The South Bay Law Firm Law Blog highlights developing trends in bankruptcy law and practice. Our aim is to provide general commentary on this evolving practice specialty.

  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • March 2014
  • September 2013
  • July 2013
  • June 2013
  • February 2012
  • January 2012
  • December 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
    Comments RSS
    Log in
      Bankruptcy and Insolvency News and Analysis Week Ending November 13, 2015
    Bankruptcy and Insolvency News and Analysis Week Ending November 6, 2015
    Bankruptcy and Insolvency News and Analysis Week Ending October 30, 2015
    Bankruptcy and Insolvency News and Analysis Week Ending October 23, 2015

    Bankruptcy and Insolvency News and Analysis – Week Ending October 30, 2015

    Sunday, November 1st, 2015



    BAPCPA at 10: Was It Good or Bad?

    Bankruptcy Filings declined 11% in Fiscal 2015, Lowest Filings since 2007

    Avoidance and Recovery

    In re MCK Millennium: Court Vacates Landmark 546(e) Safe Harbor Decision

    House Wins! 7th Circuit Holds that “Good Faith” Defense Under Section 550(b)(1) Applies to Casino in Fraudulent Transfer Action

    Distressed Investing

    As Defaults Rise, Distressed-Debt Investors Seek an Edge by Buying the DIP

    Bankruptcy 101 for Investors: Acquiring a Debtor’s Assets in a Bankruptcy Case

    Related Articles

      Email This Post  Print This Post Comments Trackbacks

    Bankruptcy and Insolvency News and Analysis – Week Ending September 18, 2015

    Friday, September 18th, 2015


    Case Commencement

    Dueling venues and the (almost) futility of involuntary bankruptcy

    Bankruptcy Estate

    Whose Property Is The Corporate Social Media Account?

    Automatic Stay

    Religious Proceeding Violates Automatic Stay

    Claims, Avoidance, and Recovery

    Think You Got A Blank Check? Think Again

    In re Alternate Fuels, Inc.: Key Takeaways for Venture Capitalists Working with Emerging Companies

    A Bankruptcy Horror Story – State Bank of Toulon v. Covey (In re Duckworth)

      Email This Post  Print This Post Comments Trackbacks

    Bankruptcy and Insolvency News – Week Ending May 1, 2015

    Friday, May 1st, 2015



    March 2015 Bankruptcy Filings Down 12 Percent

    Bankruptcies Drop: ‘The Worst I’ve Seen in 30 Years’


    The American Bankruptcy Institute’s Recommendations for Chapter 11 Reform

    Out-of-Court Workouts


    Avoidance and Recovery

    The Fraudulent Transfer Laws Do Indeed Apply To Future Creditors

    Liability for Preferential Transfer May Be Reduced by Subsequent New Value

    Fraudulent Transfer Damages: Creditor Windfall, Creditor Claims Cap, or Equitable Determination by the Court?

    Leases and Executory Contracts

    Filene’s Basement Decision Interprets Lease Rejection Damages Statute

    Intellectual Property and Social Media

    Texas Bankruptcy Court ‘Likes’ Facebook and Twitter Accounts as Property of the Reorganized Debtor


    Reorganization By Foreign Debtors In The US And UK

      Email This Post  Print This Post Comments Trackbacks

    Insolvency News and Analysis – Week Ending March 20, 2015

    Sunday, March 22nd, 2015



    Poll: Retail could push bankruptcies to rise

    Will Lower Unemployment Drive Bankruptcies?

    Case Commencement

    Petitioning Creditor Concerns in Involuntary Chapter 11

    Chapter 11 Triage: Diagnosing a Debtor’s Prospects for Success


    Bankruptcy Sales: The Stalking Horse


    Litigation or Estimation? When Should Nonbankruptcy Actions Continue in Their Original Forums, and When Should They Be Resolved Through Estimation in Bankruptcy Court?

    Look Before You Lend: Creditors’ Rights Against LLC Owners

    Avoidance and Recovery

    Eighth Circuit Says Focus is on the Intent of the Debtor in Fraudulent Transfer Law, Does Not Address Ponzi Scheme Presumption


    US Bankruptcy Court Declines to Grant Comity to Mexican Labor Board’s Decision

    Jacobs v. Terpitz: Entering Into A Partnership Constitutes “Minimum Contacts”

      Email This Post  Print This Post Comments Trackbacks

    Insolvency News and Analysis – Week Ending January 9, 2015

    Saturday, January 10th, 2015

    BK Options


    Bankruptcy Count Lowest Ever. Uptick Anticipated – Health Care Filings Lead Count

    Bankruptcies Down 12% in 2014, Forecast Predicts the Same Decline for 2015

    Legislation and Reform

    Redemption Option Value: Broad Implications for Secured Lenders

    ABI Chapter 11 Reform Commission Series: Oversight of the Case (Part I)

    Corporate Governance


    Secured Claims

    Review Twice, File Once, Review Again; UCC-3 Termination Intent Irrelevant

    Even The “Cleverly Insidious” Lender Cannot Prevent Its Borrower From Filing Bankruptcy

    Common Provisions in a Chapter 11 Plan Prevent Lender from Collecting From the Owner of the Debtor

    Leases and Executory Contracts

    Capital Leases in Bankruptcies – A Lesson from Xchange Technology Group

    It’s Not Purdy, But It’s Not A Per Se Security Agreement

      Email This Post  Print This Post Comments Trackbacks

    Insolvency News and Analysis – Week Ending October 17, 2014

    Friday, October 17th, 2014

    English: Woolworth's, Banbridge (3of3) See 110...

    Involuntary Petitions

    LLP: When Is A Partnership Not a Partnership (And Who Cares)?


    Fiduciary Considerations for Pre-Bankruptcy Transactions

    In re NE Opco, Inc: Section 363(f) Bars Pre-closing Claims Arising from Purchaser’s Alleged Wrongdoing Occurring After Entry of Sale Order


    Environmental Claims: The Gift That Keeps On Giving


    #Hashtag: Thinking of Starting Your Own Marijuana Business?


    Second Circuit Fails to See the Comity in Chapter 15


      Email This Post  Print This Post Comments Trackbacks

    The Year in Bankruptcy – 2011

    Monday, January 30th, 2012

    JonesDay’s comprehensive and always-readable summary of notable bankruptcies, decisions, legislation, and economic events was released just over a week ago.  A copy is available here.

    As 2012 gets off to an uncertain start, some more recent headlines are accessible immediately below.

    Enhanced by Zemanta
      Email This Post  Print This Post Comments Trackbacks

    Intercreditor Agreements: How Far Can They Reach?

    Tuesday, January 17th, 2012
    Creditor's Ledger, Holmes McDougall

    Image by edinburghcityofprint via Flickr

    Can a senior secured lender require, through an inter-creditor agreement, that a junior lender relinquish the junior’s rights under the Bankruptcy Code vis á vis a common debtor?

    Though the practice is a common one, the answer to this question is not clear-cut.  Bankruptcy Courts addressing this issue have come down on both sides, some holding “yea,” and others “nay.”  Late last year, the Massachusetts Bankruptcy Court sided with the “nays” in In re SW Boston Hotel Venture, LLC, 460 B.R. 38 (Bankr. D. Mass. 2011).

    The decision (available here) acknowledges and cites case law on either side of the issue.  It further highlights the reality that lenders employing the protective practice of an inter-creditor agreement as a “hedge” against the debtor’s potential future bankruptcy may not be as well-protected as they might otherwise believe.

    In light of this uncertainty, do lenders have other means of protection?  One suggested (but, as yet, untested) method is to take the senior lender’s bankruptcy-related protections out of the agreement, and provide instead that in the event of the debtor’s filing, the junior’s claim will be automatically assigned to the senior creditor, re-vesting in the junior creditor once the senior’s claim has been paid in full.

    Enhanced by Zemanta
      Email This Post  Print This Post Comments Trackbacks

    Finding New Ways to Sell Troubled Assets “Free and Clear” of Liens

    Sunday, April 24th, 2011

    One of the most effective vehicles for the rescue and revitalization of troubled business and real estate to emerge in recent years of Chapter 11 practice has been the “363 sale.”

    Seal of the en:United States Court of Appeals ...

    Image via Wikipedia


    Named for the Bankruptcy Code section where it is found, the “363 sale” essentially provides for the sale to a proposed purchaser, free and clear of any liens, claims, and other interests, of distressed assets and land.

    The section has been used widely in bankruptcy courts in several jurisdictions to authorize property sales for “fair market value” . . . even when that value is below the “face value” of the liens encumbering the property.

    In the Ninth Circuit, however, such sales are not permitted – unless (pursuant to Section 363(f)(5)) the lien holder “could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.”

    A recent decision issued early this year by the Ninth Circuit Bankruptcy Panel and available here) provides a glimpse of how California bankruptcy court are  employing this statutory exception to approve “363 sales.”

    East Airport Development (EAD) was a residential development project in  San Luis Obispo which, due to the downturn of the housing market, never came completely to fruition.

    Originally financed with a $9.7 million construction and development loan in 2006, EAD’s obligation was refinanced at $10.6 million in mid-2009.  By February 2010, the project found itself in Chapter 11 in order to stave off foreclosure.

    A mere  two weeks after its Chapter 11 filing, EAD’s management requested court authorization to sell 2 of the 26 lots in the project free and clear of the bank’s lien, then to use the excess proceeds of the sale as cash collateral.

    In support of this request, EAD claimed the parties had previously negotiated a pre-petition release price agreement.  EAD argued the release price agreement was a “binding agreement that may be enforced by non-bankruptcy law, which would compel [the bank] to accept a money satisfaction,” and also that the bank had consented to the sale of the lots.  A spreadsheet setting forth the release prices was appended to the motion.  The motion stated EAD’s intention to use the proceeds of sale to pay the bank the release prices and use any surplus funds to pay other costs of the case (including, inter alia, completion of a sewer system).

    The bank objected strenuously to the sale.  It argued there was no such agreement – and EAD’s attachment of spreadsheets and e-mails from bank personnel referencing such release prices ought to be excluded on various evidentiary grounds.

    The bankruptcy court approved the sale and cash collateral use over these objections.  The bank appealed.

    On review, the Ninth Circuit Bankruptcy Appellant Panel found, first, that the bankruptcy court was within the purview of its discretion to find that, in fact, a release price agreement did exist – and second, that such agreement was fully enforceable in California:

    It is true that most release price agreements are the subject of a detailed and formal writing, while this agreement appears rather informal and was evidenced, as far as we can tell, by only a few short writings. However, this relative informality is not fatal. The bankruptcy court is entitled to construe the agreement in the context of and in connection with the loan documents, as well as the facts and circumstances of the case. Courts seeking to construe release price agreements may give consideration to the construction placed upon the agreement by the actions of the parties. . . . Here, the parties acted as though the release price agreement was valid and enforceable and, in fact, had already completed one such transaction before EAD filed for bankruptcy. On these facts, [EAD] had the right to require [the bank] to release its lien on the two lots upon payment of the specified release prices, even though [the bank] would not realize the full amount of its claim. More importantly, [EAD] could enforce this right in a specific performance action on the contract. For these reasons, the sale was proper under § 363(f)(5).

    The Ninth Circuit Bankruptcy Appellate Panel‘s East Airport decision provides an example of how bankruptcy courts in the Ninth Circuit are creatively finding ways around legal hurdles to getting “363 sales” approved in a very difficult California real estate market.  It likewise demonstrates the level of care which lenders’ counsel must exercise in negotiating the work-out of troubled real estate projects.

    Enhanced by Zemanta
      Email This Post  Print This Post Comments Trackbacks

    Nobody Does It Better . . . Than Government Regulators

    Tuesday, April 19th, 2011

    Title II of the Dodd-Frank Act provides “the necessary authority to liquidate failing financial companies that pose a systemic risk to the financial stability of the United States in a manner that mitigates such risk and minimizes moral hazard.”

    Under this authority, the government would have had the requisite authority to structure a resolution of Lehman Brothers Holdings Inc. – which, as readers are aware, was one of the marquis bankruptcy filings of the 2008 – 2009 financial crisis.

    Readers are also aware that Dodd-Frank is an significant piece of legislation, designed to implement extensive reforms to the banking industry.  But would it have done any better job of resolving Lehman’s difficulties than did Lehman’s Chapter 11?

    The New York Stock Exchange, the world's large...

    Image via Wikipedia


    Predictably, the FDIC is convinced that a government rescue would have been more beneficial – and in “The Orderly Liquidation of Lehman Brothers Holdings Inc. under the Dodd-Frank Act” (forthcoming in Vol. 5 of the FDIC Quarterly), FDIC staff explain why this is so.

    The 19-page paper boils down to the following comparison between Chapter 11 and a hypothetical resolution under Dodd-Frank:

    [U]nsecured creditors of LBHI are projected to incur substantial losses. Immediately prior to its bankruptcy filing, LBHI reported equity of approximately $20 billion; short-term and long-term indebtedness of approximately $100 billion, of which approximately $15 billion represented junior and subordinated indebtedness; and other liabilities in the amount of approximately $90 billion, of which approximately $88 billion were amounts due to affiliates. The modified Chapter 11 plan of reorganization filed by the debtors on January 25, 2011, estimates a 21.4 percent recovery for senior unsecured creditors. Subordinated debt holders and shareholders will receive nothing under the plan of reorganization, and other unsecured creditors will recover between 11.2 percent and 16.6 percent, depending on their status.

    By contrast, under Dodd-Frank:

    As mentioned earlier, by September of 2008, LBHI’s book equity was down to $20 billion and it had $15 billion of subordinated debt, $85 billion in other outstanding short- and long-term debt, and $90 billion of other liabilities, most of which represented intracompany funding. The equity and subordinated debt represented a buffer of $35 billion to absorb losses before other creditors took losses. Of the $210 billion in assets, potential acquirers had identified $50 to $70 billion as impaired or of questionable value. If losses on those assets had been $40 billion (which would represent a loss rate in the range of 60 to 80 percent), then the entire $35 billion buffer of equity and subordinated debt would have been eliminated and losses of $5 billion would have remained. The distribution of these losses would depend on the extent of collateralization and other features of the debt instruments.

    If losses had been distributed equally among all of Lehman’s remaining general unsecured creditors, the $5 billion in losses would have resulted in a recovery rate of approximately $0.97 for every claim of $1.00, assuming that no affiliate guarantee claims would be triggered. This is significantly more than what these creditors are expected to receive under the Lehman bankruptcy. This benefit to creditors derives primarily from the ability to plan, arrange due diligence, and conduct a well structured competitive bidding process.

    Convinced?  You decide.

    Enhanced by Zemanta
      Email This Post  Print This Post Comments Trackbacks