Category Archives: Chapter 9

Court Approves Extension of the Automatic Stay in Detroit’s Chapter 9 Case to State Officials

On July 24, 2013, Judge Steven W. Rhodes of the Bankruptcy Court for the Eastern District of Michigan approved the City of Detroit’s motion to extend the automatic stay to various non-debtor parties, including certain state officials. The Court’s ruling effectively stays all pending litigation against the City, allows the City to continue to move forward with its chapter 9 case, and paves the way for a dispute over the City’s eligibility to file for chapter 9. Continue reading

City of Detroit Files Chapter 9 Bankruptcy Petition – Challenges Ahead

On the afternoon of July 18, 2013, the City of Detroit filed its highly anticipated petition for relief under Chapter 9 of the Bankruptcy Code in the Bankruptcy Court for the Eastern District of Michigan. This marks the largest municipal bankruptcy filing in United States history. As a result of the Chapter 9 filing, all actions by creditors to collect prepetition claims against the City are enjoined through the imposition of an automatic stay, except for the application of special revenues pledged to indebtedness. Continue reading

UPDATE: Court Rejects CalPERS’ Efforts to Lift Stay In San Bernardino Case

In a ruling predicted by the Restructuring Review Blog last month, Judge Meredith A. Jury of the U.S. Bankruptcy Court for the Central District of California rejected arguments by CalPERS that the Bankruptcy Court should lift the automatic stay and … Continue reading

California Dreaming? CalPERS Seeks Payment in Full of All Pension Obligations During Pendency of San Bernardino’s Chapter 9 Case

California has seen a string of three Chapter 9 filings this year and faces a long line of distressed municipalities. Given this backdrop, the California Public Employees’ Retirement System (“CalPERS”) figures to play a prominent role in the resolution of many of these situations (in or out of bankruptcy). Thus, the bond‑buying public will scrutinize closely any steps that CalPERS takes to protect its claims in the Bankruptcy Court. Continue reading

Distressed Investing – 19th Annual Conference

Doug Mintz spoke at the 19th annual Distressed Investing Conference on November 26th. He helped moderate a panel regarding Municipal Debt Restructuring, drawing on his experience in the Jefferson County, Stockton and San Bernardino bankruptcies and other out of court matters. Continue reading

Stockton: Bankruptcy Court Upholds Municipal Debtor’s Power to Impair Retiree Contracts

On August 6, 2012, Judge Christopher M. Klein of the Bankruptcy Court for the Eastern District of California dismissed a group of retirees’ adversary proceeding and held that under its pendency plan, a chapter 9 debtor has the power to … Continue reading

Jefferson County: Court Rejects Expansive Carve Out of “Net Operating Expenses” From Special Revenue Bond Payments

On June 29, 2012, Judge Thomas B. Bennett of the Bankruptcy Court for the Northern District of Alabama held that operating expenses as determined under Jefferson County’s sewer warrants indenture do not include (i) a reservation for depreciation, amortization or future expenditures or (ii) an estimate for professional fees and expenses and that the monies remaining in the sewer system’s revenue account after the payment of actual operating expense should be paid to the warrant holders in accordance with the Indenture. This decision represents an unequivocal win for special revenue lenders because it ensures that special revenue bonds will continue to be secured and serviced in accordance with the underlying indenture during a municipality’s Chapter 9 case. The Bank of New York Mellon v. Jefferson Co., Ala. (In re Jefferson Co., Ala.), Case No. 12-00016-TBB (Bankr. N.D. Ala. June 29, 2012). Continue reading

Jefferson County: “Fear not each sudden sound and shock; Tis of the wave and not the rock”

On April 20, 2012, the Supreme Court of Alabama held that Ala. Cod. § 11-81-3 (1975) does not require that an Alabama municipality have prepetition bond indebtedness as a condition of eligibility to file for bankruptcy under Chapter 9. The Supreme Court of Alabama issued its decision in response to a certified question from the District Court for the Southern District of Alabama regarding whether the City of Prichard, Alabama was authorized to file for Chapter 9 under Alabama law. See City of Prichard v. Scott A. Balzer, Case No. 1:10-0622-KD-M (Ala. Apr. 4, 2012). Continue reading

Jefferson County: To Save A Mockingbird

On March 4, 2012, Judge Thomas B. Bennett of the United States Bankruptcy Court for the Northern District of Alabama held that Alabama law specifically authorized Jefferson County to adjust its debts under Chapter 9 of the Bankruptcy Code. Through a detailed analysis of Alabama law, Judge Bennett demonstrated that while the barriers to Chapter 9 may be daunting, they are not insurmountable (at least not in Alabama). Continue reading

Jefferson County: The Bankruptcy Court Always Wins

On January 6, 2012, Judge Thomas B. Bennett of the Bankruptcy Court for the Northern District of Alabama held that (i) the Alabama state receivership court lost possession and control over Jefferson County’s property interests in its sewer system immediately upon the filing of the County’s chapter 9 bankruptcy case and (ii) special revenue warrants are exempt from the automatic stay and must continue to be serviced during the course of a chapter 9 case. This decision highlights the loss of control that municipal bondholders face when a municipality files for bankruptcy relief under chapter 9 of the Bankruptcy Code and the special treatment afforded to special revenue bonds in chapter 9. Continue reading