Category Archives: Plans/Confirmation

Federal-Mogul Court Confirms That Bankruptcy Law Trumps Anti-Assignment Provisions in Insurance Policies

On May 1, 2012, the United States Court of Appeals for the Third Circuit in In re Federal–Mogul Global, Inc. confirmed that anti-assignment provisions in a debtor’s insurance liability policies are preempted by the Bankruptcy Code to the extent they prohibit the transfer of a debtor’s rights under such policies to a personal-injury trust pursuant to a chapter 11 plan. In re Federal-Mogul Global Inc., — F.3d —, 2012 WL 1511773 (3d Cir. 2012). In so holding, the Third Circuit follows its prior dicta as well as the precedent of its sister circuits, and provides its most definitive ruling on the issue to date. Continue reading

RadLAX Review: Summary of Petitioners’ Brief in Supreme Court Credit Bidding Case

As part of our continuing coverage of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, this is one of a series of posts summarizing the briefs filed with the Supreme Court. This post summarizes the petitioners’ brief, arguing that section 1129(b)(2)(A) of the Bankrutpcy Code permits confirmation of a plan that denies secured creditors their right to credit bid. Continue reading

Seventh Circuit Affirms Secured Creditors’ Cramdown Rights

On Jan. 19, 2012, the U.S. Court of Appeals for the Seventh Circuit in an opinion penned by Judge Richard Posner affirmed a bankruptcy court’s dismissal of In re River East Plaza, LLC, a single asset real estate case, rejecting the debtor’s attempt to substitute the lender’s original collateral for another form of security and pay out the secured claim over time pursuant to the
“cramdown” provisions of the Bankruptcy Code. The court’s analysis was strongly pro-secured lender and hinged particularly on the question of whether the secured creditor should be entitled to the appreciation of future value of its original prepetition collateral. Continue reading

RadLAX Review: Supreme Court to Consider Validity of Plan Sale Without Credit Bidding in RadLAX Gateway Hotel

This spring the Supreme Court will consider a critical bankruptcy issue: whether a debtor may sell assets free and clear of liens without permitting a secured creditor to credit bid. Restructuring Review will be providing extensive ongoing coverage of this case: RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166. This first entry looks at Cadwalader’s prior coverage of key rulings along the road to the Supreme Court and the schedule of key upcoming dates. Continue reading

Structured Dismissals (Part II of II): Case Studies

Part I of this series provided an overview of structured dismissals, and discussed how and when structured dismissals are used by chapter 11 participants. This post, the second part of the series, discusses several examples of structured dismissals from recent chapter 11 cases. The cases summarized below provide further insight into the types of cases and circumstances in which a structured dismissal may be appropriate. Although the facts and circumstances of the cases vary, all of the cases share a common theme – a structured dismissal afforded the parties in interest a more effective, efficient, and economical conclusion to the case than other potential exit strategies. Continue reading

In re Thorpe Insulation Company: The Non-Settling Insurers Strike Back

On January 24, 2012, Judge Ronald M. Gould of the U.S. Court of Appeals for the Ninth Circuit held that an appeal filed by certain insurance companies with respect to a plan confirmation order was not moot and that such insurance companies had standing to object to the plan, notwithstanding the Debtors’ contention that the plan was “insurance neutral” because it did not affect insurer’s legal rights. The Ninth Circuit remanded the plan confirmation to the Bankruptcy Court for further consideration. This decision highlights the fact that a plan of reorganization can be reopened after confirmation, to deal with certain issues, including concerns raised by insurers. In re Thorpe Insulation Company, Case No. 10-56543 (9th Cir. 2012). Continue reading

Seventh Circuit in Holly Marine Affirms Exception to Gifting Prohibition

Since the Second Circuit’s decision in DISH Network Corp. v. DBSD North America, Inc., the continued viability of gift plans – plans that provide for distribution of some portion of senior creditors’ recoveries to junior stakeholders – has been called into question. The United States Court of Appeals for the Seventh Circuit in In re Holly Marine Towing, Inc., recently approved a settlement agreement that included a payment from the debtor’s principals to junior creditors. The Seventh Circuit permitted the gift because it came under chapter 7, as opposed to chapter 11, and involved the principals’ settlement proceeds, rather than estate assets. Thus, the Seventh Circuit held that the gift did not implicate the priority rules of the Bankruptcy Code. Continue reading

Fourth Circuit Clarifies Position on Non-Debtor Releases

On December 9, 2011, the U.S. Court of Appeals for the Fourth Circuit held that although non-debtor releases are permissible in certain contexts, the District Court for the Eastern District of Virginia erred in affirming a bankruptcy court’s order approving the National Heritage Foundation’s (“NHF”) chapter 11 plan containing non-debtor releases. Behrmann v. Nat’l Heritage Found., Inc., 663 F.3d 704, 712-13 (4th Cir. 2011). The Fourth Circuit found that the bankruptcy court had not stated facts sufficient to justify its decision approving the debtor’s plan. The Fourth Circuit refrained from adopting a particular test that must be satisfied before non-debtor releases may be approved, as other U.S. Circuit Courts of Appeal have done, instead emphasizing that Fourth Circuit bankruptcy courts should make such determinations on a case-by-case basis and explain such determinations with detailed facts. Id. Although Behrmann does not provide a test for determining whether particular non-debtor releases are permissible in the Fourth Circuit, the opinion provides some guidance as to the specificity necessary in bankruptcy court orders approving such provisions, and should be kept in mind by bankruptcy professionals preparing proposed findings of fact in support of chapter 11 plans. Continue reading

“New Value” Provided by Subsidiary Is No Defense to Preference Attack Launched Against Parent

On December 30, 2011, Judge Stuart M. Bernstein of the Bankruptcy Court for the Southern District of New York denied the motion of defendant Best Buy Co., Inc. for partial summary judgment on the issue of whether any recovery of a prepetition transfer made to Best Buy by a debtor must be reduced by subsequent new value provided to the debtor by one of Best Buy’s affiliates. The Responsible Person of Musicland Holding Corp., v. Best Buy Co., Inc. (In re Musicland Holding Corp.), Case No. 08-01023, 2011 WL 6880675 (Bankr. S.D.N.Y. Dec. 30, 2011). Continue reading

The Unclear Status of Stakeholder Negotiations in a Post-WaMu World

Among the several issues addressed in the September 13th opinion of the United States Bankruptcy Court for the District of Delaware in In re Washington Mutual, Inc., the distressed investment and restructuring community has been focused on the holding that the participation of certain noteholders (the “Settlement Noteholders”) in plan-related settlement negotiations and subsequent trading activity gave rise to colorable claims that could be asserted against them. This ruling has cast uncertainty upon creditors’ ability to play a constructive role in achieving successful reorganization outcomes by way of consensual agreement. In light of the essential policy interest favoring settlements over protracted litigation, the framework set forth in WaMu may have the regrettable effect of chilling creditor participation in negotiations that would otherwise serve to benefit all stakeholders. Continue reading