This year has been an exciting one for the Secured Credit Committee (SCC). For those of you interested in learning more about SCC activities, and hopefully becoming more involved, this message summarizes some of the highlights of the SCC in 2015, the SCC's goals for 2016, and areas in which you might want to become involved.
Can a debtor use its lack of following corporate and statutory formalities as a defense to a request for adequate protection? The U.S. Bankruptcy Court for the District of Maine ruled on this question as well as some others in In re Parkview Adventist Medical Center.
On June 1, 2015, the U.S. Supreme Court decided Bank of America N.A., v. Caulkett,[1] unanimously holding that debtors could not strip off a second lien in a chapter 7 proceeding. In Caulkett, the debtors were attempting to void a junior lien where the debt owed by the senior lien exceeded the value of the collateral.
Foreclosure of personal property is a necessary evil for lenders in the commercial default context, and the foreclosure and sale must meet the commercially reasonable standard to withstand later scrutiny by competing creditors and unrequited borrowers.
In In re Alternate Fuels Inc.[1], the Tenth Circuit Court of Appeals describes and applies standards for (1) recharacterizing debt claims as camouflaged equity and (2) equitably subordinating debt claims. In doing so, the court confirmed two things:
What happens if an undersecured creditor makes an election under 11 U.S.C. § 1111(b) but does not otherwise participate in the bankruptcy process? The Fifth Circuit Court of Appeals addressed this question in In re R.L. Adkins Corp. In In re Adkins, the debtor filed a plan of reorganization recognizing the lien of Bakers Hughes Oilfield Operations, Inc. (BHO) on four mineral leases and one well. The total amount due to BHO far exceeded the value of its collateral.
Secured lenders often look to the borrower's or guarantor's rights under insurance policies to improve their collateral position. For example, obtaining a collateral interest in a business interruption insurance policy may protect a lender who is dependent upon the ongoing cash flow of its borrower for debt service. Moreover, obtaining an assignment of an interest in a life insurance policy of the borrower's owner or a principal guarantor protects...
Secured Credit Under the Code and Commission Report
The Asset Sales Committee hosted their most recent committee call on Wednesday, November 12. This call was titled "Bankruptcy Reform Commission’s Consideration of a Proposal to Surcharge Secured Lenders for 363 Asset Sales" and worked to more broadly inform and engage bankruptcy and restructuring professionals about the proposal being considered by the Bankruptcy Reform Commission to assess a charge on secured lenders for 363 asset sales in Chapter 11. Ms. Kathryn A. Coleman of Hughes Hubbard & Reed LLP and Mr. Gregory A.
In the spirit of the New Year, and in the spirit of par-plus-interest recoveries for secured lenders everywhere, we would like to share five New Year’s resolutions culled from recent case law and our experience assisting secured creditors in pre-bankruptcy planning for a defaulted borrower.