Creditors Rights
To Tell The Truth; The Importance Of Full And Frank Disclosure To Preserving The Attorney-Client Privilege
Imagine yourself as the owner of a small company, or the CEO of a large corporation. The company is not doing well, but you are convinced the distress can be overcome. While sales are down, competition is fierce and your latest expansion – made with borrowed money – did not go well, the business is […]
Being Proactive: Steps a Supplier Can Take in the Face of Potential Customer Bankruptcy
The impending bankruptcy of a retailer is one of the most stressful experiences that a supplier may face. The supplier is confronted not only with the potential loss of a major customer, but also with the possibility of significant financial losses on account of unpaid accounts receivable. A supplier often finds itself scrambling to mitigate […]
Unsecured Creditors Prevail Against the UCC-1
In the realm of lending, the perfected Uniform Commercial Code-1 (“UCC-1”) is the hallmark of security. If a secured asset has value, and the liens are valid, what other issues are there to consider? Well, in at least one instance, underlying intercompany notes were the issue. And because of the nature of these notes, the […]
Six Common Mistakes in Drafting Collateral Descriptions
Drafting can easily go awry. When collateral descriptions are drafted errantly in security agreements and financing statements, secured creditors may not get what they bargained for and expensive disputes can bloom. A valid security agreement executed by the owner of the collateral and the secured party creates a security interest. Such a security agreement grants […]
Fourth Circuit Approves Recharacterization of Secured Debt Into Equity
A Brief Summary of PEM Entities: Unsecured Creditors Pulled Down a Secured Creditor In its recent unpublished opinion PEM Entities, LLC v. Province Grande Old Liberty, LLC, 2016 WL 4254917, (4th Cir. Aug. 12, 2016), the Fourth Circuit Court of Appeals affirmed the bankruptcy court’s award of summary judgment to certain unsecured creditors (the “Plaintiffs”) […]
Limiting Credit Bidding “For Cause” After In re Aeropostale
Section 363(k) of the Bankruptcy Code (the “Code”) allows a secured creditor to bid at a section 363 sale and use the amount of their claim to offset the purchase price at the sale, called “credit bidding.”[2] A court may limit this right “for cause.”[3] The “for cause” standard is not defined in the Code […]
Bankruptcy Considerations in a Collections Action
Understanding what can occur during a collection action can be vital in determining which accounts to pursue. One common occurrence is that the debtor files for bankruptcy. So, what exactly is bankruptcy? Bankruptcy is a procedure which allows debtors to reorganize their debts and potentially liquidate certain assets. It also allows a debtor to receive a discharge of […]
Neither a Borrower Nor A Lender Be…In an Oil Market After a Sharp Plunge in Prices
Anyone who has even casually glanced at the financial news in recent months is already well aware of the big story today—global oil prices have fallen dramatically. At their lowest levels in six years, and at 50% cheaper than the average over the last 4 years, this is a huge story, and one that is […]
What Else Can a Creditors Committee Do? Maybe Reap $1.5 Billion for Unsecured Creditors (Lender Beware)
JPMorgan Chase & Co. and others (“JPM”) lent $1.5 billion to General Motors Corporation (“Old GM”) under a term loan agreement (the “Term Loan Agreement”). JPM was the senior secured creditor of Old GM. Old Gm went into chapter 11 bankruptcy. Under the terms of the DIP financing approved by the bankruptcy court, proceeds of […]
KUNEY’S CORNER – The Many Fates of Intercreditor Agreements: Ignored in a Cramdown, Or Enforced Because Well-Drafted and Not Contrary to Bankruptcy Policy, or What?
Secured creditors often seek agreement among themselves in order to limit intercreditor conflict and expedite realization of their respective claims against a borrower in a chapter 11 case. One might call it a “strength through peace” approach. However, in chapter 11 cases, some courts have ignored intercreditor agreements in cramdown situations, refused to enforce certain […]