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Although a wealth of case law has found pre-petition bans on bankruptcy filings to be unenforceable as a matter of public policy, a recent unpublished decision from the Tenth Circuit Bankruptcy Appellate Panel (BAP) upheld a pre-petition ban included as an amendment to an operating agreement. [1] The debtor, DB Capital Holdings LLC, was organized under Colorado law as a manager-operated, limited liability company. The debtor was created to develop and sell a timeshare project in Aspen known as Dancing Bear Residences.
A potential conflict among circuit courts regarding § 1129(b)(2)(A) of the Bankruptcy Code may soon exist. In a recent decision, Hon. Bruce Black in In re River Road Hotel Partners, LLC[1] denied the debtors’ request to sell real property under a plan using bid procedures that denied the secured creditors the right to credit-bid.
To confirm a chapter 11 plan under the so-called "cramdown option," at least one impaired class of creditors must accept the proposed plan. [1] To accept a plan, more than one half (in number) of the voting claimants in a class, representing at least two-thirds of the total dollar amount of voting claims in such class, must vote to accept. [2] In single-asset real estate cases, [3] the lienholder frequently holds a deficiency cl
When a retail company enters bankruptcy, its most valuable asset routinely includes its interest as a tenant in unexpired commercial-space leases. Subject to certain limitations, the Bankruptcy Code permits the debtor-tenant to continue its operations in the profitable locations and “reject” the unprofitable stores, which are effectively abandoned back to the landlords.
In a case of first impression in the circuit, the Sixth Circuit Court of Appeals has applied Federal Rule of Civil Procedure 60(b) to revoke a bankruptcy trustee's "technical" abandonment of property. LPP Mortgage Ltd. v. Brinley, 547 F.3d 643 (6th Cir. 2008). If a bankruptcy trustee files a notice of abandonment of property under §554(a) of the Bankruptcy Code, the property is irrevocably abandoned, at least when the property is scheduled or the trustee is otherwise aware that it exists. See, e.g.,In re Bryson, 53 B.R. 3 (Bankr. M.D. Tenn. 1985).
Historically, a credit bid in a chapter 11 sale has frequently been viewed as a "non-sale" event, and the parties did not feel an obligation to pay an investment banker, business broker, real estate broker or auctioneer (the professional) a commission for the result. The professional's employment agreement frequently calls for payment "from the sale proceeds," and there are no cash proceeds from which to pay in the event of a credit bid.
Examples of how the current economic meltdown impacts the chapter 11 landscape are many. The unavailability of debtor-in-possession financing in most cases makes maintaining cash levels that much more important during the reorganization process. The continuous decline of asset values across the board means that debtors, unsecured creditors' committees and, in some instances, subordinated secured lenders are leaving no stone unturned in the search of untapped value.
Do you remember when advertising a "bankruptcy sale" attracted legions of deal-hungry bidders? Not anymore: The game has changed. Real estate disposition now requires new techniques to drive values and timely sales.
