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90 Second Lessons: The Mindset of a Real Estate Workout Lender
Editor’s Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to [email protected] and we will try to answer it. Question Russell S. wrote in asking, “I have a real estate portfolio that consists of several commercial buildings, and my loans are badly in default. My […]
3 Issues for Vendors to Consider When Their Customer Files Bankruptcy
Trade Creditors Still Have Options In the Event of a Customer Bankruptcy When a customer files bankruptcy, vendors can be exposed to considerable losses if they have debts owed by the customer that arose before the commencement of the case (the “Petition Date”). Once the case is filed, the vendor becomes a creditor, or trade […]
Which Creditors Get Paid First? The Liquidation Order of (Absolute) Priority
What is the Hierarchy of Claims Under the Absolute Priority Rule? If you are a vendor, service provider, or another 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 of “I’ll stand by […]
Third-Party Litigation Funding (TPLF) and Issues It Creates In Bankruptcy
Investing in Litigation – The Bankruptcy Code and Third-Party Funding Third-party litigation funding (“TPLF”) is, beyond a doubt, here to stay. In bankruptcy cases, TPLF arises in a number of contexts. First is the TPLF as a pre-petition secured or unsecured creditor—i.e., the TPLF source funded litigation and thereby acquired property rights in litigation proceeds […]
Lender Liability Claims are Alive and Well: A Case Study
Lender Liability Law Protects Distressed Borrowers from Unfair Practices The relationship between a lender and borrower can be complex. The borrower wants capital to run and grow its business, and the lenders want to earn a return and eventually get their principal back. If the borrower complies with the terms of the loan, all is […]
Lender vs Debtor on the Payment of Post-Petition Interest
The Battle Over Post-Petition Interest for Oversecured Creditors In bankruptcy, an oversecured creditor (in which the value of its collateral is higher than its claim) is first in line to be paid. Unfortunately, oversecured creditors are also entitled to post-petition interest (interest that accrues or would accrue after the start of bankruptcy proceedings, regardless of […]
The Order of Claims in Bankruptcy: Absolute Priority Rule, Structured Dismissals and More
Are the Rules Really “Absolute?” At its core, corporate bankruptcy addresses the problem of the “inadequate pie.” While occasionally the debtor will be solvent, in most cases, the debtor will, for lack of a better term, be “bankrupt.” That is, it won’t have enough money or other assets to pay its creditors all they are […]
When are Goods ‘Received by the Debtor’ for Purposes of a Section 503(b)(9) Administrative Expense Claim?
Two Decisions that Clarify “Receipt” of Goods in Administrative Expense Claims Section 503(b)(9) of the Bankruptcy Code1 allows a creditor an administrative expense claim (i.e., a claim with payment priority over other pre-bankruptcy claims) for the value of goods that the debtor “received” within 20 days before filing for bankruptcy. But what precisely does […]
90 Second Lesson: What is the Difference Between Recharacterization and Equitable Subordination?
Discerning Similar Methods to Lower the Order of Priority of Creditors’ Claims [Editors’ Note: This is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to [email protected] and we will try to answer it.] Question: Jeff P. from Los Angeles asked us to explain the […]
Meridian Sunrise Village: Risks of Loan-to-Own Strategy
Considerations for Distressed Private Equity You are a PE fund manager. Your fund employs a loan-to-own strategy (also referred to as distressed private equity) 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 to block […]