Bankruptcy

Vultures Beware: Fisker’s Potential Implications for Distressed Debt Investors

Why is this decision significant? Without credit-bidding, vulture funds may have a difficult time profiting from their investments in situations where they hope to use credit-bidding to acquire a debtor’s assets in a Section 363(b) sale. Section 363(b) of the bankruptcy code permits a debtor to sell some or all of its assets outside the normal course of business during a Chapter 11 reorganization. Section 363(k) allows secured creditors to use the value of their claim as credit in purchasing a debtor’s assets during a 363(b) sale. While credit-bidding was originally intended to protect secured creditors, it has been used as an offensive weapon by vulture funds aiming to profit off of secured debt acquired at discounted rates. Section 363(k)(b), however, allows bankruptcy courts to limit or eliminate the right to credit bid for cause. In Fisker, the bankruptcy court saw an uncompetitive auction as being enough cause to limit the amount Hybrid could credit-bid.Now is an interesting time to home in on bankruptcy cases where credit-bidding is a focal point, as it is likely that a big decision will soon resolve many of the questions the Fisker court left open.

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POSTED IN Banking & Finance, Bankruptcy, Capital Markets, Corporate Law, Restructuring, vulture funds

New York’s No Compensation Rule on Law Partnership Fee Matters: Balancing Partners’ Fiduciary Duties to Each Other with Their Duties to Clients

A recent surge in law firm insolvencies has revealed unaddressed questions in New York Partnership Law.  For example, despite a surplus of decisions on New York’s application of the Unfinished Business doctrine to contingent fee matters, the parallel issue of hourly matters had not reached New York courtrooms until recently.  In separate cases decided months […]

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POSTED IN Bankruptcy

Fifth Circuit Affirms Important Decision in International Bankruptcy Law Disallowing Non-Debtor Discharge

Several months ago, we covered a U.S bankruptcy court’s denial of comity to Vitro S.A.B. de C.V. (“Vitro”)’s Mexican reorganization plan.  The Fifth Circuit recently affirmed the decision. While press interest has been moderate, professionals have recognized that the case has important ramifications for Chapter 15 beyond the argued facts. What follows is a brief […]

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POSTED IN Bankruptcy, Restructuring

A (Brief) Examination of Examiners in Chapter 11

Marathon Asset Management recently requested the appointment of an examiner in the American Airlines bankruptcy case.  Ostensibly, the hedge fund creditor was requesting an investigation of $2.26 billion in debt that AMR Corp., the parent corporation of American Airlines, assumed from its regional airline subsidiary American Eagle prior to the bankruptcy filings.  Nonetheless, there was […]

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Dewey & LeBoeuf Bankruptcy: The Partner Contribution Plan

In May of 2012, Dewey & LeBoeuf LLP filed for bankruptcy.  After sustaining itself for years on the “Big-Law” business model, too many financial missteps led to fleeing partners, which ultimately resulted in one of the biggest law firm meltdowns in US history.  Despite its downfall, the firm has implemented a novel strategy during its […]

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POSTED IN Bankruptcy

The Presidential Blame Game

When something around you breaks, there is one universal response: “I didn’t do it.” Whether you are a child, a businessman, a criminal, or a presidential candidate, you will most likely be inclined to deny everything and to make counter-accusations. We are obsessed with blame, particularly with avoiding it…

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POSTED IN Bankruptcy, Government, Litigation, SEC Investigations

A Cross-Border Insolvency Showdown: Vitro’s Mexican Restructuring Plan Denied Comity in U.S. Bankruptcy Court

In a rare event, the Bankruptcy Court for the Northern District of Texas (“Bankruptcy Court”) refused to extend comity to a Mexican court and declined to enforce an order for a plan of reorganization for Vitro, S.A. B. de C.V. (“Vitro”).  The Bankruptcy Court  found the plan manifestly contrary to the public policy of the […]

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POSTED IN Bankruptcy, Comparative Law

Municipal Bankruptcies and the Unintended Impact on Muni Bonds

The municipal bond market is quickly becoming the latest entity to be impacted by the lingering housing and financial crisis.  In June, Stockton, California became the latest city to head to bankruptcy court to sort out its financial woes and is hoping to be the first city to impose losses on bondholders in its plan […]

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American Airlines Seeks to Use Bankruptcy Court to Restructure Labor Costs

As was the case for many previous airlines that declared for Chapter 11, American Airlines’ labor costs under union contracts were a prominent reason for seeking bankruptcy protection.  Tom Horton, chief executive of American, stated that American Airlines’ labor costs exceed that of its major competitors by roughly $800 million a year.  These labor costs […]

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Credit Bidding Has Its Day in Court

In a “cramdown” reorganization involving the sale of the debtor’s assets, does a secured creditor have an absolute right to use its outstanding claim against a debtor to purchase its own collateral? The Supreme Court will answer this question in April. The contested use of credit bidding under 1129(b) of the Bankruptcy Code turns on […]

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POSTED IN Bankruptcy

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