All items from Business Finance & Restructuring News - Weil

If you ask the average person (a non-bankruptcy lawyer, that is) what they know about bankruptcy, chances are they will reference the Bankruptcy Code’s “automatic stay” provisions in their answer. That is because, the automatic stay, which is found in section 362(a) of the Bankruptcy Code, is considered one of the most fundamental tenets of bankruptcy law. The filing of a bankruptcy petition triggers the protections of the automatic stay—staying, among other things, “the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title.” 
The requirement that an action must be against the debtor is generally strictly construed. Nonetheless, bankruptcy courts have relied upon section 105(a) of the Bankruptcy Code, which permits bankruptcy courts to “issue any order, process, or judgment that is necessary or appropriate” to carry out the provisions of the Bankruptcy Code, to extend the protections of the automatic stay to non-debtors. This extension creates a whole new set of questions pertaining to when the protections of the automatic stay are available to non-debtors.



Posted 12 weeks 1 day ago

NORTH OF THE BORDER UPDATE
This article has been contributed to the blog by Caitlin Fell and Mary Angela Rowe. Caitlin Fell is an Associate in the Insolvency & Restructuring group of Osler, Hoskin & Harcourt LLP. Mary Angela Rowe is an Articling Student-at-law at Osler, Hoskin & Harcourt LLP.
A court-appointed receiver is bound to maximize return on the sale of an asset. But when a purchaser gets a better offer for the asset than the receiver could, all parties are in a difficult position. In the case of Meridian Credit Union Limited v. Baig, the court considered when partial truths may amount to fraud, after a buyer tried to conceal from a receiver that the buyer had re-sold the property before closing the sale. 
Facts



Posted 12 weeks 2 days ago

It’s Rosh Hashanah – the Jewish New Year, and we at the Weil Bankruptcy Blog are pleased to send wishes for a shanah tovah u’metukah —  sweet, happy, and healthy year to all of our readers (and non-readers too).
Rosh Hashanah and the days surrounding it are called the Days of Awe because those days are a time of personal reflection.  So, in the spirit of reflection, we are taking some time off.  We’ll be back on Monday.  In the meantime, you, too, can reflect on the year by viewing our Weil Bankruptcy Blog Mid-Year Review here.  And not to toot our own, ahem, horns,* but it’s a pretty great recap, if we may say so ourselves.  A final note of caution: we take no responsibility for anyone caught reading the Mid-Year Review during the rabbi’s sermon.  Not that it’s a bad idea. . .
*On Rosh Hashanah, and in most of the month leading up to it (and until Yom Kippur), it is customary to blow the shofar – an animal horn that sounds a lot like a trumpet – in observance of the Days of Awe.



Posted 12 weeks 6 days ago

The Weil Bankruptcy Blog team is excited to bring you our Inaugural Review, highlighting important cases, topics, and themes in the restructuring world that we have addressed on the Weil Bankruptcy Blog in the past few months. In this first edition, we look back at interesting entries during the first half of the year. Going forward, we will be circulating a quarterly review and an annual review.
We launched the Weil Bankruptcy Blog on September 29, 2010, with the ambitious target of posting a substantive bankruptcy and restructuring related article every weekday. We’re proud to say that, nearly four years later, we’ve published more than 1,000 blog posts, showcasing both the strength and depth of the talent in Weil’s Business Finance & Restructuring Department. Our blog posts are regularly republished in major legal publications, and the number of readers of our blog posts has vastly surpassed our expectations.
If you have a topic that interests you, please reach out to us to let us know. Lastly, if you’ve been enjoying the blog, please keep reading!
View the Weil Bankruptcy Blog 2014 Mid-Year Review here.
To receive a hardcopy of the Review please request one here.



Posted 13 weeks 9 hours ago

The 2005 Amendments to the Bankruptcy Code ushered in section 503(b)(9) of the Bankruptcy Code, which grants trade creditors an administrative expense for goods sold to the debtor in the ordinary course of the debtor’s business and that the debtor received within 20 days prior to the commencement date. Trade creditors also may face preference litigation for payments they received prior to the petition date, but may be able to reduce or eliminate their preference exposure by asserting a “new value” defense under section 547(c)(4) of the Bankruptcy Code (one of the more frequently raised defenses to preference liability). To reduce or eliminate preference liability under a new value defense, the creditor must have given unsecured new value to the debtor by selling goods or providing services on credit terms after the alleged preference payment but prior to the petition date. If these conditions are met, the creditor can subtract the value of those goods from the preference amount.



Posted 13 weeks 1 day ago

Weil partner, Joseph H. Smolinsky, will participate in a webinar with Aaron D. Lacey, partner at Thompson Coburn LLP, and Carol Flaton, managing director at Zolfo Cooper, LLC, to discuss rightsizing options in the higher education sector.
This webinar presentation will examine restructuring, reorganization, teach-outs, and similar rightsizing options, and focus on how these options can be used deliberately and appropriately to ensure the longevity and success of an institution and its students. The presenters will examine the historical stigma in this sector associated with bankruptcy and restructuring (which can direct or delay decision-making to the detriment of the institution and its students and stakeholders), and discuss how institutions that successfully manage rightsizing will be best positioned to serve their students and stakeholders, to unlock value, and to take advantage of future opportunities. The presenters will also discuss possible legislative fixes that, if implemented, could lead to a healthier and more financially stable industry.
This webinar will be held on September 30, 2014, at 2 PM Eastern.
Please click here to request additional information.
Panelists are:



Posted 13 weeks 1 day ago

We previously covered the Meridian Sunrise Village case on the Bankruptcy Blog here. As you may remember, this case turned on a choice between two competing interpretations of “financial institution” under a $55 million loan agreement governed by Washington state law.
Distressed debt funds in this case had sought to acquire the debt of a troubled borrower from an existing lender, something they were only able to do if they were an “Eligible Assignee” under the terms of the loan agreement between the borrower and its lenders. The distressed debt funds argued that they were Eligible Assignees, as the definition of “Eligible Assignee” in the loan agreement included “financial institutions.” The borrower argued that the distressed debt funds were not financial institutions as it is commonly understood, and therefore were not “Eligible Assignees.”



Posted 13 weeks 2 days ago

During the 2008 financial crisis and its aftermath, it became commonplace for a distressed bank to be taken over(night) by the Federal Deposit Insurance Corporation (FDIC) and then sold, that same day, to another bank (or bank holding company) that agreed to take on the depository liability associated with the failed bank in exchange for its assets (and customer base). Some banks, however, survived the tidal wave of takeovers. A recent decision by the United States Bankruptcy Court for the Middle District of Georgia in the involuntary chapter 7 case of In re FMB Bancshares, Inc. tells a new chapter in the life cycle of these nearly-failed banks—the possibility of their sale in chapter 11, something that is occurring with greater frequency in the past few years.
Background



Posted 13 weeks 5 days ago

Since it burst onto the Bankruptcy Code scene in 2005 with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), section 503(b)(9) of the Bankruptcy Code, which affords a creditor administrative priority for the value of goods the debtor received within 20 days prior to its bankruptcy filing, has been the subject of many bankruptcy decisions. The express language of section 503(b)(9) has come under heavy scrutiny, with much of the litigation surrounding section 503(b)(9) focusing on what constitutes a “good.” You can read about whether electricity, for example, is a “good” here, here, here and here.



Posted 13 weeks 6 days ago

The extent of a transferee’s knowledge in the context of fraudulent transfer claims under the Bankruptcy Code has been a frequent topic of discussion on the Weil Bankruptcy Blog. Recently, we examined the knowledge required to establish a transferee’s “good faith” defense under section 548(c) of the Bankruptcy Code. Now, the United States Court of Appeals for the Third Circuit in SB Liquidation Trust v. Preferred Bank, Nos. 13-1373 and 13-1959 (3rd Cir. Aug. 11, 2014) has provided more food for thought when it comes to the issue of a transferee’s knowledge, concluding that it is not necessary to plead the transferee’s knowledge of the fraudulent transfer to maintain a cause of action under section 548(a)(1) of the Bankruptcy Code.
Background



Posted 14 weeks 10 hours ago