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From Penthouse to Ground Floor: The Penthouse Magazine Bankruptcy
Creative Destruction and an Inevitable Fall: What Can We Learn From the Penthouse Magazine Bankruptcy? Penthouse International, publisher of Penthouse Magazine, sold for $11.2 million in June of 2018. The company was worth about $700 million (adjusted for inflation) at its height. The latest Penthouse Magazine bankruptcy highlights just how far Penthouse has fallen, and […]
Consignment Arrangements: Dos & Don’ts to Avoid Getting Hurt
What Happens When Your Consignee Becomes Distressed and What You Can Do I was speaking with a client yesterday about consignment arrangements. What we discussed should be of interest to any company that sells goods using a consignment arrangement, and I thought I would share. What is a Consignment Arrangement? In a consignment arrangement, the […]
90 Second Lesson: Carve-Outs for Unsecured Creditors
How Does a Fee Carve-Out Relate to A Carve-Out for Unsecured Creditors? [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.] In a separate 90 Second Lesson, we defined and explained the […]
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 […]
Limiting Credit Bidding in Section 363 Bankruptcy Sales Post-In Re Aéropostale, Inc.
Chilled Credit Bidding and the Section 363 Sale 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.” A court may limit this right “for cause.” The “for […]
Kuney’s Corner: The Secured Creditor’s Counter Strike – Section 1111(b) Election
Section 1111(b) Election: A Countermeasure for Undersecured, Secured Creditors Mathew 5:29 – And if thy right eye offend thee, pluck it out, and cast it from thee: for it is profitable for thee that one of thy members should perish, and not that thy whole body should be cast into hell. In a previous […]
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 […]
Kuney’s Corner – Giving Secured Creditor Substitute Collateral in a Chapter 11 Cramdown
Pacifying a Hostile Lender with a Motion to Substitute Collateral Can a Chapter 11 debtor confirm a plan that gives a hostile secured creditor a lien on an orange as a substitute, in essence, for the secured creditor’s lien on an apple that the debtor wants to keep and use?1 Yes, a motion to […]
The Fisker Case: My Credit Bid Capped at the Amount I Paid for the Debt?
Should Secured Creditors and Buyers of Distressed Assets Worry About Facing Limits On Their Credit Bids? 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 […]
Determining the Collateral Value of a Secured Claim
Knowing Collateral Value Helps Determine the Creditor’s Rights Under a Plan The question of why we need to know the collateral value of a secured claim seems quite obvious when a secured creditor may be under-secured, that is when the value of its claim exceeds the value of the collateral securing it. In that case, […]