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Creditors Rights

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A Brief Summary of PEM Entities​: Unsecured Creditors Pulled Down a Secured Creditor In its recent unpublished opinion PEM Entities, LLC v. Province Grande Old Liberty, LLC, 2016 WL 4254917, (4th Cir. Aug. 12, 2016), the Fourth Circuit Court of Appeals affirmed the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 […]


RECOMMENDED READING: What Can a Creditors Committee Do? Prevent the DIP Lender From Making Off With Assets That Could Help Pay Unsecured Creditors

The recommended reading this time is not an article but a pleading in a bankruptcy case. The official committee of unsecured creditors (the “Committee”) appointed in the Kids Brands case (In re Kid Brands, Inc., Case No. 14-22582 (Bankr. D. N.J.) objected to financing for which the large corporate debtor seeks approval from the Court. […]


Try to Be the Least Bit Cool: Credit Bidding Rights After Fisker and Free Lance Star-Publishing

Holders of secured debt now have two cases to make them nervous as to whether they got all they paid for with respect to their right to credit bid at a sale of the collateral in a section 363 sale in bankruptcy.  It may appear that both courts chopped back credit bidding rights solely to […]


KUNEY’S CORNER – To Cheat Perdition Under the Debtor’s Plan: The Secured Creditor’s Section 1111(b) Election

A recent article by this author on this site presented the debtor’s cram down powers, to be employed in confirming a plan over the opposition of impaired creditors.[i] That article referred briefly to an undersecured secured creditor’s counter-measure: the section 1111(b)(2) election. By making this election, a secured creditor chooses to do without (i.e. “plucks […]


90 Second Lesson: What is a “UCC Article 9” Sale?

Editors’ Note: This is the first in an irregular series in which we answer readers’ questions. If you have a question, submit it to info@dailydac.com and we will try to answer it. QUESTION: Jack B. emailed, asking, “Please explain what an Article 9 sale is. My lawyer said that if I give a security interest to a […]


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