HHR Bankruptcy Report

Category Archives: Chapter 11

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The Gate Swings Shut: Second Circuit Ruling Narrows Restructuring Limitations.

Posted in Chapter 11, Second Circuit, Trust Indenture Act
After a 2014 decision in the Southern District of New York holding that section 316(b) of the Trust Indenture Act (“TIA”) barred any non-consensual restructuring that impaired a creditor’s actual ability to receive payment, issuers, creditors and the financial markets more generally have been uncertain as to the contours of permissible out-of-court restructurings.[1]   The recent… Continue Reading

Bankruptcy Wildcatting: Challenging Midstream Contracts In The Wake of Sabine

Posted in Chapter 11, Energy
This article can be found in the New York Law Journal‘s Corporate Restructuring and Bankruptcy special report. Amidst the sometimes dramatic fluctuations in commodity prices that buffet the oil and gas industry, investors generally relied on one segment of the market to be safe and stable: so-called “midstream” companies that own the pipelines that transport… Continue Reading

“Gunning” for a New Disinterestedness Standard for Bankruptcy Professionals

Posted in Chapter 11, Section 327(a)
In order to be retained to provide bankruptcy services to a debtor, most professionals generally need to satisfy the “disinterestedness” requirement of Bankruptcy Code Section 327(a). Typically, in order to be “disinterested,” among other things, the professional in most cases cannot be a creditor of the debtor, have outstanding invoices, at the time of the… Continue Reading

SCOTUS Grants Cert in Jevic

Posted in Chapter 11, SCOTUS, Third Circuit
Yesterday, the Supreme Court granted certiorari in Czyzewski v. Jevic Holding Corp (“Jevic”). As previously reported, Jevic addressed whether a bankruptcy court can approve a settlement agreement that provides for distributions that violate the absolute priority rules as part of the structured dismissal of a chapter 11 proceeding. The Third Circuit held that such structured… Continue Reading

Solicitor General Sides With Priority Creditors In Recent Amicus Brief

Posted in Chapter 11, SCOTUS, Section 1112, Third Circuit
Last summer, the HHR Bankruptcy Report analyzed the Third Circuit’s ruling in Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.),[1] which approved, as part of the structured dismissal of a chapter 11 proceeding, a settlement agreement that allowed distributions that violated the absolute priority rule.  Following the Third… Continue Reading

Chapter 11 Debtors Exempt From Their Obligations Under An Expired Collective Bargaining Agreement

Posted in Chapter 11, Section 1113, Third Circuit
The Third Circuit’s decision in In re Trump Entertainment presents interesting opportunities for employers with expired collective bargaining agreements (“CBAs”) seeking to reorganize their companies under Chapter 11 of the Bankruptcy Code. [1] In In re Trump Entertainment, the Court held that a debtor may reject an expired CBA under Section 1113 of the Bankruptcy… Continue Reading

Guidance on the Scope of Airline Debtors’ “Surrender and Return” Obligations Under Section 1110 of the Bankruptcy Code

Posted in Aviation, Chapter 11, Section 1110
Section 1110 of the Bankruptcy Code provides special protections to lenders and lessors that lease, finance, or conditionally sell aircraft equipment.  In 2000, Congress amended section 1110 to add section 1110(c), which provides that a debtor must “immediately surrender and return” aircraft equipment to a secured party if such party is entitled to possession under… Continue Reading

Downstream Service Providers Hit a Dry Well: Bankruptcy Court Permits Rejection of Service Contracts in Sabine Oil & Gas

Posted in Chapter 11, Energy, Executory Contracts
A recent decision by Judge Shelley C. Chapman of the Bankruptcy Court for the Southern District of New York in the Sabine Oil & Gas chapter 11 cases[1] could have significant commercial implications on a U.S. energy sector already stressed by an extended period of low commodity prices.  Relying on Bankruptcy Code section 365(a)’s deference… Continue Reading

A Third Party Release in a Confirmed Plan Shields Against Unknown and Nonexistent Claims

Posted in Chapter 11, Section 502(h), Third party release
Bankruptcy law and business expectations converged in the Residential Capital (“ResCap”) proceeding when the Bankruptcy Court confirmed that the third party release contained in ResCap’s plan of reorganization protected ResCap’s non-debtor parent from claims that were not known and did not exist at the time the plan was confirmed. The Bankruptcy Court reasoned that Section… Continue Reading

Baha Mar Creditors Head Back to Bahamas

Posted in Chapter 11, Cross-Border Restructuring, Delaware
On Tuesday, September 15, 2015, Judge Kevin J. Carey, United States Bankruptcy Judge for the District of Delaware, granted motions to dismiss Chapter 11 proceedings relating to the failed Baha Mar resort project filed by Baha Mar’s Bahamian creditors CCA Bahamas Ltd. and Export-Import Bank of China.  The Debtors include fourteen corporations based in the… Continue Reading

In Recent Ruling, SCOTUS Preserves Junior-Lien Lenders’ Secured Claims

Posted in Bankruptcy Claims, Chapter 11, Claims Subordination, SCOTUS
On June 1, 2015, the U.S. Supreme Court issued its decision in Bank of America v. Caulkett.[1] The Court’s unanimous opinion, which was written by Justice Thomas, established that junior mortgage lienholders maintain a “secured” claim against a bankrupt debtor even where the junior mortgage lien is completely underwater. Further, an underwater junior mortgage lien… Continue Reading

Structured Dismissal: The “Least Bad Alternative”

Posted in Chapter 11, Delaware, Third Circuit
The Third Circuit, in Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.),[1] became the first court of appeals to approve the settlement and dismissal of a chapter 11 case. Structured dismissals, as understood by the Third Circuit, are “simply dismissals that are preceded by other orders of the… Continue Reading

Supreme Court Concludes That Orders Denying Confirmation Of A Bankruptcy Plan Are Not Final For Purposes Of Appeal, Resolving Circuit Split

Posted in Chapter 11, Chapter 13, Plan Confirmation, SCOTUS
As previously reported, on December 12, 2014, the Supreme Court granted certiorari on an appeal from the decision of the First Circuit Court of Appeals in Bullard v. Hyde Park Savings Bank, to resolve a circuit court split regarding whether an order denying confirmation of a bankruptcy plan is a final order appealable as of… Continue Reading

Supreme Court To Resolve Circuit Split On Finality Of Orders Denying Confirmation Of A Bankruptcy Plan

Posted in Chapter 11, Chapter 13, Plan Confirmation, SCOTUS
On December 12, 2014, the Supreme Court agreed to hear an appeal of the ruling in Bullard v. Hyde Park Savings Bank (In re Bullard), 752 F.3d 483 (1st Cir. 2014) to resolve a circuit court split regarding whether an order denying confirmation of a bankruptcy plan is a final order appealable as of right… Continue Reading

ABI’s Commission to Study the Reform of Chapter 11 Issues Recommendations

Posted in ABI, Chapter 11
Earlier today, ABI issued its much-anticipated report regarding potential revisions to Chapter 11 of the Bankruptcy Code.  As Reuters reports, ABI “formed the commission in 2012 amid concerns that rising costs of Chapter 11 were deterring companies from filing for bankruptcy.” Stay tuned to the Hughes Hubbard Bankruptcy Report for updates on key takeaways in… Continue Reading

TMT Procurement – DIP Lender Did Not Meet “Good Faith” Requirement

Posted in Chapter 11, Debtor-in-Possession Financing, Fifth Circuit
The Fifth Circuit recently held that a debtor-in-possession (DIP) lender did not qualify as a “good faith” lender, overturning orders of the United States District Court and Bankruptcy Court for the Southern District of Texas, including a final order approving DIP financing.  In re TMT Procurement Corp., 764 F.3d 512 (5th Cir. 2014).   Notably, the… Continue Reading

Second Circuit Hears Arguments in Important Test of Safe Harbor Provisions

Posted in Chapter 11, Safe Harbor Provisions, Second Circuit
On November 5, 2014, the Second Circuit (Judges Winter, Droney, and Hellerstein) held oral arguments in In re Tribune Litigation (Case No. 13-3992) and Whyte v. Barclays Bank PLC (Case No. 13-2653).  As we outlined here, both cases consider the reach of the safe harbor provisions found in section 546 of the Bankruptcy Code that… Continue Reading

Safe Harbor Provisions Intact in Recent Seventh Circuit Decision

Posted in Chapter 11, Safe Harbor Provisions, Seventh Circuit
Participants in the securities and futures markets rely on the Bankruptcy Code’s safe harbor provisions to protect their transactions and assets when a counter-party enters bankruptcy.  Reliance on the safe harbor provisions, whose objective is to increase the overall stability of the financial markets, was tested by a recent decision of the District Court for… Continue Reading

In re Fisker: Delaware Bankruptcy Court Imposes Roadblock to Credit Bidding

Posted in Chapter 11, Delaware, Section 363
In considering a Section 363 asset sale in In re Fisker Automotive Holdings, Inc., , the United States Bankruptcy Court for the District of Delaware used its “for cause” power under Section 363(k) to limit the proposed purchaser’s credit bid and trigger a competitive cash auction for the debtor’s assets.  2014 WL 210593 (Bankr. D.… Continue Reading

In re Garlock Sealing Technologies: Bankruptcy Court Accepts Legal Liability Approach to Estimation

Posted in Asbestos, Chapter 11
On January 10, 2014, Judge George R. Hodges of the U.S. Bankruptcy Court for the Western District of North Carolina issued an order in In re Garlock Sealing Technologies, LLC (No. 10-31607) estimating Garlock’s asbestos liability for present and future mesothelioma claims to be $125 million, the value proposed by the debtors.  The Asbestos Claimants… Continue Reading

Which Hat Hides the Ball?: Courts Test Extent of Safe Harbor Protections in Financial Transactions

Posted in Chapter 11, Safe Harbor Provisions
When a legal right depends on the capacity in which a party purports to act, it won’t be long before the lawyers are talking about “hats.”  In two bankruptcy cases now pending before the Second Circuit, the hat in question is that of the trustee under section 546 of the Bankruptcy Code and the right… Continue Reading

Protecting Lenders In Structured Financing Transactions: The Utility of “Bankruptcy-Remote” Entities Following In re GGP Properties, Inc.

Posted in Chapter 11, Structured Finance
In 2009, Judge Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York issued several remarkable rulings in the bankruptcy In re GGP Properties, Inc.[1](“GGP”).  Participants in structured credit markets initially expressed their “grave concern” regarding the potential “catastrophic impact” of the GGP rulings.[2]  While the ultimate effects of the… Continue Reading

Tax Sharing Arrangements in Bankruptcy: Who’s Refund Is It?

Posted in Chapter 11, Eleventh Circuit, Tax
When a multi-national conglomerate corporation fails, how the corporation’s tax-sharing arrangements (“TSAs”) will be interpreted in bankruptcy can be a multi-million dollar question, especially where a holding company is being reorganized separately from a subsidiary.  If the TSA is deemed to create debtor-creditor relationships between the affiliates, the affiliate holding the rebate on the date… Continue Reading