Courts across the country have recently been confronted with disputes originating from the acquisition of distressed debt or loans by a party, and the subsequent chapter 11 bankruptcy case commenced by the debtor company.
The right to credit-bid is one of the most valuable rights afforded to secured creditors under the Bankruptcy Code. Credit-bidding is the process by which a secured creditor places a bid at a sale of the collateral to which its lien is attached, using the debt owed to it to offset the purchase price.[1] Section 363(k) of the Bankruptcy Code allows secured creditors to credit-bid when a debtor conducts a sale of assets outside the ordinary course of business.[2]
Collateral estoppel, or issue preclusion, is an important doctrine that protects parties from expensive and vexatious litigation where those parties have previously had a “full and fair opportunity to litigate” the issues.[1] Within the Third Circuit, “a court will bar re-litigation of an issue on collateral estoppel grounds when ‘(1) the identical issue was previously adjudicated; (2) the issue was actually litigated; (3) the previous determination was necessary to the decision; and (4) the party being precluded from relitigating the issue was ful
Due to the increasing integration of the world’s economies, globalization is now a business reality, even for lower- and middle-market companies. Accordingly, it is becoming more commonplace for foreign debtors to initiate chapter 15 proceedings in the U.S. in connection with insolvency-type proceedings in their home countries. The increasing frequency of chapter 15 proceedings requires insolvency and restructuring practitioners to be versed in the fundamentals of chapter 15 jurisprudence before their clients encounter it.
Editor’s Note: This is the second installment of a two-part series by the author. The first article was published in the December 2013 edition of the Business Reorganization Committee Newsletter.
The Bankruptcy Case: Determining Insolvency When Key Assets Are People
As previously discussed in ABI’s Ethics and Professional Compensation Committee’s November 2013 Newsletter,[1] fee-sharing and proper disclosures in connection with certain professionals’ retention applications became the central issue in the GSC Group Inc., et al.
Federal tax refunds generated from investment or operating losses can represent a sizeable claim for an individual taxpayer or a consolidated taxpayer group. Ownership of tax refunds among consolidated members is not dictated by federal law, the Internal Revenue Code or regulation, but can be specified in tax-sharing agreements among affiliates.
Even the smallest chapter 11 reorganizations are complex, with many process handoffs, transactions and communication touchpoints. For cases with substantial or volatile creditor populations, the selection of a claims agent capable of helping a debtor company emerge from chapter 11 successfully can be critical.
The relatively recent decisions of the Third and Fifth Circuits in Philadelphia Newspapers [1] and Pacific Lumber, [2] with respect to the rights of creditors to credit-bid in a sale of assets under a reorganization plan, uprooted the expectations of secured lenders who had come to expect that in the case of a proposed plan effecting a sale of assets free and clear of liens, they would have the ability to credit-bid.
On July 6, 2011, the FDIC issued a final rule implementing certain orderly liquidation authority provisions of the Dodd-Frank Act.