bankruptcy Matters
Texas Society of Certified Public Accounts - 2001 CPE Exposition Conference
11/01/2000 - Revised Article 9 - Primer for the Bankruptcy Lawyer