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      Insolvency News and Analysis - Week Ending August 1, 2014
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    Insolvency News and Analysis - July 18, 2014
    Insolvency News and Analysis - July 11, 2014
       

    Posts Tagged ‘debt’

    Recent Insolvency and Bankruptcy Headlines – June 6, 2014

    Friday, June 6th, 2014

    Some of the week’s top bankruptcy and restructuring headlines:

    English: Part of Title 11 of the United States...

    English: Part of Title 11 of the United States Code (the Bankruptcy Code) on a shelf at a law library in San Francisco. (Photo credit: Wikipedia)

     

    Trends

     

    - Business Bankruptcy Filings Off 21% Year-Over-Year

     

    - Less Than 1M Filings This Year?

     

    LBO Defaults Set to Reach A High This Year, Fitch Says

     

    - The Changing Nature of Chapter 11

     

    Cross-Border

     

    - Cross-Border Issues: Misconduct No Grounds for Termination of Chapter 15

     

    Liquidators urge speedy action on Hong Kong corporate rescue bill

     

    Financing

     

    - DIP Dimensions: Energy Future Intermediate Holding Co. LLC”s Financing Fracas

     

    Avoidance Actions

     

    - Avoidance Actions: Subsequent New Value Defense, Good Faith Defense, and Section 546(e) Safe-Harbor

     

    - Ponzi Schemes:  11th Circuit Opines on “Property of the Debtor”

     

    Thelen Ruling Highlights Evidentiary Issues in Fraudulent Transfer Case

     

    Bankruptcy Sales

     

    - Limits On Credit Bidding and Section 363(k):  Another Court Follows Fisker

     

    Successful Bidder Must Pay Damages (In Addition to Forfeiting Deposit) After Backing Out of Sale – At Least in Certain Circumstances

     

    Upsetting a Bankruptcy Auction: Money Talks

     

    - Never Do This: A Lesson On What Not To Do In a Section 363 Auction

     

    Confirmation

     

    - Plan Confirmation:  The Tax Man Cometh . . . And Getteth Impaired

     

    Claims

     

    - Debt Recharacterization: In re Alternate Fuels: Tenth Circuit BAP Holds Recent Supreme Court Decisions Do Not Limit Power to Recharacterize Debt to Equity

     

    . . . And More Debt Recharacterization: In re Optim Energy: Court Denies Creditor Derivative Standing to Seek Recharacterization of Equity Sponsors’ Debt Claims

     

     

     

    And Still More:

     

    Related articles

     

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    Rule 2019: A Kinder, Gentler, Amendment

    Monday, June 14th, 2010

    The Advisory Committee on Bankruptcy Rules of the Administrative Office of the U.S. Courts has pulled back from its earlier position on the disclosure required of hedge fund and other distressed debt investors participating as ad hoc committees or other, loosely organized creditor groups in Chapter 11 cases.

    Seal of the Administrative Office of the Unite...
    Image via Wikipedia

     

    An earlier version of proposed amendments to Federal Rule of Bankruptcy Procedure 2019 would have required such investors to disclose the dates and prices paid for their purchases of distressed securities.  These changes were resisted by investor groups such as the Loan Syndications and Trading Association, and created some press coverage last year (an earlier post on the amendments is available here).

    That said, investors will still be required to reveal the “disclosable economic interest” they each hold in a company, including debt and derivatives. This includes the identity of specific investors and the date such investors acquired their interests.

    Morever, Committee notes to the proposed rule indicate that the previously-contested disclosures of pricing and purchase dates may be compelled through discovery or by the Court acting under its own authority outside the proposed rule.

    A copy of the proposed rule, along with a summary of comments received on earlier versions and the Committee’s advisory notes, is available here.

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    What’s It Worth?

    Monday, December 7th, 2009

    Prior to the economic downturn – when sales were rising and debt was cheap – many businesses found it convenient to spur further growth by taking on “second-tier” secured financing, or engaging in aggressive leveraged buy-outs (LBO’s).  With the recession and resulting steep drop-off in firm revenues worldwide, many of the same businesses (and LBO targets) found themselves over-leveraged and struggling to service their debt.  First priority lenders have responded to this distress by negotiating exclusively with their debtors for pre-arranged “restructuring” plans that, in effect, provide for the transfer of assets and repayment of the first-priority debt – but provide little, if anything, to “second-tier” lenders and other creditors.

    recent piece from Reuters discusses what junior creditors are doing about it.

    As illustrated in recent Chapter 11 cases such as Six Flags Inc., Pliant Corp., and Trump Entertainment Resorts, Inc., junior creditors are attempting to fight back with competing restructuring plans of their own – proposed plans that provide them with better returns, or with a meaningful equity stake in the reorganized debtor. 

    A review of the dockets in each of those cases indicates that these efforts have met with varying degrees of success.  The Reuters piece suggests three variables that can impact the success of this strategy:

    - Valuation.   Arguably the most critical factor in supporting a plan that competes with one pre-negotiated with the first-priority creditors is evidence demonstrating that the debtor is, in fact, worth more than the first-priority creditors claim.  That demonstration can be challenging, particularly in light of today’s uncertain economy and pricier debt.  Even so, junior creditors are likely to argue credibly that a company whose revenues were historically strong should not be under-valued purely on the basis of weaker performance in a generally weaker economy.  Still other junior creditors seeking to preserve their original position may be willing to advance additional funds, thereby opening up a possible source of financing otherwise unavailable to the debtor.

    - The Court.  Concerns such as docket management and the court’s philosophical disposition to maximize enterprise value or protect the position of junior creditors – or not – are factors that have real effect on the success of junior creditors’ bid to present a competing plan.

    - Cost-Benefit.  Finally, the presence – or absence – of effective negotiation between the parties can impact the perceived benefit of a competing plan.  When everyone is talking and a plan can be effectively built, a successful outcome is more likely than a full-blown “plan fight” which weighs down the estate with administrative expense and can, if sufficiently large, even jeopardize the debtor’s successful post-confirmation operations.

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