All items from Business Finance & Restructuring News - Weil

The question “Where’s the Beef?” is typically associated with the famous Wendy’s television commercial from 1984 and its lovable actress, Clara Peller. But the recent decision in the chapter 7 case of a national meat processor had an avoidance action defendant asking, “Where’s the Beef … (with me)?” after the debtor’s chapter 7 trustee attempted to avoid over $5 million in transfers made by the debtor to the defendant prepetition. This is the first of two posts on Saracheck v. Crown Heights House of Glatt, Inc., a recent decision from the Bankruptcy Court for the Northern District of Iowa that provides insight into fraudulent transfer and preference defenses. Today’s post focuses on the court’s fraudulent transfer analysis, and the next post will focus on its preference analysis.
The debtor, Agriprocessors Inc., operated a slaughterhouse and meat-packing factory in Postville, Iowa. Agriprocessors was one of the nation’s largest producers of kosher meat and poultry. Aaron Rubashkin, a Hasidic butcher from Brooklyn, and his family founded, owned, and ran the business. The Rubashkins were part of a tight-knit Lubavitch community. Prepetition, certain members of the community lent money to Agriprocessors on an unsecured basis.

Posted 18 hours 54 min ago

When evaluating a debtor’s bankruptcy or restructuring options, determining how to increase or preserve the debtor’s liquidity is crucial to the analysis. Well-advised debtors with significant labor liabilities will need to explore whether attaining cost savings through rejection of their collective bargaining agreements is a viable alternative. When dealing with the issue of CBA rejection pursuant to section 1113 of the Bankruptcy Code, the bankruptcy court decision in In re Trump Entertainment Resorts, Inc. is a helpful resource. 
The Stakes
In Trump, the debtors, owners and operators of two casino hotels located in Atlantic City, New Jersey, moved to reject the CBA between the limited liability company that owns the Taj Mahal Casino Resort and the union and implement the debtors’ proposal modifying certain terms of the CBA. In support of their motion, the debtors’ investment banker testified that relief from the CBA would have to be granted if the debtors were to avoid closing the casino and liquidating the business. The union, in contrast, did not present any witnesses at the evidentiary hearing (although the court refused to speculate on the reasoning behind its failure to do so).

Posted 1 day 22 hours ago

This article has been contributed to the blog by Andrea Lockhart, an associate in the insolvency and restructuring group of Osler, Hoskin & Harcourt LLP
A recent decision of the British Columbia Supreme Court in Re Bul River Mineral Corp. highlights the discretionary nature of claims-bar orders under the Companies’ Creditors Arrangement Act (the “CCAA”). We have previously commented on this topic in our article discussing Re Timminco, where the Ontario Court permitted a lifting of the stay of proceedings to permit the pursuit of a class-action proceeding that had not been filed by the claims bar date. In this case, among other things, the Court reviewed a preferred shareholder claim that had been deemed to be accepted as a debt claim in accordance with a “negative option” claims procedure. Notwithstanding the claims resolution mechanics set out in the claims procedure order and the debtors’ acceptance of the claim in accordance with such order, the Court exercised its discretionary authority to review the claim in light of the objectives of the CCAA and recharacterized the claim as an equity claim.

Posted 2 days 21 hours ago

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.
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Posted 5 days 19 hours 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.

Posted 6 days 19 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. 

Posted 1 week 18 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 1 week 1 day 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 1 week 2 days 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 6 days ago