Claims


June 12, 2017
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An Introduction to Bankruptcy Claims Trading: Part 2

Timothy C. Bennett Seyfarth Shaw LLP 620 Eighth Avenue New York, New York 10018 212-218-3386 Tbennett@seyfarth.com   Documenting a Claims Trade   In our previous article, we discussed the claims trading marketplace, focusing on its characteristics, the motivations for its participants, some basics of documentation, key business and legal structuring considerations, as well as risks borne by sellers and purchasers in these types of transactions.  In this article, we will take a closer look at the...

March 27, 2017
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An Introduction to Bankruptcy Claims Trading

Timothy C. Bennett
Seyfarth Shaw LLP
620 Eighth Avenue
New York, New York 10018
212-218-3386
Tbennett@seyfarth.com


Upon the filing of a bankruptcy petition by a debtor in a U.S. chapter 11 proceeding, any attempts to collect debt by a creditor are halted.  As a result, creditors face the daunting prospects of either waiting out the debtor’s bankruptcy case - not knowing when, how much, or even if they will ultimately recover on their claims - or engaging in what could be a drawn out and expensive dispute with the debtors to...

November 28, 2016
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Fourth Circuit Approves Recharacterization of Secured Debt Into Equity

The Editorial Staff of Commercial Bankruptcy Investor


A Brief Summary of PEM Entities​: Unsecured Creditors Pulled Down a Secured Creditor In its recent unpublished opinion PEM  Entities, LLC v. Province Grande Old Liberty, LLC, 2016 WL 4254917, (4th Cir. Aug. 12, 2016), the Fourth Circuit Court of Appeals affirmed the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”) who had sued a putative holder of a very large secured debt --who would rank ahead of the Plaintiffs’ unsecured claims...

April 25, 2016
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90 Second Lesson: What is the Difference Between Recharacterization and Equitable Subordination?

From the Editorial Staff of DailyDAC.com


Editors’ Note:  This is part of our 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:  Jeff P. from Los Angeles emailed asking us to explain the interplay between recharacterization and equitable subordination? ANSWER:  While recharacterization and equitable subordination are often mentioned in the same breath, the underlying purposes of these doctrines—and the analysis conducted by courts in evaluating claims...

June 30, 2015
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Anatomy of an Airline Bankruptcy: Aloha Airlines

Breaking News Alerts from Chapter11Dockets.com


When Aloha Airlines, Inc. filed for bankruptcy in 2008, it was the airline's second bankruptcy filing in less than five years.  While Aloha initially filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code, the case was quickly converted to Chapter 7 at the airline's request.  Seven years later, the bankruptcy is concluded and we can see how the case played out: The Trustee generated gross receipts of almost $58 million during the bankruptcy case. Of...

June 29, 2015
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Chrysler Bankruptcy - How Did Creditors Fare?

Breaking News Alerts from Chapter11Dockets.com


This month, the Old Carco Liquidation Trust filed its motion for entry of a final decree in the historic Chapter 11 bankruptcy cases of Chrysler LLC and its affiliates.  Once granted, the final decree will mark the official end of Chrysler's approximate six year journey through bankruptcy court.  As part of the final decree motion, the Liquidation Trust filed a detailed final report of the bankruptcy cases, a copy of which can be accessed here....

April 17, 2015
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The Rumors of Kanye West Buying Karmaloop Have Been Greatly Exaggerated

Jon Petersen
Distressed Debt/Equities Research Team
jpetersen@dailydac.com


There has been a lot of hot air blown in the past couple of weeks regarding Kanye West and Dame Dash being interested in buying the troubled e-commerce retailer Karmaloop. The two made a series of Instagram posts where they described with some bluster how they were purchasing the company. "We just about to do some new shit, you know, stick together culturally -- take over the world and create a whole new industry and...

March 26, 2015
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Lehman Brothers Files Notice of Seventh Distribution to Creditors

Breaking News Alerts from Chapter11Dockets.com


Lehman Brothers Holdings Inc. and its affiliates filed a notice with the Southern District of New York bankruptcy court today.  In that notice (a copy of which is available here), Lehman Brothers disclosed the percentage recovery that will be distributed to holders of allowed claims (other than secured, administrative, priority or convenience claims) in the upcoming seventh distribution, as well as the cumulative percentage recovery.  Those disclosures are made separately for claims against each Debtor in each Class under...

March 9, 2015
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ResCap Liquidating Trust Files Annual Report

Breaking News Alerts from Chapter11Dockets.com


The ResCap Liquidating Trust filed an annual report for calendar year 2014 with the United States Bankruptcy Court for the Southern District of New York today.  The ResCap Liquidating Trust is the successor in interest to Residential Capital, LLC and its affiliates that filed for bankruptcy in 2012.  Residential Capital remains one of the largest financial firms to ever file for bankruptcy in the United States. Among the highlights of the annual report (a copy of which...

February 10, 2015
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What Does RadioShack's Bankruptcy Mean for Creditors & Shareholders?

Breaking News Alerts from Chapter11Dockets.com


One of the fundamental questions - perhaps the most fundamental question - for creditors and shareholders following a company's bankruptcy filing is "what does this mean for me?"  RadioShack Corporation and a number of affiliates filed for bankruptcy protection last week with plans to sell some of their operations and liquidate the rest.  It is, at present, challenging to put an exact dollar figure on either portion of that plan in terms of the amount...

February 10, 2015
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Liquidation Trust Created in TOUSA, Inc. Bankruptcy Files Annual Report

Breaking News Alerts from Chapter11Dockets.com


The Liquidation Trust which was created pursuant to the Amended Joint Plan of Liquidation of TOUSA, Inc. and Its Affiliated Debtors and Debtors in Possession Under Chapter 11 of the Bankruptcy Code filed its annual report for the year ended December 21, 2014 with the Southern District of Florida bankruptcy court yesterday.  TOUSA was one of the largest homebuilders to file for bankruptcy protection in the wake of the financial crisis.  When it filed for Chapter 11...

January 23, 2014
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How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part III – Equitable Subordination vs. Recharacterization

 

  • Lawrence V. Gelber
  • James T. Bentley
  • Schulte Roth & Zabel LLP
  • New York, New York
  • (212) 756-2000
  • lawrence.gelber@srz.com
  • james.bentley@srz.com

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]  In this finale of the series, we contrast recharacterization with equitable subordination, which is another means by which some creditors...

October 28, 2013
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How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part II - Clawback of "Loan Repayments"

 

  • Lawrence V. Gelber
  • James T. Bentley
  • Schulte Roth & Zabel LLP
  • New York, New York
  • (212) 756-2000
  • lawrence.gelber@srz.com
  • james.bentley@srz.com

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 trustees because, under the Bankruptcy Code's priority scheme, debt claims (and all general unsecured claims) must be repaid in full...

October 3, 2013
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How Unsecured Creditors Push Ahead of Lenders Who in Fact Invested, Part I – What is Recharacterization?

 

  • Lawrence V. Gelber
  • James T. Bentley
  • Schulte Roth & Zabel LLP
  • New York, New York
  • (212) 756-5000
  • lawrence.gelber@srz.com
  • james.bentley@srz.com

When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck. -James Whitcomb Riley 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 --...

May 24, 2013
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Tempted to Sell Your Bankruptcy Claim?

  • Christopher M. Cahill
  • Lowis & Gellen LLP
  • Chicago, Illinois
  • (312) 364-2500
  • ccahill@lowis-gellen.com

You sold services and received, instead of payment, a notice that your counterparty has filed for chapter 7 or chapter 11 bankruptcy protection. You understand that you have a “claim” against the “debtor,” in bankruptcy parlance. A claims purchaser offers to purchase your claim from you for cash. You accept. You metaphorically light a cigar for cash collected and troubles avoided. Sixteen months or so later, the debtor (or its successor under a chapter 11...

April 24, 2013
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Dear Debtor: I Thought I Was Your Priority?

  • Patrick C. Maxcy
  • Dentons
  • Chicago, Illinois
  • (312) 876-2810
  • patrick.maxcy@Dentons.com

If you are a vendor, service provider or other unsecured creditor to a chapter 11 debtor, you cannot be blamed for feeling like a duped lover after learning about the bankruptcy of your once devoted business companion. Despite the promises that "I’ll stand by you if you stand by me," all those outstanding invoices won’t be paid after all. If it helps soothe the pain (and of course it won’t), it's not just you. The...



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