All items from Business Finance & Restructuring News - Weil

The timing of a bankruptcy petition filing is often a carefully calculated decision that a debtor makes to obtain certain protections of the Bankruptcy Code, most notably, the automatic stay, in advance of a looming event. In many cases, a debtor may be close to tripping a covenant, missing a debt payment, or a creditor may be attempting to foreclose on the debtor’s assets. The debtor must be cognizant of the timing of these events as the protections of the Bankruptcy Code only apply after the petition has been filed. In In re Buckskin Realty, Inc, the United States Bankruptcy Court for the Eastern District of New York explained that it would not grant nunc pro tunc relief to deem a bankruptcy petition filed earlier than it actually was when substantive rights would be altered. Where the debtor’s principal argued that he could not file the bankruptcy petition to invoke the automatic stay before the foreclosure sale on the grounds that the subway directions to the courthouse were wrong and caused the delayed filing, the court held excusable neglect and inaccessibility of the clerk’s office could not be used as a means to deem an earlier filing of a bankruptcy petition.

Posted 2 days 2 hours ago

The automatic stay is a powerful tool of the Bankruptcy Code, affording debtors a breathing spell from creditors seeking payment. Section 362(k)(1) of the Bankruptcy Code reinforces the stay by allowing individual debtors to recover actual and punitive damages for willful violations.
We’ve covered several decisions analyzing what constitutes an automatic stay violation and the remedy for such a violation. Violations come in many forms. For instance, courts have found harvesting cranberries on a debtor’s farm to be a stay violation and that computer error can constitute a willful violation. Recently, the United States Bankruptcy Court for the Eastern District of North Carolina held that suspension of the individual debtors’ wholesale warehouse club membership was a stay violation. In awarding sanctions for a stay violation, the court in In re Heeley analyzed what constituted a willful violation and what remedy was proper.

Posted 4 days 2 hours ago

As our loyal readers know, the Weil Bankruptcy Blog is running a series of posts discussing the various interesting topics covered in the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 Final Report and Recommendations. In this installment, we cover the Commission’s review of rules relating to claims trading – discussed in section VI.D. of the Report.
Claims trading is a hot topic. The claims trading industry has been growing exponentially in recent years. Indeed, the Report notes that in 2012, amid a slowdown in large corporate chapter 11 cases, distressed investors still bought and sold more than $41 billion in bankruptcy claims. With an inevitable change in the economic cycle on the horizon (and perhaps even closer for the currently-troubled oil and gas industry), any changes to rules governing claims trading will be of interest for a large – and growing – audience.
So what did the Commission recommend on this important topic? Well, nothing. The Commission, which focused primarily on disclosure, did not suggest any material changes to the claims trading disclosure requirements. As discussed below, this recommendation of no change is significant.

Posted 5 days 2 hours ago

As market participants will know, the appeal in the Apcoa II scheme of arrangement settled just before Christmas. While welcome for the players involved, it deprived the market of the clarity of a Court of Appeal judgment on many scheme issues such as jurisdiction, the imposition of new obligations and class composition. In the absence of the Court of Appeal’s review, we offer our own reflection on the current state of key issues arising on schemes of arrangement in financial restructurings.
continue >>>

Posted 1 week 2 days ago

“The past can’t hurt you anymore, not unless you let it.” – Alan Moore, V for Vendetta
Prior to the commencement of a bankruptcy case, the waiver by a potential debtor of the protections afforded by the Bankruptcy Code is usually found to be unenforceable. As a recent decision of the United States Bankruptcy Court for the District of Puerto Rico demonstrates, however, this general proposition has become more nuanced over the past few years. In In re Triple A & R Capital Investment, Inc. the court was faced with the question of whether to enforce a prepetition waiver of the protections of the automatic stay contained in a prepetition forbearance agreement between the debtor and its primary secured lender. Ultimately, enforcement of such waiver did not depend upon the debtor’s prepetition actions, but turned on the debtor’s postpetition actions. The bankruptcy court found that the debtor ratified the stay waiver when it entered into a postpetition cash collateral stipulation with the secured lender. The decision serves as a reminder that what practitioners may regard as “boilerplate” in a cash collateral stipulation or DIP agreement may have significant consequences.

Posted 1 week 3 days ago

Today’s blog article, which looks at the treatment of specific oil and gas property interests in the bankruptcy context, is the second in the Weil Bankruptcy Blog series, “Drilling Down,” where we review issues at the intersection of the oil and gas industry and bankruptcy law. In Part One, we provided an overview of the oil and gas industry and a discussion of some of the unique challenges currently facing this sector. In Part Three, we will look at the ability to assume, assign, or reject oil and gas “leases” under section 365 of the Bankruptcy Code. In Part Four, we will dive into how certain financing arrangements specific to the realm of oil and gas may be considered a “disguised financing” vs. a “true sale of interests.” 
Part Two: The Treatment of Oil and Gas Interests in Bankruptcy
In attempting to convert dreams of black gold to hard cash, aspiring capitalists split the property interest in oil into more fragments than the atom or the rainbow.” — Jones v. Salem Nat’l Bank (In re Fallop), 6 F.3d 422, 424 (7th Cir. 1993)

Posted 1 week 4 days ago

Many readers likely are familiar with the basic tenants of contractual interpretation. The key is to give effect to the intent of the parties. Where contractual language has a plain meaning, that is the best indication of intent. Where language is ambiguous, a court can examine extrinsic evidence (i.e., evidence outside the four corners of the agreement, such as evidence of negotiations) to determine the parties’ intent. These are some of the more basic elements from the framework used by attorneys and judges in the pursuit of meaning. The recent Chesapeake Energy Corporation decision from the United States Circuit Court for the Second Circuit illustrates that, though the basic interpretive framework appears straightforward, in application it can be complex, difficult, and contentious. Depending on one’s perspective, this decision might serve as a cautionary tale – or a signpost for opportunity.
A Latent Dispute: Two Readings, One Text

Posted 1 week 5 days ago

As part of the Weil Bankruptcy Blog’s series on the recently released ABI Commission Report, we previously discussed the ABI Commissions’ recommendations on management and oversight of cases in chapter 11. In this entry we turn to the often debated topic of professional fees and the costs of complex chapter 11 cases.
Professionals and Compensation Issues

Posted 1 week 6 days ago

“Each player must accept the cards life deals him or her: but once they are in hand, he or she alone must decide how to play the cards in order to win the game.”
– Voltaire
Where a creditor has a lien attached to proceeds of a particular transaction “in whose hands they may come,” does the charging lienor have to identify a specific, isolated fund to which its lien attaches? In In re Trump Entertainment Resorts, Inc., the United States Bankruptcy Court for the District of Delaware answered “no” (at least with respect to attorney’s charging liens in New Jersey). In so doing, the Bankruptcy Court also affirmed the common law rule that “first in time is first in right.”
Know When To Hold ‘Em

Posted 2 weeks 2 days ago