Special Situations and Restructuring

On June 27, 2024, the United States Supreme Court ruled in favor of the United States Trustee, who had objected to Purdue’s plan of reorganization that granted releases of third party claims to members of the Sackler family in exchange for their contribution of up to $6 billion to the Purdue bankruptcy estate. Justice Neil Gorsuch, writing for the majority, found that the type of relief being granted to the Sacklers (i.e., a blanket shield from all existing or potential liability relating to the opioid crisis) represented the kind of “discharge” only available to debtors who have “placed all their assets on the table.”

In a decision that should help restore investors’ faith in the protections afforded municipal bondholders under the United States Bankruptcy Code (the “Bankruptcy Code”), on June 12, 2024, the United States Court of Appeals for the First Circuit (the “First Circuit” or the “Court”) held that the bondholders (the “Bondholders”) of certain Puerto Rico Electric Power Authority (“PREPA”) electric revenue bonds (the “Bonds”) have a non-recourse claim against PREPA’s estate in PREPA’s reorganization proceedings under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. §§ 2161-78 (“PROMESA”), for the full principal amount of their outstanding Bonds, plus matured interest, of approximately $8.5 billion, and that the Bonds are secured by PREPA’s current and future Net Revenues.

Chapman is a proud sponsor of the 2024 Turnaround Management Association (TMA) Distressed Investing Conference.

The Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) recently issued a decision in In re Envision Healthcare holding that a debtor did not forfeit its rights (including voting and managerial rights) in a Delaware limited liability company (an “LLC”) by filing for bankruptcy, notwithstanding the fact that Delaware state law terminates a person’s membership interest in an LLC upon the member’s bankruptcy.

The Corporate Transparency Act (CTA) went into effect January 1, 2024. Under the CTA, all newly created entities are now required to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of formation, unless an entity qualifies under one of 23 exemptions. That means, unless an exemption applies, any newly formed LLC, limited partnership, corporation, statutory trust, or other organization that is created by filing with a secretary of state has an additional federal filing requirement. All existing entities formed prior to January 1, 2024, that do not qualify for an exemption have until the end of 2024 to file a Report.

The Second Circuit Court of Appeals recently issued an eagerly awaited decision in Kirschner v. JP Morgan Chase Bank, N.A., which reconfirmed the widely accepted view that loans are not securities under federal or state securities laws.

Chapman partners Michael Friedman and Eric Silvestri, and associate Helena Honig discuss a recent decision of the US Bankruptcy Court for the Southern District of New York in an article published in the June 2023 issue of Israel Desks Magazine.

Distressed US assets present unique investment opportunities for those willing to accept certain levels of risk and create value. Michael Friedman, Chapman's Israel practice head and practice leader for the firm's Special Situations and Restructuring Group, and associate Helena Honig, provide perspective on distressed investing in the United States in the US-Israel Legal Review, published by Israel Desks.

Chapman is a proud sponsor of the 2023 Turnaround Management Association (TMA) Distressed Investing Conference.

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

Chapman attorney Larry Halperin is speaking at a webinar hosted by the Turnaround Management Association's New York City Chapter. 

The success of Ultra Petroleum bondholders’ make-whole claims is grounded in the unusual circumstance of a solvent debtor, with the Fifth Circuit unambiguously holding that make-whole entitlements in non-solvent-debtor cases must be disallowed.

In an opinion issued on June 15, 2022, the Delaware Supreme Court reversed a decision by the Chancery Court and found that a transfer by an insolvent corporation of substantially all of its assets to a newly created entity (“SeeCubic”) controlled by its secured creditors, in full satisfaction of its debts, violated the corporation’s charter.

On February 19, 2020, the Small Business Reorganization Act came into effect and Debtors with aggregate liabilities that do not exceed $2,566,050 were provided an opportunity to resolve their outstanding liabilities. But even before the SBRA could see its first successes (or failures), the Coronavirus Aid, Relieve and Economic Security Act of 2020 increased a small business’s debt threshold to $7.5 million.

The Delaware Supreme Court is currently considering an appeal of a series of decisions by the Court of Chancery which held that a vote of a majority of shareholders is not required for an insolvent company to transfer its assets to its secured creditors.

This article in the Journal of Corporate Renewal, authored by Chapman Partner Scott A. Lewis, outlines the legal developments stemming from Puerto Rico's economic crisis. 

The proliferation of investments in small, family-owned and mid-cap companies by private equity funds has led to changes in corporate governance provisions in the acquired companies’ organizational documents. Some private equity funds team up with existing management and take a minority position in the acquired company, while others will make an investment only if they can acquire controlling interest or 100 percent ownership of a company. In cases where a fund acquires a controlling interest in a company, it will often populate the company’s governing body with the fund’s principals or employees and the company’s chief executive. The fund may also seek to add outside directors with industry expertise to help govern the company. Where a private equity fund acquires a non-controlling interest, it will often seek to protect its investment by having consent and/or veto rights for certain significant transactions – for instance, the incurrence of debt, issuance of additional equity, and acquisition or disposition of assets. Thus, the organizational documents of a company may contain provisions restricting certain activities without the requisite consent of certain directors or equity holders.

Chapman is sponsoring the 2022 Turnaround Management Association (TMA) Distressed Investing Conference.

On January 18, 2022, Judge Laura Taylor Swain of the United States District Court for the District of Puerto Rico entered an order under PROMESA (as defined below) confirming a Plan of Adjustment (the “Plan”) of the Commonwealth of Puerto Rico (the “Commonwealth”), the Employees Retirement System of the Government of Puerto Rico (the “ERS”), and the Puerto Rico Public Buildings Authority (the “PBA”).¹ The Plan’s confirmation is a major milestone for the Commonwealth and its creditors. The Commonwealth’s restructuring proceeding under Title III of PROMESA is the largest municipal restructuring in United States history.

On December 22, 2021, in a memorandum opinion on a motion to dismiss, the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (i) provided further guidance as to what qualifies as “voluntary” redemption of debt for purposes of make-whole claims, (ii) held that, without more, a make-whole payment is not triggered by a redemption automatically resulting from a voluntary bankruptcy filing, if the governing contract only provides for payment of such premium prior to “maturity” and (iii) determined that neither the Bankruptcy Code nor the “solvent debtor exception” requires a solvent debtor to pay an unimpaired unsecured creditor post-petition interest at the applicable contract rate, finding that payment of interest at the federal judgment rate is sufficient. The Bankruptcy Court left open whether make-whole claims could be disallowed as unmatured interest.

Chapman's Larry Halperin is speaking at a Turnaround Management Association (TMA) New York City Chapter Academic Relations event, "The Restructuring of Danfurn LLC."

Chapman attorney Steve Tetro spoke at iiBIG's 13th Annual Investment and M&A Opportunities in Healthcare Conference.

Lenders and investors are taking different approaches to building ESG portfolios based on the entity’s own preferences and values. However, one widely used tool involves screening of select assets or transactions that align with those values.

Chapman attorney Michael Friedman spoke at an American Bankruptcy Institute (ABI) webinar entitled "Key Concepts in Post-COVID Real Estate Restructurings."

Chapman attorney Larry Halperin will be speaking at a Turnaround Management Association New York City Chapter Academic Relations Virtual Program.

The Bankruptcy Court for the Eastern District of Michigan has expressed reservations about a Second Circuit decision regarding when transfers to financial institutions’ customers that are settlement payments or made in connection with securities contracts are entitled to protection from avoidance actions under the bankruptcy safe harbors.

Chapman attorneys Jim Heiser and Juliet Huang spoke at an Association for Governmental Leasing and Finance webinar.

On December 27, the Consolidated Appropriations Act, 2021 was signed into law, which, among other things, contains an important amendment to Section 547 of the United States Bankruptcy Code.

Chapman attorneys Lara Daly-Sims and Frank Top will be speaking at the ABS East Virtual 2020 conference.

Chapman attorney Larry Halperin spoke at a webinar hosted by the Turnaround Management Association's New York City Chapter. 

As companies default under their credit agreements, lenders have to decide what course of action is appropriate to effectuate their goals. Should the lender give the borrower breathing room by entering into a forbearance agreement in exchange for certain milestones, or is more aggressive enforcement action required?

This is the third and final Client Alert of a three-part series relating to executing a Strict Foreclosure. As discussed in our previous Client Alerts, it is imperative to focus on who is going to run the business after consummating the Strict Foreclosure.

Chapman attorney Michael Friedman spoke at the American Bankruptcy Institute’s Northeast Virtual Bankruptcy Workshop.

This is the second Client Alert of a three-part series relating to executing a Strict Foreclosure. 

This Client Alert is part of a three Alert series. This Alert focuses on when Strict Foreclosure can be a lender’s best option and the potential path to execute a Strict Foreclosure. 

The Federal Reserve has established the Main Street Loan Program to provide support to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.

On June 5, the Paycheck Protection Program Flexibility Act of 2020 was signed into law and made key changes to the Paycheck Protection Program just a few weeks before the program’s official termination on June 30.

This client alert will address questions about loan forgiveness under the Paycheck Protection Program for both borrowers and lenders as known at the current time, but we note that legislative efforts currently underway may change the terms of these loan forgiveness provisions.

Chapman attorney Larry Halperin spoke at a Turnaround Management Association New York City Chapter webinar.

On May 5, in a case of first impression in Delaware, a Delaware bankruptcy judge, rejected a preferred shareholder’s motion to dismiss Pace Industries’ chapter 11 cases for failure to obtain its consent to file, a right provided in the debtor’s certificate of incorporation, finding that a minority shareholder’s blocking rights were unenforceable as violative of federal policy.

This alert explores the three loan facilities constituting the Main Street Lending Program: the newly announced Main Street Priority Loan Facility, the revised Main Street New Loan Facility, and the revised Main Street Expanded Loan Facility.

Chapman’s "Bankruptcy and Aircraft Finance" handbook details certain special rights afforded aircraft creditors and some of the strategies employed. With the airline industry suffering devastating losses as a result of the COVID-19 pandemic, we hope this will be a useful resource for creditors.

The Coronavirus Aid, Relief, and Economic Security Act to support individuals and businesses affected by COVID-19 pandemic was signed into law on March 27. This client alert summarizes the various tax provisions in the CARES Act.

In response to the COVID-19 pandemic, federal and state courts throughout the country are issuing general orders providing for important changes to procedures for pending and newly scheduled court hearings. This is a summary of such procedural changes for the federal courts located in Chicago and the state courts in Cook and the surrounding collar counties. 

This client alert has been updated from our March 31, 2020 client alert to reflect guidance from the U.S. Treasury Department and the Small Business Administration.

This Client Alert focuses on some major programs established by the Coronavirus Aid, Relief, and Economic Security Act to financially support, through loans or grants, (1) small businesses, (2) larger businesses, and (3) states and municipalities. 

While many questions and uncertainties exist with respect to the impact of COVID-19 on the economy, this is an overview of the prominent issues for lenders to consider regarding existing middle market credit agreements – particularly, as a spike in amendment and waiver activity is expected in coming months.

In response to the COVID-19 pandemic, federal and state courts throughout the country are issuing general orders providing for important changes to procedures for pending and newly scheduled court hearings.

Chapman attorney Michael Friedman spoke at Turnaround Management Association of Florida’s 10 Annual Winter Conference.

Chapman attorneys Michael Friedman and Larry Halperin spoke at VALCON 2020, which was hosted by the American Bankruptcy Institute and the Association of Insolvency & Restructuring Advisors.

Chapman attorney Larry Halperin spoke at the 2020 Turnaround Management Association Distressed Investing Conference.

On November 22, in a fact-specific ruling, the U.S. Court of Appeals for the First Circuit held that two separate, but related Sun Capital Partners Inc. private equity investment funds were not liable for the multiemployer plan withdrawal liability of a bankrupt portfolio company that the two funds co-owned.

This article in Business Credit magazine discusses best practices that unsecured creditors consider in determining early-on whether or not a customer is in financial distress, assessing the circumstances, and taking appropriate action. 

Chapman attorney Jim Sullivan spoke at the Honorable Robert E. Ginsberg Annual Program on Commercial Bankruptcy Law.

Chapman attorney Larry Halperin spoke at the Turnaround Management Association NYC Academic Relations Class at the NYU Stern School of Business.

Chapman attorneys Laura Appleby and Aaron Krieger attended the American Bankruptcy Institute's Mid-Level Professional Development Program.

Chapman attorney Michael Friedman spoke at the 2019 Higher Education Real Estate Lawyers Annual Conference.

In a case of first impression, the Seventh Circuit recently held that a UCC financing statement that incorporates a description of collateral by reference to an unattached security agreement sufficiently “indicates” the collateral, such that a separate and additional description of the collateral is not required to properly perfect a lender’s security interest.

In a decision that upends the expectations of the municipal bond market, a three-judge panel of the U.S. Court of Appeals for the First Circuit has ruled that the “special revenue” provisions of the U.S. Bankruptcy Code do not compel the payment of debt service on certain municipal bonds during the pendency of a bankruptcy proceeding.

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that liquidated damages provisions calculating damages based upon stipulated loss value schedules designed to provide the lessor/owner participant with a return on investment of 4% (and not as a proxy for actual damages) violated New York public policy and were unenforceable as penalties.

The First Circuit recently found that a UCC filing amendment naming the debtor contained an appropriate name and that, when coupled with a corrected collateral description in the amendment, the bondholders’ lien was perfected and therefore unavoidable under the “strong-arm” provisions of the Bankruptcy Code.

The US Court of Appeals for the Ninth Circuit is the latest court in a developing line of case law to find that the doctrine of equitable mootness applies to prevent an aggrieved creditor from unwinding a substantially consummated Chapter 9 municipal bankruptcy plan.

In a case of particular significance to parties that enter into forward contracts as means of hedging the future price of commodities used in their business, the U.S. Bankruptcy Court for the Northern District of Ohio has found that a “forward contract merchant” must be in the business of entering into forward contracts in order to generate a profit, not merely as a hedge.

On April 25, the U.S. District Court for the Southern District of New York reversed a bankruptcy court’s finding that a bank’s imposition of a freeze on a married couple’s bank account upon the filing of their Chapter 7 bankruptcy petition, pending instructions from the Chapter 7 trustee, violated the automatic stay.

Chapman attorney Laura Appleby spoke at the Turnaround Management Association's Network of Women Summit.

Chapman attorneys Laura Appleby and Larry Halperin spoke at a program hosted by the Municipal Analysts Group of New York. 

Having failed in attempts to accelerate the termination of a CDO, an investor group holding senior notes filed an involuntary petition against an issuer to liquidate the CDO before its stated maturity under the U.S. Bankruptcy Code.

In a break from other recent circuit court decisions, the Fifth Circuit ruled that amounts due under a make-whole provision contained in a note purchase agreement constituted unmatured interest and were not permitted to be paid to a creditor under the Bankruptcy Code.

In a case of constitutional importance, the US Court of Appeals for the First Circuit addressed whether members of the Financial Oversight and Management Board created by PROMESA are “Officers of the United States” subject to the US Constitution’s Appointments Clause.

Chapman attorneys Michael Friedman and Larry Halperin spoke at VALCON 2019, which was hosted by the American Bankruptcy Institute and the Association of Insolvency & Restructuring Advisors.

A recent decision of the United States District Court for the District of Delaware has provided further support within the Third Circuit for so-called “gift” plans (i.e., plans in which a secured creditor class “gifts” a portion of its plan distribution to a junior class).

A recent court decision has provided guidance regarding the meaning of “governmental unit” under the U.S. Bankruptcy Code.This determination is important because if it is a “governmental unit,” an entity would only be eligible to file a bankruptcy petition if it is a “municipality” under the Bankruptcy Code and meets the other eligibility requirements for filing a municipal bankruptcy petition.

Providers of services acting as mere conduits for parties transferring money remain protected from fraudulent conveyance actions under the United States Bankruptcy Code, at least according to a recent bankruptcy court decision in the Eleventh Circuit.

In two recent cases, the Court of Appeals for the Seventh Circuit held that the Illinois Department of Revenue could not collect delinquent retail and sales taxes from the proceeds of assets sold pursuant to section 363 of the Bankruptcy Code.

A decision by the Court overseeing Puerto Rico’s bankruptcy-like Title III proceeding has reiterated what every secured creditor understands — perfection matters. The Court found that bondholders holding $2.9 billion in debt issued by the Employees Retirement System of the Government of the Commonwealth of Puerto Rico were rendered unsecured due to inadequate financing statements.

The U.S. Court of Appeals for the Fifth Circuit recently affirmed decisions of a Bankruptcy Court and District Court recharacterizing an alleged lease to a disguised financing arrangement. The Court determined that the transaction was “per se” a financing, and therefore did not need to go on to analyze the economic realities of the transaction in detail.

This desk reference is intended to provide an in-depth analysis of the numerous issues affecting an equipment lessor when dealing with a lessee after it has filed for bankruptcy protection.

It is common for buyers of assets in bankruptcy cases to proceed to closing even if the court’s approval of the sale is under appeal. Their willingness to do so comes in large measure thanks to Section 363(m) of the Bankruptcy Code, which protects most sales from being unwound even in the face of an otherwise meritorious appeal. 

The Jefferson County bankruptcy proceeding may have reached its culmination with a recent decision by the U.S. Court of Appeals for the Eleventh Circuit finding an appeal of the bankruptcy court’s approval of the Jefferson County plan of adjustment as equitably moot.

The United States Court of Appeals for the Ninth Circuit issued a decision reversing a lower court’s order that designated the vote of a secured bank creditor that had purchased claims from a subset of unsecured creditors for the admitted purpose of blocking confirmation of the debtor’s plan of reorganization.

This article discuss two recent decisions that have provided some insight into what happens when a debtor files a Chapter 13 bankruptcy petition as a means of redeeming sold real estate taxes.

Recently in Hackler v. Arianna Holding Co., the U.S. District Court for the District of New Jersey held that a real estate tax foreclosure sale can be set aside as a preferential transfer under Section 547 of the Bankruptcy Code.

On April 9, 2018, Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York, in In re Avanti Communications Group PLC, held that non-consensual third-party releases included in a U.K. scheme of arrangement were enforceable under chapter 15 of the United States Bankruptcy Code.

Chapman’s "Defaulted Securities: The Guide for Trustees and Bondholders" advances understanding and consideration of issues related to trustees and bondholders in both corporate and municipal financings.

The question of what happens when a debtor files a Chapter 13 bankruptcy petition as a means of redeeming sold real estate taxes is being addressed throughout the country with more regularity. Recently, bankruptcy courts in Illinois and Georgia have provided some insight into how this question should be answered.

Czyzewski v. Jevic Holding Corporation made some court-watchers nervous that the decision would be applied broadly to disturb other bankruptcy-related distributions.

In a decision likely to have a far-reaching effect in the municipal debt markets, the Court overseeing Puerto Rico’s bankruptcy-like Title III proceeding ruled that holders of municipal obligations secured by a pledge of special revenues are not guaranteed payment during the pendency of a bankruptcy proceeding.

In bankruptcy cases where a not-for-profit corporation is closely related to or controlled by a governmental unit, a creditor may challenge the not-for-profit corporation’s bankruptcy eligibility, arguing that the not-for-profit corporation is, in substance, a “governmental unit” and therefore not eligible to file a Chapter 11 petition.

On January 11, the Third Circuit issued a decision in a case that limited the reach of the Rooker-Feldman doctrine as a defense to bankruptcy avoidance actions. The court’s reasoning, however, has implications that go well beyond the particular facts of the case.

As state and local governments seek more creative financing methods for economic development projects, some have turned to the formation of subsidiary entities that can provide financing assistance, potentially without triggering debt limits under state or local laws or violating covenants under existing financings.

Chapman partner Michael Friedman joined DebtWire’s Richard Goldman for a podcast interview.

In an effort to provide insight into questions about the ability to assume, or assume and assign, intellectual property licenses through the bankruptcy process, Chapman attorney Peter Bach-y-Rita co-authored a recent article in the American Bankruptcy Institute Law Review. 

A debtor-in-possession is entitled to use cash collateral over the objections of PACA claimants so long as the debtor demonstrates that the interests of the PACA claimants are adequately protected, according to a recent ruling by Judge Dales of the United States Bankruptcy Court for the Western District of Michigan.

The U.S. Court of Appeals for the Second Circuit reversed both the district court and the bankruptcy court’s decisions in MPM Silicones, LLC, which had held that the “prime plus” formula was the appropriate method for determining the interest rate required in connection with new notes issued to secured creditors under a Chapter 11 cramdown plan of reorganization.

On September 21, a Bankruptcy Court ruled that holders of notes issued pursuant to a Note Purchase Agreement entered into by a debtor’s operating subsidiary were entitled to what the court termed an ‘enormous’ make-whole payment, post-petition interest, and recovery of related fees and expenses.

On October 3, the U.S. Bankruptcy Court for the District of Delaware granted a motion to reconsider a decision it made over a year ago in the bankruptcy of Energy Future Holdings Corp. and its co-debtors and in doing so disallowed a $275 million breakup fee to a prospective asset purchaser that it had previously approved.

On October 3, 2017, the U.S. Bankruptcy Court for the District of Delaware granted a motion to reconsider a decision it made over a year ago in the bankruptcy of Energy Future Holdings Corp. and its co-debtors and in doing so disallowed a $275 million breakup fee to a prospective asset purchaser that it had previously approved.

Following a recent decision by the Court overseeing the Commonwealth of Puerto Rico’s bankruptcy-like Title III proceeding, bondholders should continue to pay close attention to the pledge securing their bonds to determine how those bonds would be treated in a bankruptcy proceeding.

While many of lender's rights are self-explanatory, a question has arisen as to what it means to amend “pro rata” sharing requirements. Recently, an amendment to NYDJ Apparel, LLC’s credit agreement highlighted what a loan investor needs to look out for when reviewing protections related to pro rata sharing.

Intercreditor agreements are commonly used to define the relative rights of senior and junior lenders, especially should the borrower become distressed or file bankruptcy. Properly defining priorities between lenders is particularly important when both parties possess security interests in the same collateral.

Many equipment lessors are watching yesterday’s prime customers transform into tomorrow’s distressed credits. This article addresses some of the key considerations for lessors in formulating a plan to deal with distressed or likely-to-be-distressed lessees, both prior to and during a potential bankruptcy proceeding.  

On August 3, 2017, the Delaware district court upheld the Delaware bankruptcy court’s confirmation of a so-called “gift” plan (i.e., a plan in which a secured creditor class “gifts” a portion of its plan distribution to a junior class).

On August 3, the Delaware district court in In re Nuverra Environmental Solutions, Inc. upheld the Delaware bankruptcy court’s confirmation of a so-called “gift” plan, notwithstanding the recent Supreme Court decision in Czyzewski v. Jevic Holding Corp. that had cast doubt on the viability of such plans.

Chapman Partner Nick Whitney joined Xtract Research’s senior covenant analyst Vince Pisano for the inaugural recording of the new Xtract Research podcast series.

In a recent case, the Sixth Circuit held that under Michigan law a properly perfected assignment of rents bars a debtor from using the rents to fund its operations in a Chapter 11 reorganization.

11 U.S.C. § 1111(b)(1)(A) provides that a creditor holding a non-recourse lien on real property possesses a claim against a debtor’s bankruptcy estate upon the filing of the bankruptcy petition. But what happens to the secured creditor’s non-recourse claim when the property securing the loan has been sold via foreclosure?

On March 27, the U.S. Supreme Court granted certiorari in the case of In re the Village at Lakeridge LLC, under which an appeals court held that a claim of an “insider,” which is not counted for the purpose of creating an accepting impaired class for the purpose of “cramming down” a plan of reorganization over the opposition of a rejecting class, does not retain its status as a claim of an insider for that purpose once transferred to a noninsider third party.

Before purchasing any debt, distressed investors need to be mindful of what unrestricted subsidiaries are and how they may impact the overall credit of a company or debt recoveries.

Chapman Partner Michael Friedman recently discussed the U.S. corporate loan market at the Tel Aviv Institutional Investment Conference.

In a stark reminder to the bankruptcy community of the old adage that “you can run but you can’t hide,” the U.S. Bankruptcy Court for the Southern District of New York recently denied an Austrian bank’s motion to dismiss for lack of personal jurisdiction.

Investments in “unrestricted subsidiaries” are an exception to investment covenants, which have been used in an attempt to provide flexibility in restructuring a company’s capital structure.

Lenders and investors in companies often have assumed that claims related to the purchase and sale of securities are subordinated to the level of the underlying security in question. However, a recent decision has raised a serious question as to when claims for damages should be deemed “arising from” the purchase or sale of a security.

Lenders and investors in companies often have assumed that claims related to the purchase and sale of securities are subordinated to the level of the underlying security in question. However, a recent decision has raised a serious question as to when claims for damages should be deemed “arising from” the purchase or sale of a security.

In a decision that deals a potential blow to holdout noteholders in out-of-court restructurings, the United States Court of Appeals for the Second Circuit adopted a narrow interpretation of Section 316(b) of the Trust Indenture Act.

The New York Court of Appeals issued a decision holding that when two parties agree to the material terms of a sale, the parties have entered into a binding agreement, even though the sale remains subject to the execution of a written sales agreement.

In a break from recent decisions, on November 17, the Third Circuit Court of Appeals reversed the District Court’s decision in the Energy Future case, finding that make-whole premiums were in fact payable upon a “redemption” even if such redemption occurred after a bankruptcy filing and the automatic acceleration of the underlying debt where the applicable indentures did not otherwise provide.

A recent bankruptcy court decision in the Aéropostale bankruptcy case pending in the bankruptcy court for the Southern District of New York may provide some comfort to secured creditors seeking to credit bid in a sale process commenced by a debtor pursuant to Section 363 of the U.S. Bankruptcy Code. 

The second edition of Chapman's book is a valuable resource for municipal debt marketplace participants, including state and local government officials, municipal credit analysts, credit enhancers, investors, legislators, and administrators.

Earlier this month, the Sixth Circuit provided to creditors of municipalities emerging from bankruptcy proceedings additional assurance that they can rely on the bankruptcy plan approved by a court.

Last week, the U.S. Sixth Circuit Court of Appeals provided to creditors of municipalities emerging from bankruptcy proceedings additional assurance that they can rely on the bankruptcy plan approved by the court.

Chapman attorneys Laura Appleby and Michael Friedman participated in a podcast interview with Debtwire Radio's Richard Goldman.

Despite the Supreme Court cautioning that the “reasonably equivalent value” principle would in most cases remain similar to a market-value definition, and refusing to force its holding on other forced-sale proceedings, on Sept. 8, 2016, the Ninth Circuit became the third federal appeals court to extend BFP’s holding to real estate tax sales.

The services agreements under which midstream oil and gas companies operate are routinely structured as long-term contracts requiring a large initial expenditure. In these cases, the midstream service providers’ investment is only recouped over the life of the agreement, and early termination or rejection of such agreements can be devastating.

On September 8, 2016, the Ninth Circuit held in In re Tracht Gut, LLC v. L.A. Cnty. Treasurer & Tax Collector that California real estate tax sales are for reasonably equivalent value and cannot be set aside as fraudulent transfers.  

Congress has approved the Puerto Rico Oversight, Management, and Economic Stability Act, and President Obama is expected to sign the measure into law by July 1, 2016. Puerto Rico owes its bondholders a $1.9 billion debt payment on July 1 that by all accounts it cannot make.

This article discussed leveraged lending guidelines, unitranche facilities and the risks associated with unitranche facilities, including with respect to “agreements among lenders” as illustrated by the recent case of In re Radio Shack Corporation.

On June 3, 2016, the United States Bankruptcy Court for the District of Delaware ruled that the intercreditor agreement between first lien noteholders and junior noteholders in In re Energy Future Holdings Corp. did not require the junior noteholders to bear the cost of a previously disallowed make-whole payment to the first lien noteholders. 

On May 27, 2016, New Jersey Gov. Chris Christie signed into law the Casino Tax Property Stabilization Act in an effort to help Atlantic City get back on the path to fiscal stability.

The U.S. Supreme Court placed the final nail in the coffin of the Puerto Rico Public Corporation Debt Enforcement and Recovery Act. The Court found that Puerto Rico was not entitled to create its own restructuring process because such a process is prohibited by the Bankruptcy Code.

New Jersey has taken steps to aid troubled Atlantic City in an apparent attempt to avoid a bankruptcy filing that may not only impact the distressed city but also other cities and towns in the State.    

It is a basic principle in bankruptcy that a secured lender is entitled to receive interest and other charges arising post-petition to the extent the lender is over-secured. A recent decision challenges this principle in cases where the value of a lender’s collateral diminishes during the course of the bankruptcy case.

A recent decision issued by a federal district court in North Carolina challenges the familiar principle that in a borrower’s bankruptcy, the lender, if it is oversecured as of the bankruptcy filing date, is entitled to receive post-petition interest, attorneys’ fees and other charges arising post-petition to the extent of the value of its collateral.

Atlantic City is in the midst of a financial crisis that has been in the making for years. Increased competition and a host of unfortunate spending and hiring decisions have led to a state of affairs that currently features the nation’s highest home foreclosure rate, junk bond credit status and an alarmingly large budget deficit. 

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

In a widely expected ruling, the Illinois Supreme Court has upheld a Cook County state court ruling holding that a state law, Public Act 98-641, reducing annuity benefits for employees and retirees of the City of Chicago, in exchange for increased contributions to certain pension funds, was unconstitutional.

Retail bondholders recently filed two class action suits in the United States District Court for the Southern District of New York challenging exchange offers under the Trust Indenture Act.

On February 16, 2016, the District Court for the District of Delaware affirmed the decision of the Delaware bankruptcy court in In re Energy Future Holdings Corp., that noteholders’ claims for make-whole premiums may be blocked by the automatic stay of the U.S. Bankruptcy Code. 

On Feb. 8, 2016,  the United States Court of Appeals for the Ninth Circuit held that a claim of an “insider,” which is not counted for the purposes of creating an accepting impaired class for confirmation of a contested plan of reorganization, does not retain insider status once transferred to a third party that is not an insider. 

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

On November 2, 2015, the Delaware bankruptcy court ruled that where a majority of bondholders direct an indenture trustee to withdraw its confirmation objections, the remaining minority who did not file independent objections to confirmation may not step in to press the indenture trustee’s objections. 

In a decision that may ease the resolution of future bankruptcy proceedings, the Third Circuit Court of Appeals affirmed a bankruptcy court’s approval of a sale of substantially all of a debtors’ assets based on a settlement in which the secured creditors gifted funds to general unsecured creditors.

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

Though the RadioShack proceeding sheds light on how bankruptcy courts may interpret an agreement among lenders, unfortunately, it still remains unclear as to whether U.S. bankruptcy courts will assert jurisdiction to consider arguments arising under an agreement among lenders.

On July 13, 2015, the United States Court of Appeals for the Eleventh Circuit reversed lower court orders that had precluded a lender from collecting accrued default interest from a debtor as a condition for reinstatement of the loan under a confirmed plan of reorganization. 

In a move intended to fortify the rights of holders of California municipal general obligation debt as well as lower borrowing costs for California municipalities, California Governor Jerry Brown signed SB 222 into law earlier this month.

Law360 republished a Chapman Client Alert.

Recently, before awarding bondholders any amounts on account of a make-whole provision upon a debt prepayment, courts have repeatedly insisted on clear language in the credit documents requiring such payment notwithstanding a bankruptcy filling and a related automatic acceleration.

Pratt's Journal of Bankruptcy Law published an article written by Chapman attorneys. 

In a decisive opinion, the U.S. Court of Appeals for the First Circuit affirmed a lower court ruling that the Puerto Rico Public Corporations Debt Enforcement and Recovery Act is preempted by the U.S. Bankruptcy Code and therefore unconstitutional. 

A recent decision in the Southern District of New York interpreting the Trust Indenture Act will likely provide bondholders additional leverage in out-of-court restructurings.

The U.S. Supreme Court’s 6-3 split decision in Baker Botts LLP v. Asarco LLC will have long standing implications for all bankruptcy professionals’ compensation, potentially making it much more costly for all professionals retained in chapter 11 cases.

In Delaware, arms-length negotiations may no longer be sufficient to protect an unwitting lender from a derivative claim brought by a borrower’s shareholder with respect to certain change of control defaults contained in credit agreements.

Under current law, affiliated creditors holding debt arising from the same loan transaction will not likely be lumped together when determining the number of creditors that have voted to approve or reject a plan, particularly where such affiliates held such debt prior to a bankruptcy filing and assert their claims through separate proofs of claim.

On December 8, 2014, the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 released its Final Report and Recommendations for amendment to the current Bankruptcy Code. The proposals are significant, and on the whole, largely harmful to the rights of secured creditors.

The United States District Court for the Southern District of New York recently affirmed the Bankruptcy Court’s decision in In MPM Silicones, LLC, establishing Judge Drain’s “prime plus” formula as the appropriate interest rate required in connection with new notes issued to secured creditors under a cramdown plan of reorganization in the Southern District of New York.

This is the fifth installment of Chapman and Cutler LLP’s discussion of the proposals contained in the Final Report and Recommendations of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11.

In order to avoid future intercreditor disputes, investors can learn from past mistakes and draft or revise their intercreditor agreements accordingly. In this Client Alert, we attempt to highlight a number of specific considerations that may improve intercreditor agreements, to better achieve their intended purpose of delineating the respective priorities and rights of senior and junior secured creditors while avoiding intercreditor conflict.

Out-of-court debt restructurings may face greater hurdles to success in light of two recent federal court decisions out of New York broadly expanding dissenting bondholders’ rights under the Trust Indenture Act.

Pratt's Journal of Bankruptcy Law recently published an article based on a recent Chapman Client Alert.

On February 6, 2015, the U.S. District Court for the District of Puerto Rico issued a decision holding Puerto Rico’s Public Corporations Debt Enforcement and Recovery Act unconstitutional, noting that it was “not a close case.”

As discussed in our previous client alert on this subject, litigation over whether $1.5 billion in prepetition loans to GM were secured or unsecured has been pending before the Second Circuit Court of Appeals. The Second Circuit recently issued a decision upholding the termination. 

This is the fourth installment of Chapman’s discussion of the proposals contained in the American Bankruptcy Institute’s Final Report and Recommendations to amend the Bankruptcy Code. 

One of the well-known benefits of bankruptcy is that assets can be sold free and clear of claims and interest in the property. But unknown future claims have presented difficulties for purchasers of assets in bankruptcy sales and courts have struggled to devise a clear rule for dealing with such claims.

As discussed in our first two installments, the American Bankruptcy Institute released its Final Report and Recommendations containing proposals to modify the Bankruptcy Code, many of which will have significant and negative implications for secured creditors. 

As discussed in our first installment, the American Bankruptcy Institute released its Final Report and Recommendations containing proposals to modify the Bankruptcy Code, many of which will have significant and negative implications for secured creditors.

Pratt's Journal of Bankruptcy Law published an article based on a recent Chapman Sidebar.

Can a lender use evidence outside the four corners of a security agreement to prove that it has a valid security interest against the bankruptcy trustee?

Last week, the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 released its Final Report and Recommendations for amendment to the current Bankruptcy Code.

The Delaware Supreme Court ruled recently that a secured party’s security interest in collateral can be terminated upon the filing of a UCC termination statement even though there was a mistake in the document.

Chapman and Cutler attorneys have been monitoring decisions and developments with respect to creditors' rights and have compiled the client alerts published to date that provide important insight regarding the implications of these decisions for holders of secured debt and highlight what every creditor should know in order to effect rights under its credit agreement.

In an important bench ruling in the MPM Silicones case, Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York has provided debtors with a potentially coercive tool to use as leverage against their secured creditors.

As prices for distressed loans have risen, holders of secured claims are focusing not only on the recovery of principal but also on repayment of interest, fees and pre-payment-premiums or “make whole” payments.

A Nebraska bankruptcy court recently upheld the longstanding principle that a creditor filing a proof of claim may seek the entire amount due despite amounts collected from other obligors who may be jointly and severally liable for the debt.

The United States Supreme Court issued its decision in the RadLAX Gateway Hotel v. Amalgamated Bank case on May 29, 2012, closing the door on a debtorʼs end-around a secured creditorʼs right to credit bid.1 In a unanimous decision delivered by Justice Scalia, the Supreme Court found its answer to be “an easy case,” rejecting recent decisions allowing a debtor to sell secured property free and clear of all liens without providing for the secured partyʼs credit bid rights when the sale was pursuant to a plan of reorganization.2 The decision provides secured creditors with predictability and consistency whether its collateral is being sold pursuant to a proposed plan or a sale during the bankruptcy case.