An Important Ruling for Secured Lenders – Ninth Circuit Holds that the Proper Cramdown Valuation is Replacement Value

Mountain-landscapeIn an important decision for secured creditors, the Ninth Circuit recently held that the proper “cramdown” valuation of a secured creditor’s collateral is its replacement value, regardless of whether the foreclosure value would generate a higher valuation of the collateral.  The appellate court’s decision has the potential to significantly impact lenders that include certain types of restrictions on the use of the collateral (such as low income housing requirements) in their financing documents.

In First Southern Nat’l Bank v. Sunnyslope Housing Ltd. P’ship (In re Sunnyslope Housing Ltd. P’ship), No. 13-16180, 2017 U.S. App. LEXIS 9198 (9th Cir. 2017) (en banc), the debtor owned an apartment complex in Phoenix, Arizona.  The financing for the apartment complex came primarily from an $8.5 million loan funded by Capstone Realty Advisors, LLC (“Capstone”), which was secured by a first priority deed of trust.  The Capstone loan was guaranteed by the United States Department of Housing and Urban Development (“HUD”).    Continue Reading

Cross Border Insolvency Regulations 2006- UK recognition of Azerbaijan Restructuring Proceedings

Azerbaijan FlagThe English courts have recently wrestled with the Cross Border Insolvency Regulations 2006 (“CBIR”) in a case about the lifting of the automatic stay on proceedings against Korean company STX Offshore & Shipbuilding Co Ltd

In the present case (Re International Bank of Azerbaijan OJSC) the English High Court found itself dealing with the application of Azerbaijan’s largest bank for an order recognising restructuring proceedings in Azerbaijan as main proceedings under the CBIR and imposing an administration moratorium in the UK.

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Statutory Limits to Retained Jurisdiction – – The Contract May Not Be The Answer

Businessman Looking at Brick WallA recent decision by the United States Court of Appeals for the First Circuit provides additional guidance with respect to jurisdictional disputes that bankruptcy professionals often see in practice. In particular, the Gupta v. Quincy Med. Ctr., 2017 U.S. App. LEXIS 9814 (1st Cir. June 2, 2017) case analyzed whether a bankruptcy court had jurisdiction to adjudicate a post-sale dispute among a purchaser of estate assets and former employees of the debtors.

In Gupta, the debtors operated the Steward Family Hospital in Quincy, Massachusetts. The debtors executed an asset purchase agreement (the “APA”) to sell the hospital to a subsidiary of Steward Health Care System (“Steward” or “Purchaser”). A day later on July 1, 2011, the debtors filed for Chapter 11 bankruptcy and submitted a 363 sale motion to approve the APA. Provisions of the APA obligated Steward to pay certain severance obligations owed to employees terminated by Steward on or after the sale closing. Continue Reading

Don’t You Know There’s An Election On?

General Election 2017You might have noticed that the UK is heading to the polls on 8 June.

Elections of course create a great deal of uncertainty. One of the few things we can be certain of is that whichever party (or coalition of parties) succeeds, the new UK government faces significant challenges going forward, not least of all negotiating Britain’s exit from the European Union whilst establishing a strong footing on the world stage. The question is, however, with each party focusing on Brexit and the economy, how will the manifestos affect UK businesses?

The Institute for Fiscal Studies published its analysis of the Conservative and Labour Party manifestos on Friday 26 May and criticised both heavily as failing to address the long-term challenges faced by the country. This blog picks out some of the key areas highlighted in that report most likely to affect UK business.

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Assignments of Rent – – A Dangerous Intersection of State and Federal Law

A recent decision by the Sixth Circuit Court of Appeals may have muddied the question of the impact of collateral rent assignments on a debtor’s ability to re-organize under chapter 11.

Town Center Flats LLC v. ECP Commercial II LLC involved a fairly standard real estate finance transaction for a multi-unit residential complex in Michigan. The loan used to finance the complex was secured by a mortgage and an assignment of rents.  The assignment of rents was structured as an absolute transfer, coupled with a license for the debtor to utilize the rents until the occurrence of an event of default.  Upon default, the agreement provided that the license would automatically terminate, thus re-vesting the rents in the secured party assignee.

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More changes afoot! Introducing the Business and Property Courts England and Wales

Courthouse Close with Justice inscribedFrom June this year, several specialist courts of the High Court of England and Wales are being banded together under a new title – “THE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES”.

The idea is to give these specialised courts a memorable and (it is hoped) user-friendly umbrella title, whilst still preserving the value of the existing brands of the individual courts.

The specialist courts that will co-exist under this new umbrella comprise the Commercial Court (including the Admiralty and Mercantile Court), the Technology and Construction Court (“TCC”) and the various distinct courts which make up the Chancery Division (including the Bankruptcy and Companies Court).

The new title will not replace the existing individual names of the specialist courts per se but will appear as the new heading on court filings.

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Cross-Border Co-operation in Group Insolvency Proceedings- Myth or Reality?

533193315As 26 June 2017 approaches – the date of entry into effect of the Recast EU Insolvency Regulation (2015/8484/EU) – we  look in detail at the new provisions for co-ordinating the insolvency proceedings of members of a pan-European group of companies and consider whether the new proposals for co-operation will be compulsory, the practicalities of who will pay the co-ordinator’s fees and whether the creditors can have a say in the process. Continue Reading

Unfinished Business: Insolvency Rules 2016 and changes still to come

90331419The Insolvency Rules (England and Wales) 2016 (“IR2016”) came into force on 6 April 2016 applying to most corporate and personal insolvency regimes in England and Wales. However, there is still unfinished business for the Government and further regulation is expected to be introduced later this year to ensure the changes apply uniformly in all areas. Continue Reading

How safe is safe?

United States Supreme Court Building in Washington, DCEarlier this month, the United States Supreme Court agreed to review a Seventh Circuit decision regarding the scope of the so-called “safe harbor” from avoidable transfers provided in Section 546(e) of the Bankruptcy Code.  Many in the U.S. bankruptcy industry expect that the Supreme Court granted certiorari to hear Merit Management Group, LP v. FTI Consulting, Inc., Case No. 16-784, in order to resolve a long-running split among the 2nd, 3rd, 6th, 8th, and 10th Circuits, on the one hand, and the 7th and 11th Circuits on the other.

The basic issue in Merit is whether Section 546(e) protects an otherwise-avoidable transfer made by or to a financial institution, whether or not the institution has a beneficial interest in the property transferred.  Understanding how the Section 546(e) safe harbor protects certain transfers requires a familiarity with (a) preferential transfers under Section 547(b), which allows a debtor-in-possession or a trustee to avoid certain transfers made within 90 days of a debtor’s bankruptcy filing, and (b) fraudulent transfers under both Section 548, which allows avoidance of constructively or actually fraudulent transfers made to or for the benefit of an insider of the debtor within two years of the bankruptcy filing, and Section 544 which incorporates state fraudulent transfer statutes. Continue Reading

EACTP debates draft Business Insolvency Directive in Brussels

Andreas Lehmann, Chris Laughton and Jukka-Pekka Joenssuu

Andreas Lehmann, Chris Laughton and Jukka-Pekka Joensuu

The European Association of Certified Turnaround Professionals (EACTP) organized an evening of debate about the proposed new European Directive on business insolvency held in Brussels on May 2nd at the offices of Squire Patton Boggs. Salla Saastamoinen, the European Commission Director of the Civil and Commercial Justice Unit, attended the event called A New European Restructuring Regime in a Changing World and met turnaround professionals from across Europe. Continue Reading