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By nearly any measure, the chapter 11 cases of Hawker Beechcraft and its affiliates (the debtors) were a significant success. The cases began as a standalone reorganization predicated upon a restructuring support agreement (RSA) among the debtors’ senior lenders and noteholders, which soon thereafter gained the support of the official creditors’ committee. The cases then switched over to a sale process, and when that bogged down the debtors, the lenders and the committee seamlessly restarted the standalone reorganization based on the RSA.
When making a commercial loan, financial institutions typically require commercial borrowers to provide additional security by obtaining personal guarantees for the repayment of the outstanding debt. When the commercial borrower defaults on the loan, the financial institution looks to the guarantors for repayment, in addition to taking all steps necessary to liquidate the collateral that has been pledged by the borrower. Faced with significant monetary judgments, many guarantors file bankruptcy proceedings to discharge their guaranty obligations to the financial institution.
A borrower’s deposit accounts are attractive collateral for lenders. Deposit account funds are essentially cash, and if the lender maintains the account, then the lender can reach the funds without effort. A borrower’s bankruptcy, however, creates a dilemma for deposit account lienholders, and a recent case counsels lenders to obtain adequate protection before turning over deposit account funds to the bankruptcy estate.
In September 2008 as Lehman Brothers Holding Inc. was reaching a state of crisis, it looked like the company might be able to avoid bankruptcy by completing the sale of certain assets to Barclays PLC. The sale would have provided Lehman with much-needed capital and additional time to plan for an orderly wind-down. After days of frenzied negotiations involving Lehman, Barclays and U.S. regulatory entities, a deal was agreed to in principal.
Mortgage Electronic Registration Systems Inc. (MERS) is the leading electronic registry for mortgage lenders, and is linked more and more each day to the foreclosure crisis. MERS has been recently challenged in state foreclosure actions, frequently to different ends creating a “patchwork of conflicting laws and court decisions in different states.”[1]
I cannot recall how many attorneys, young and old, creditor counsel or debtors I have heard stand up in open court and state with conviction that a debtor must provide “adequate protection” under 11 U.S.C.
The use of nonrecourse carve-out clauses and so-called “springing” or “bad-boy” guarantees in commercial lending is a relatively new concept. Accordingly, case law dealing with their enforceability is not very well developed. The courts that have addressed these issues have uniformly held that such lender safeguards are generally enforceable. This article analyzes these early decisions.
A majority of individuals filing for bankruptcy relief do so in the wake of mounting mortgage debt and collapsing home values. In such circumstances, the ability to “strip off” a wholly unsecured mortgage lien could bring tremendous relief to debtors who are homeowners. Stripping off an unsecured mortgage lien requires it to be treated as an unsecured claim in the bankruptcy case. Such a claim would be discharged in a chapter 7 case or be paid as a pro rata distribution under a chapter 13 plan in conjunction with unsecured creditors.
It is well established by the Delaware courts that the creditors of an insolvent corporation have standing to bring a breach of fiduciary duty derivative suit against directors. [1] The basis for such standing heavily relied on “equitable considerations.” [2] Many scholars—and even some courts—have assumed that such derivative standing extends to the creditors of a limited liability company (LLC). According to a recent Delaware Chancery Court ruling, they were wrong.
The Fifth Circuit Court of Appeals, on October 19, 2010 corrected a bankruptcy court’s calculation of a secured lender group’s superpriority administrative claim more than two years after consummation of the debtors’ chapter 11 reorganization plan. [1] In doing so, the court reconciled the rationale for giving secured lenders “adequate protection” with the “fallback” superpriority administrative claim of § 507(b) of the Bankruptcy Code. [2]
