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Marblegate’s Lost Marbles and Why Bondholders and Indenture Trustees Should Care

This week the U.S. Court of Appeals for the Second Circuit issued its highly-anticipated ruling in Marblegate Asset Management, LLC v. Education Management Corp. (“Marblegate”).  At issue in Marblegate was whether Education Management Corp. (“EDMC”) violated the Trust Indenture Act when it implemented a restructuring that impaired the rights of Marblegate Asset Management, LLC (“MAM”).  … Continue Reading

Are Structured Dismissals on Hold Pending the Supreme Court’s Decision in Jevic?

American Apparel, the struggling clothing manufacturer and retailer, found itself in chapter 11 this past November after failing to implement its turnaround plan amid a challenging retail environment.  Last week, Judge Shannon in the District of Delaware approved a largely consensual sale of American Apparel’s assets to Gildan Activewear.  While the hearing transcript is not … Continue Reading

The Road Ahead for 2017 – Restructuring & Insolvency in US

Slide Rules and Hula Hoops – Business Obsolescence and Bankruptcy One of the functions that bankruptcy proceedings can serve is to encourage entrepreneurship by allowing people to pursue bold innovations while still allowing them to recover if their new ideas don’t prove successful. Another equally important function is to provide a structure for restructuring or liquidation … Continue Reading

Serial Filers: Lenders And Lessors Given A New Remedy

What can a lender do about successive bankruptcy filings by a borrower? What can lessors do when their tenants file successive bankruptcy petitions?  A recent decision by a bankruptcy court in the Eastern District of New York gives guidance on these questions. Readers of this blog know that immediately upon the filing of a bankruptcy … Continue Reading

Quantum Foods – – Administrative Expense Claims as an Avoidance Offset.

Judge Carey in the District of Delaware recently ruled on an intriguing question—can a defendant in a preference action reduce the amount of a recoverable preference by setting off the value of an allowed administrative expense claim? Though not late-breaking news, this case provides a thorough examination of the essential character of administrative expense claims.… Continue Reading

Jevic Holding Corp.: Is The Supreme Court Now Ready To Strike Down Structured Dismissals?

In a prior post, we discussed the Third Circuit Court of Appeals’ decision in Jevic Holding Corp., where the court upheld the use of so-called “structured dismissals” in bankruptcy cases, and the Supreme Court’s grant of certiorari.  Yesterday, the Supreme Court heard oral argument in Jevic.  The Court’s ultimate ruling will likely have a significant … Continue Reading

Equitable Mootness – – Are Bankruptcy Courts Still to be “Courts of Equity?”

The concept of “equitable mootness” is a doctrine of relatively long-standing in bankruptcy jurisprudence. It has been used by courts to avoid determination of issues raised on appeal that would require the unscrambling of a plan previously confirmed and implemented. However, that doctrine has recently been questioned in a variety of decisions. It appears that … Continue Reading

Stormy Seas for Indenture Trustees and Bondholders Settling Claims in Bankruptcy

Recently, in Caesars Entertainment Operating Co. (“Caesars”), U.S. Bankruptcy Judge A. Benjamin Goldgar denied payment of indenture trustee Wilmington Trust’s attorneys’ fees and costs in connection with the Debtors’ motion to approve a settlement.  The U.S. Trustee objected to payment arguing that the Debtor could not rely on 11 U.S.C. § 363 (seeking settlement approval) … Continue Reading

Ninth Circuit Makes Plan Confirmation More Expensive And Doubtful

What does it mean to “cure” a default in the context of a plan of reorganization? This question arises by virtue of section 1123(a)(5)(G) of the Bankruptcy Code, which requires that a plan provide adequate means for the plan’s implementation, including the “curing or waiving of any default.”  On November 4, 2016, the Ninth Circuit … Continue Reading

Sixth Circuit: Standard For Sealing Judicial Records “Vastly More Demanding” Than For Rule 26 Protective Order

In Shane Group, Inc. v. Blue Cross Blue Shield of Mich., a unanimous panel of the Sixth Circuit vacated the district court’s orders sealing “most of the parties’ substantive filings” and approving a class action settlement in a price-fixing action against an insurer. In vacating the orders placing documents under seal and the settlement approval, … Continue Reading

Excuse me, but I believe I was first in line! Severance Claims as a Matter of Priority.

Among other strategic considerations a financially troubled company must grapple with as it prepares for a potential bankruptcy filing is how best to effectively implement necessary workforce reductions as part of its overall reorganization efforts. A workforce reduction could potentially give rise to severance and other employee obligations, and, under certain circumstances, could also give … Continue Reading

An Original Signature Means an Original Signature – Attorney Sanctioned Over the Use of DocuSign Signatures

In a recent memorandum decision, Judge Robert S. Bardwil of the United States Bankruptcy Court for the Eastern District of California sanctioned a Sacramento attorney and ordered him to complete a local e-filing course because he did not maintain copies of filed documents that included the original “wet” signature. Instead, the attorney relied solely upon … Continue Reading

Does a Super-Priority Claim Remain Superior Through a Conversion to Chapter 7? One Bankruptcy Court Says Yes.

In a recent decision in In re Packaging Systems, LLC, the Bankruptcy Court for the District of New Jersey ruled that a lender that held a “super-priority” administrative expense claim under section 364(c)(1) of the Bankruptcy Code was still entitled to its super-priority status even after the debtor’s case converted to chapter 7.  The decision may … Continue Reading

Puerto Rico Continues the Struggle to Restructure its Debts

When we last discussed the Commonwealth of Puerto Rico’s efforts to restructure some $72 billion in municipal debt, a Federal District Court Judge had found the Commonwealth’s 2014 municipal debt-restructuring law, the “Recovery Act,” to be pre-empted by the federal Bankruptcy Code, unconstitutional and therefore void. The ruling hinged on the definition of “State” under Section … Continue Reading

“Reasonably Equivalent Value” – – A Path Without Guideposts.

“Reasonably equivalent value” – – part of the standard for evaluation of potential constructive fraudulent transfers – – is both subjective and imprecise. The words “equivalent value” require the court to make a subjective judgment whether consideration received in exchange for a transfer is worth the same as the consideration transferred by the debtor. And … Continue Reading

Gibraltar Court Recognises Chapter 11 Bankruptcy as a Foreign Main Proceeding

Peabody Energy Corporation is one of the biggest energy companies in the world. Its main business is coal mining and it conducts extensive operations in the United States and in Australia. Peabody had been hit by declining coal prices both for thermal coal and also for metallurgical coal used for steel making, especially due to the declining demand from … Continue Reading

Teenagers And The D.C. Circuit Agree: Internet Service Is A Utility – Will Bankruptcy Courts Follow?

The topic of net neutrality has continued to be at the forefront of public discourse over recent years.  This is the result of the FCC’s repeated attempts to impose regulations designed to protect consumers while at the same time telecom companies seek to control their product and the services they provide without what they contend … Continue Reading

“But Sometimes You Get What You Need” – – Another Decision on Annuity Exemptions

Last week, our post “You Can’t Always Get What You Want” discussed a Texas bankruptcy court decision rejecting efforts by debtor Sam Wyly to claim as exempt a number of offshore private annuities. In denying the exemptions, the bankruptcy judge rejected the debtor’s arguments that the principle of liberal application of exemptions and the policy of … Continue Reading

“You Can’t Always Get What You Want” – – Denial of Claimed Exemptions for Offshore Annuities

The bankruptcy courts have a long history of being willing to use their judicial power under the Bankruptcy Code to prevent perceived efforts by debtors to inappropriately shield their assets from creditors. This is true even when the debtors employ structures and devices that are complex and crafted in seeming compliance with applicable law. A … Continue Reading

US and English Courts welcome most- but not all- foreign debtors

TMA’s Journal for Corporate Renewal July/August 2016 published an article written by Nava Hazan, Mark Salzberg and Susan Kelly, which discusses how the US Bankruptcy Courts have been open to foreign debtors, as well as the limits to such availability, which was the subject of the recent Baha Mar decision in Delaware. The article further … Continue Reading
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