Business Bankruptcy
RECOMMENDED READING: The Lender Made Borrower Waive Its Right to File Bankruptcy – Enforceable?
Your company’s loan agreement contains a waiver of the company’s right to file a bankruptcy case. Enforceable? No, for it contravenes public policy. Your company’s formation documents require that any bankruptcy filing be authorized in a certain manner (e.g., approval of a certain percentage of directors, partners, or members). Enforceable? Many such restrictions have been […]
How Much Can I Add to My Claim? (says Lender) How Much Liquidity Will I Have? (says Reorganizing Debtor): On the Payment of Post-Petition Interest
Your company owes substantial loan principal secured by real property that your company is developing into a hotel, condominiums, and a nightclub. Your company defaulted on the construction loan by missing some payments and filed a chapter 11 petition with the strategic goals of making operations more efficient and further developing the real property to […]
RECOMMENDED READING: PACA Claims in Bankruptcy
Certain suppliers of agricultural goods get paid ahead of secured party, both inside bankruptcy and outside bankruptcy. The suppliers benefit from a federal statutory trust imposed to protect them from nonpayment. The goods involved are “fresh fruit and fresh vegetables of every kind and character” – and regulations set the limits on what qualifies. Suppliers […]
KUNEY’S CORNER – Cramming Down a Chapter 11 Plan by Giving Secured Creditor Substitute Collateral
Can a chapter 11 debtor confirm a plan that gives a hostile secured creditor a lien on an orange as a substitute, in essence, for the secured creditor’s lien on an apple that the debtor wants to keep and use?[i] Yes, if the value of the new lien meets the test of “indubitable equivalence” with […]
Bid Now or Forever Hold Your Peace: Challenging the Results of a Section 363 Sale in Bankruptcy (In re New Energy Corp.)
You would like to purchase wind turbines in a lease-to-own scenario, that is, you would like to take possession of certain items and pay for the purchase or ownership over time or in a lump-sum at some point in the future. You prefer this mode to an outright cash purchase because of your other cash […]
Meridian Sunrise Village: Highlighting Some Loan-to-Own Risks
You are a PE Fund manager. Your Fund employs loan-to-own strategies to effect take-overs of target companies. You are accustomed to exerting powerful leverage in chapter 11 cases, particularly when you buy enough claims to confirm a plan, or else to block confirmation of a plan by other parties. For a plan to be approved […]
KUNEY’S CORNER – Cramdown: An Impaired Class of Claims Says “No” But the Plan is Confirmed Anyway
By filing a chapter 11 petition, the debtor seizes the initiative in proposing a reorganization plan – which is to provide how soon, in what amount, and in what manner creditors’ claims are paid. [i] But a debtor does not necessarily get its way. A class of creditors who are not getting paid in full […]
Opening the Kimono: Operational and Financial Reporting Obligations at the Outset of a Chapter 11 Case
While providing numerous advantages to the companies that choose to invoke it, chapter 11 also imposes significant and sometimes burdensome public reporting obligations on them – hence the metaphor of the opened kimono. Because of the debtor’s reporting obligations, creditors and other parties with an interest in the chapter 11 case (such as potential purchasers […]
Assessing Potential Return – When the PBGC Files a [Huge] Claim in a Bankruptcy Case
What should interested parties in a bankruptcy case monitor when the Pension Benefit Guaranty Corporation (PBGC) files a claim in the case as an unsecured creditor? When a company that has filed a petition in bankruptcy sponsors the type of pension plan insured by the PBGC, it is more likely than not that the pension […]