All items from Business Finance & Restructuring News - Weil

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 13 weeks 6 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 14 weeks 3 days ago

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.

Posted 14 weeks 4 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 14 weeks 5 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 14 weeks 6 days ago

Have you ever wanted to start your own marijuana cultivation and distribution business? Do you see billboards on the highway advertising pot-growing seminars and think, “Maybe I should go?” Does the grass seem greener on the other side? What was once a mere dream can be a reality now that several states have legalized the use, possession, distribution and cultivation of cannabis (a fancy term for marijuana) for medical or recreational reasons, and other states (such as my own state of Florida) will be voting on whether to legalize marijuana in the near future. Most people do not like to think about what would happen if things go awry with their perfectly-planned future business. But things do go wrong, businesses fail, and bankruptcy is regarded as a palliative means of bringing a failing business back to life or an orderly means of letting a business die with dignity. Before you quit your day job, however, and start spending the riches from your hypothetical marijuana business (or start thinking about the “joint-ly” administered cases you’ll file and “pot plan” you’ll propose should things go sour), read this cautionary tale. #hashtag:thingsonedoesnotappeartothinkaboutwhenplanningtheirfuturemarijuanabusiness.
The Arenas Case

Posted 15 weeks 2 days ago

The United States Bankruptcy Court for the Southern District of New York was recently presented in In re Rede Energia, S.A. with the question of whether a confirmed Brazilian reorganization plan for Rede Energia, S.A. should be enforced in the United States. Rede, one of the largest power companies in Brazil, filed a reorganization proceeding in Brazil after the operations of its regulated subsidiaries were seized. After an auction process for investments in Rede was completed, the Rede debtors proposed and confirmed a reorganization plan in accordance with Brazilian law. Thereafter, Rede’s foreign administrator commenced a chapter 15 proceeding in the United States and sought an order granting, among other things, full faith and credit to Rede’s confirmed Brazilian reorganization plan. An ad hoc group of noteholders—who rejected the plan in Brazil but were crammed down—objected to the U.S. bankruptcy court’s recognition of Rede’s plan, arguing that the plan and Rede’s Brazilian reorganization proceeding were a “wholesale trampling of their rights that was conceived of and executed by the Brazilian government and rubberstamped by the Brazilian bankruptcy court.” The New York bankruptcy court granted the relief requested over the ad hoc group’s objection.
Chapter 15 Rewind

Posted 15 weeks 3 days ago

Because we couldn’t possibly top Judge Fisher’s opening line, we’re borrowing it for our introduction of In re Daniel W. Allen, Sr., a recent decision from the Third Circuit: “Although the facts of this case include details of money transfers and offshore asset protection trusts in sunny South Pacific locales, its ultimate resolution involves nothing more exotic than the interpretation of the Bankruptcy Code.” In Allen, the Third Circuit addressed Bankruptcy Code provisions defining “property of the estate” and determined what is required for a trustee to “recover” property that has been fraudulently transferred. The court also considered some interesting questions regarding subject matter jurisdiction along the way.
I’m About to Give You All of My Money and All I’m Asking in Return Is . . . Reasonably Equivalent Value.

Posted 15 weeks 4 days ago

Regardless of whether a creditor has a claim identified in a debtor’s schedules of assets and liabilities, generally speaking, most attorneys representing creditors in the context of a chapter 11 case will advise their clients to file a formal proof of claim with the bankruptcy court.  Often this is just “belts and suspenders” and a matter of good practice but, if nothing else, a formal proof of claim will serve to protect a creditor’s rights and interests vis à vis the estate. In many cases, however, some creditors, for whatever reason, either forget or simply fail to file a proof of claim prior to the expiration of the bar date. Although the usual effect would be that the claim would be barred against the estate, a recent decision out of the United States Bankruptcy Court for the District of Idaho shows that all may not be lost because another document prepared by the creditor (there, a declaration submitted to the United States Trustee) may serve as an effective “informal proof of claim.”   

Posted 15 weeks 5 days ago