All items from Business Finance & Restructuring News - Weil

In July 2014, Argentina defaulted on a $539m interest payment on its sovereign debt in the latest round of its ongoing legal dispute with bondholders.
Continue >>>



Posted 17 hours 2 min ago

Outside of section 506(b) of the Bankruptcy Code, which affords secured creditors a right to enforce their contractual entitlements to fees, the Bankruptcy Code does not expressly give creditors a right to seek reimbursement of fees incurred during a debtor’s bankruptcy. Section 503(b)(3)(D) of the Bankruptcy Code, however, permits a creditor to seek reimbursement of fees and expenses incurred by the creditor in making a “substantial contribution” to the case. In assessing a creditor’s “substantial contribution,” where does the bankruptcy court draw the line between the consequences of a creditor acting out of self-interest to capture the maximum value from the debtor’s estate as opposed to the effects of a creditor acting to uphold the integrity of the bankruptcy system? Does the motive even matter if the results benefit the estate? In a recent decision, the Bankruptcy Court for the Eastern District of Pennsylvania adopted a framework for answering these questions.
Background



Posted 1 day 17 hours ago

In the well-known children’s story book written by P.D. Eastman and edited by beloved Dr. Seuss, a baby bird embarks on a quest to find his mother, asking a hen, a dog, and a kitten, among others, the famous question, “Are you my mother?”   If Dr. Seuss had penned the recently-decided case of Thielman v. MF Global Holdings, Ltd. (In re MF Global Holdings Ltd.), he might have called it, “Are You My Employer?” and its plot would have centered around the WARN Act plaintiffs’ efforts to convince the court that the MF Global enterprise, collectively, was the plaintiffs’ mother ahem employer. Just as the baby bird in Are You My Mother was faced with a journey before he could meet his mother, so too did the plaintiffs in MF Global Holdings embark on a journey of sorts—meeting the bankruptcy court and then the Southern District of New York along the way —before finding out that maybe in, some instances, it’s not necessary to know exactly who your mother, ahem employer, is. 
Background



Posted 2 days 15 hours ago

Although the bankruptcy world has long been acquainted with Ponzi schemes, the courts have not clearly answered the question of how to distribute investors’ funds after a scheme fails – especially in the scenario where certain investors profit. The United States Bankruptcy Court for the District of Utah recently weighed in on the issue in Gillman v. Russell (In re Twin Peaks Financial Services, Inc.), in which it considered whether returns to investors in a Ponzi scheme are recoverable as fraudulent transfers.
The Defendant’s Investment
The debtor in Twin Peaks operated a real estate investment firm.  Apparently, however, the investment returns were not what they seemed, and the fund turned out to be a Ponzi scheme. After the scheme failed and the debtor filed for bankruptcy, the chapter 7 trustee commenced an adversary proceeding against the defendant, an investor in the scheme who had received over $440,000 from the debtor in excess of his original investment. The trustee argued, among other things, that the defendant’s proceeds were fraudulent transfers under section 548 of the Bankruptcy Code and moved for summary judgment.



Posted 3 days 18 hours ago

Being one of the first defendants to settle claims has its pros and cons. On the one hand, defendants may avoid protracted litigation. On the other hand, future defendants may ultimately negotiate lower settlement amounts. To avoid “leaving money on the table,” defendants who settle early may seek to include an equal treatment provision, or “most favored nations” (MFN) clause, into the settlement agreement. Although MFN clauses vary, these provisions often enable a defendant to recover some or all of the difference between the amount at which it settled and the negotiated settlement amount reached by a later defendant. Of course, as with all legal agreements, the devil is in the details. A recent ruling in In re Madoff highlights the importance of carefully drafting every MFN clause.



Posted 4 days 18 hours ago

The ability of a foreign debtor to avail itself of the protections of the Bankruptcy Code, such as the automatic stay, with respect to its property located within the United States is one of the most fundamental and valuable tools available to foreign debtors with domestically located property. When a foreign debtor obtains “recognition” of its principal insolvency proceeding by U.S. courts, section 1520 of the Bankruptcy Code does not only provide the foreign debtor the protections of the automatic stay, but also requires the foreign debtor to obtain approval under section 363 of the Bankruptcy Code with respect to any transfer of an interest in property within the territorial jurisdiction of the United States.
It is easier to say with certainty that certain types of property are “within the territorial jurisdiction of the United States” than other types. But what about a foreign debtor’s claim against a domestic debtor? About a year and a half ago, we blogged about a decision in which the United States Bankruptcy Court for the Southern District of New York ruled that a foreign debtor’s claim against a domestic debtor was not “located” in the United States. Since then, the decision was appealed to the United States District Court to the Southern District of New York, which agreed with the bankruptcy court.



Posted 1 week 1 day ago

NORTH OF THE BORDER UPDATE
This article has been contributed to the blog by Ziyi Shi. Ziyi Shi is an associate cross-appointed to the Corporate Group and the Insolvency Group of Osler, Hoskin & Harcourt LLP.
In lengthy insolvency proceedings, interest accrued on existing claims during the “post-filing” period can represent a substantial portion of the debtor’s estate. In Re Nortel Networks Corporation et al, 2014 ONSC 4777, the Ontario Superior Court (the “Court”) ruled on whether the holders of unsecured bonds of the now-defunct Nortel group (“Nortel”) could assert a claim to post-filing interest in proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”).
The ensuing decision, in which Justice Newbould of the Court rejected the post-filing interest claim on the basis of the Canadian “interest stops” rule, could be of consequence for future rulings under both the CCAA in Canada and Chapter 11 proceedings in the US.
BACKGROUND



Posted 1 week 2 days ago

This past Saturday, October 11, 2014, marked an important day in the too-big-too-fail regulatory and industry initiative. The International Swaps and Derivatives Association, Inc. (ISDA) announced on Saturday that 18 major global banks (G-18) have agreed to sign a new ISDA Resolution Stay Protocol, developed in coordination with the Financial Stability Board, to support cross-border resolution and reduce systemic risk. For a copy of ISDA’s press release, click here.



Posted 1 week 3 days ago

In case you were wondering, Columbus Day is in the top ten of “legal holidays” that Bankruptcy Rule 9006 recognizes.  Although the Weil Bankruptcy Blog is observing the holiday, we thought it provided a good opportunity to remind everyone of the diminished significance of legal holidays under Rule 9006.
Under current Bankruptcy Rule 9006(a)(1), if today is the last day in a time period set by the Bankruptcy Rules, the Federal Rules of Civil Procedure, any local rule or court order, or in any statute (assuming the statute does not otherwise specify a method of computing the time), you can go watch your neighborhood’s parade because you have an extra day to file your pleading or take some other action.
Remember, though, that Bankruptcy Rule 9006 no longer excludes weekends and legal holidays when computing a time period.  Before 1987, weekends and legal holidays were excluded from computing a time period when the period was shorter than seven days.  It was then changed to any period shorter than eleven days in 1987.  In 2009, Congress changed the rule to require that weekends and legal holidays always count when computing a time period.
By the way, according to the “Holiday Insights” website , today also is International Skeptics Day.  So, today is a great day for those who doubt that Christopher Columbus discovered the New World, as well as those who believe that he did!



Posted 1 week 4 days ago