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.
 





 
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    Insolvency News and Analysis - Week Ending May 15, 2015
    Insolvency News and Analysis - Week Ending May 8, 2015
       

    Posts Tagged ‘“United States Bankruptcy Court”’

    Insolvency News and Analysis – Week Ending April 24, 2015

    Friday, April 24th, 2015
    Historic Minnesota Supreme Court Chamber in th...

    Historic Minnesota Supreme Court Chamber in the Minnesota State Capitol (Photo credit: Wikipedia)

    Trends

    Why It’s OK That Companies Are Dying Faster Than Ever

    Business Bankruptcy Filings Continue To Decline, Will The Trend Continue?

    Retail Chapter 11 Filings Up, Bucking Bankruptcy Trends In Economic Recovery

    Proposed Recommendations for the Reform of Chapter 11 U.S. Bankruptcy Code

    Administration

    SEC Temporary Asset Freeze Not Barred by Automatic Stay Provisions

    US SDNY Bankruptcy Court Finds Bank Violated Automatic Stay by Placing Administrative Freeze on Debtor’s Bank Account

    Avoidance and Recovery

    Minnesota Supreme Court Rejects The Ponzi Scheme Presumption: Lenders Claw Back Some Of Their Own Rights

    Valuation

    Valuation of derivatives and complex securities

    Confirmation

    ABI Commission Report – Cramdown Interest Rates

    Cross-Border

    US Bankruptcy Court Recognized Israeli Liquidation Proceeding in a Chapter 15 Case

    Delaware decisively ousts New York as friendliest US cross-border insolvency venue

     

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    Insolvency News and Analysis – Week Ending April 17, 2015

    Friday, April 17th, 2015
    Trade Off theory diagram

    Trade Off theory diagram (Photo credit: Wikipedia)

    Trends

    Corporate bankruptcies are on the rise in America

    U.S. public companies seek bankruptcy at fastest 1st-qtr rate since 2010

    Q1 Bankruptcy Filings Fall 15%

    Dr. William Rule (AOUSC): When Will Bankruptcy Filing Trends Change Course?

    The $12,473 Corporate Reorganization

    Current Developments

    Bankruptcy Year In Review 2014

    Corporate Governance

    Corporate Governance In Chapter 11 – Business As Usual, With Possible Exceptions

    Administrative Claims

    Reclamation, Administrative Claims and Other Possibilities for Recovery When a Factor Has Not Approved Orders

    Unsecured Claims

    Mandatory Subordination: How Even A Money Judgment Can Be Treated Like Equity In Bankruptcy

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    Insolvency News and Analysis – Week Ending April 10, 2015

    Friday, April 10th, 2015

     

    Pigs Get Fat

    Trends

    Q1 Distressed debt & bankruptcy restructuring review: Thomson Reuters

    ABI Commission’s Plan Process and Confirmation Recommendations: A Mixed Bag for Secured Creditors

    Weil’s Bankruptcy Blog: 2014 Annual Review

    Out-of-Court Restructuring

    Recent Case Law Impacting Debt Transactions

    Sales and Distressed Investing

    Distressed debt: Loan to own investment strategies after Fisker

    Hedge Funds and Distressed Debt Investing Program – Summary

    Avoidance and Recovery

    9th Circ. Panel Bolsters Trustees’ Reach-Back Powers

    Secured Claims

    Have Courts Left The Pinegate Open?

    Confirmation

    Tipping Point: Plan Clarification or Plan Modification? Third Circuit Denies Bankruptcy Court’s Use of Its Plan Clarification Powers to Circumvent Plan Modification Requirements of Section 1127

    Non-Consensual Third-Party Releases: Eleventh Circuit Joins “Pro-Release” Majority

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    Insolvency News and Analysis – Week Ending March 20, 2015

    Sunday, March 22nd, 2015

    jobs

    Trends

    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

    Sales

    Bankruptcy Sales: The Stalking Horse

    Claims

    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

    Cross-Border

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

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

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    Insolvency News and Analysis – Week Ending March 13, 2015

    Friday, March 13th, 2015

    bankruptcy

    Trends

    Survey sees potential for rise in Chapter 11 filings this year

    Return of the Turnaround?

    Executory Contracts

    Dysfunctional Analysis Part 1

    Dysfunctional Analysis Part 2

     Related Articles

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    Bankruptcy and Insolvency News and Analysis – Week Ending March 6, 2015

    Friday, March 6th, 2015

    Secured Credit

     

    Trends

    Bankruptcy Filings Down Again 10.1% in February 2015

    ABI: February Chapter 11 Filings Down 25%

    Secured Claims

    No Security by Obscurity: The Importance of Clearly Identifying Collateral

    Avoidance Actions and Recoveries

    Avoiding the Avoid: Re-Securing the Mortgage Lender Post-BFP

    Intellectual Property

    Don’t Complicate Things: Existence of a License Comes Down to the Terms of a Contract

    Confirmation

    Del. District Court Upholds Use of Pre-Confirmation Tender Offers

     

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    Insolvency News and Analysis – Week Ending January 16, 2015

    Sunday, January 18th, 2015
    A bond from the Dutch East India Company, dati...

    A bond from the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins. (Photo credit: Wikipedia)

    Legislation and Reform

    ABI Wants Chapter 11 Easier for Small Companies: Bankruptcy

    Automatic Stay

    Prepetition Stay Waivers: Which Way Is The Wind Blowing?

    Postpetition Ratification of Prepetition Stay Waivers – A Possible End Around of the General Prohibition Against Prepetition Waivers of Bankruptcy Rights?

    Secured Claims

    Charging Liens and Trump Cards: Specific Isolated Funds Not Required

    UCC Collateral Description: More May Not Be Better

    Unsecured Claims

    Chesapeake Bond Redemption Case: Ambiguity, Plain Meaning and Value

    Reorganization and Exit Strategy

    Cashing Out: The Rise of M&A in Bankruptcy

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    What’s In A Name?

    Thursday, October 2nd, 2014

    William Shakespeare

    “What’s in a name?” Shakespeare once asked, rhetorically.  According to Shakespeare’s character Juliet – and according to the US Bankruptcy Court for the District of Columbia – not a great deal.

    In a decision issued in early August, US Bankruptcy Judge Martin Teel, Jr. held that the so-called “general partner” of a District of Columbia limited liability partnership (LLP) could not, despite her title, initiate an involuntary bankruptcy proceeding against the debtor LLP.

    Bankruptcy Code section 303(b)(3) provides that one or more of a partnership’s general partners are eligible to commence an involuntary petition against the entity.  Acting under this section, the designated “general partner” of Washington DC’s Beltway Law Group, LLP commenced an involuntary Chapter 7 case against her own firm.  Judge Teel subsequently found in reviewing the petition that – notwithstanding her title of “general partner” – the principal of a District of Columbia LLP could not commence an involuntary petition against the entity.

    Judge Teel observed that the term “general partner,” for purposes of section 303(b)(3), refers to a partner who has at least some personal liability for the partnership’s debts.  Under District of Columbia partnership law, however, partners in an LLP are not liable for the LLP’s debts as a result of their partnership status.  Instead, such partners are at risk only to the extent of the capital subscribed.  An LLP is therefore more akin to a “corporation” as that term is used in section 101(9)(A).

    Judge Teel allowed that if an LLP had previously been a partnership within the contemplation of section 303(b) such that its partners were liable for the former partnership’s debts, the LLP’s status as a partnership for purposes of those debts would remain in place.  But this was not Beltway Law Group’s case.  Consequently, the petitioner – despite her title – was not a “general partner” for purposes of commencing an involuntary petition against the LLP.

    The limited liability partnership is a common entity form in many jurisdictions.  It is also an entity form which did not exist at the time the Code was drafted.  Understanding how the form is treated for purposes of involuntary filings provides useful guidance in the event of financial distress and/or a dispute amongst the holders of interests in an LLP.

    Though based in local law (here, the District of Columbia), Beltway Law Group’s discussion provides a helpful, straightforward analytical framework for determining whether an LLP may ever be classified as a “partnership” for purposes of an involuntary bankruptcy filing.  Of particular help is Judge Teel’s clarification of the difference between a “corporation” and a “partnership” as those terms are employed by the Code.

    Beltway Law Group provides localized – but nevertheless useful – guidance for practitioners who may be evaluating the possibility of an involuntary “partnership” bankruptcy filing.

     

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    Paid in Full

    Sunday, August 10th, 2014
    American National Bank AD

    American National Bank AD (Photo credit: Wikipedia)

    One of the fundamental functions of any bankruptcy proceeding is the establishment of an amount and priority for each creditor’s claim against the debtor. A short, 5-page decision issued late last month by the Nebraska Bankruptcy Court in two related Chapter 11 cases (Biovance and Julien) serves as a reminder that although creditors are not permitted a “double recovery” on their claims, they are nevertheless permitted to assert the full value of their claims until those claims are paid in full.

     
    In the US, it is common for creditors to mitigate credit risk through two primary means: Taking a security interest in the debtor’s collateral, and/or securing a guaranty of payment from a [non-debtor] third party. Further, and in the event of a payment default, courts frequently recognize a creditor’s right to pursue simultaneous collection activity for the entirety of the debt against the debtor, the collateral, and the guarantor. In a recent decision involving two related Chapter 11 debtors, a Nebraska Bankruptcy Court was asked by the debtors to limit the amounts claimed by a creditor as the creditor had already received a portion of the payments owed to it.

     
    In this case, a business debtor (Biovance) had leased equipment from American National Bank (ANB), collateralizing one of the leases with a certificate of deposit held by that debtor.  The other lease was protected by a guarantee issued by the individual debtor (Julien) to ANB.  ANB had obtained permission to collect its collateral with respect to the first lease, and to liquidate its claims in Nebraska state court with respect to the second (which claims were subsequently settled).  The debtors argued, among other things, that as the confirmed bankruptcy plan provided for payment in full of all claims, the creditor was therefore obligated to immediately credit the amounts it had received.  ANB argued that a proof of claim filed under 11 U.S.C. § 502 need not be reduced by amounts recovered from a third party unless it stood the chance of a double recovery.

     
    The Bankruptcy Court of Nebraska agreed with ANB, noting that the confirmed plan is neither a recovery nor payment in full. It is only a promise to pay. The Court went on to hold that until such time as ANB had actually received its payment in full, it was entitled to assert the balance due against all concerned parties – including the debtors.

     
    Establishing the amount and priority for each creditor’s claim against the debtor fixes the limit of recoveries available to a creditor from the debtor’s estate. Such claims are, in the aggregate, an important factor in the creditors’ assessment of the feasibility of a debtor’s proposed reorganization – and in determining whether liquidation offers them a preferable recovery.

     
    The Biovance decision, though not surprising, nevertheless reminds creditors and their counsel to preserve all of the value of their claims, even if paid partially, until the claims are paid in full.

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    Chapter 15 Round-Up

    Tuesday, February 14th, 2012
    English: Gold miner with cart emerging from a ...

    Image via Wikipedia

    Canadian gold mining concern Crystallex International Corp. filed for protection under Canada’s Companies’ Creditors Arrangement Act (CCAA) on Dec. 23, 2011.  The company operates an open pit mine in Uruguay and three gold mines in Venezuela. 

    Among its Venezuelan projects is the 9,600-acre Las Cristinas mine.  Court papers said the site’s untapped gold deposits are among the largest in the world, containing an estimated 20 million ounces of gold.  Crystallex filed for Chapter 15 bankruptcy protection in Delaware on the same date to protect its US assets while seeking a Canadian restructuring.  Delaware Bankruptcy Judge Peter Walsh granted recognition on January 20.

    Crystallex’s financial troubles allegedly stem from the Venezuelan government’s threatened revocation of Crystallex’s operating agreement for the Las Cristinas project as a result of the company’s failure to obtain an environmental permit.  Crystallex blames this failure on the Venezuelan government’s own continued failure to grant the permit.

    The company continues to operate, but appears to be staking its restructuring hopes primarily on arbitration claims for $3.8 billion in alleged losses suffered in connection with the Las Cristinas agreement.  Crystallex said it has invested more than C$500 million in the uncompleted Las Cristinas project.  The company believes an arbitration award will provide sufficient funds to pay all its creditors in full while leaving value for the company’s shareholders.

    Those creditors include secured lenders China Railway Resources Group (owed C$2.5 million) and Venezolano Bank about (owed $1 million).  They also include $104.14 million in 9.34% senior unsecured notes the company issued on Dec. 23, 2004.  Crystallex’s CCAA filing and its concurrent Chapter 15 petition were filed on the same date its notes matured.

    Recently, the company sought to alleviate its immediate liquidity concerns by means of an auctioned DIP facility.  Specifically, Crystallex sought a debtor-in-possession loan of C$35 million, convertible into an “exit facility.”

    Crystallex reported to the US Bankruptcy Court that it was in receipt of multiple expressions of interest in such a facility.  Meanwhile, pending the completion of due diligence and approval by the Canadian Court, Cyrstallex sought recognition of a much smaller C$3.125 million “bridge facility” from Tenor Special Situations Fund, L.P., which the Canadian Court approved January 20.

    The bridge facility expires April 16, and required US Bankruptcy Court approval by February 20.  Judge Walsh provided that approval at a hearing held yesterday.

    Crystallex’s Chapter 15 proceeding is pending as Case No. 11-bk-14074.

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