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Connacher’s Woes: Over-Levered and at the Mercy of Global Economic Forces

Shifts in both commodities and credit markets are causing pain for Connacher Oil and Gas, and have led to a “going concern warning“[i] being included in their Q3 results. Connacher is seen as likely to run into difficulties making interest payments, and as a result its stock price is down some 85% from its 2 […]

Can North Riverside, Illinois Pull a Detroit?

North Riverside, Illinois, like many municipalities in Illinois (and the state itself), is beset by burgeoning public employee pension fund liabilities.  The village of about 6,672 souls faces an operating budget deficit of $1.9 million, with $1.8 million due to fire department pension obligations (annual required payments have septupled over the past ten years).  Most […]

The Fisker Case: My Credit Bid Capped at the Amount I Paid for the Debt?

One way to purchase assets (including the assets of a business as a going concern) is to prevail at a foreclosure sale or a § 363 bankruptcy auction with a credit bid.  The first step is to acquire the senior secured debt on the assets at a steep discount.  The next step is to outbid […]

How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part III – Equitable Subordination vs. Recharacterization

In part one of our series on recharacterization, we discussed the elements of judicial recharacterization of loans as equity interests.[i]  In part two of the series, we considered how debtors can “claw back” putative “loans” that they may have repaid years earlier because the “loans” were in fact equity investments and their repayment was invalid.[ii]  […]

How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part II – Clawback of “Loan Repayments”

In our last article[i], we discussed the judicial recharacterization of loans as equity interests.  As we described, a court will recharacterize a lender’s debt claim as equity if it determines the “loan” actually was intended to be, and was treated by the parties as, an equity investment.  Recharacterization is a powerful tool for creditors and […]

How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part I – What is Recharacterization in Bankruptcy?

In bankruptcy, a debt claim has a higher priority than an equity interest (or share) in the debtor company, and should be (and ordinarily is) paid in full before equityholders receive any distribution from the debtor.  Better, then, to acquire or hold a debt claim — an elegant swan — than to hold an equity […]