All items from Restructuring Review Blog

Court Finds Investment Advisor’s Payments to Customers Are Not Exempt From Avoidance Under Section 546(e) of the Bankruptcy Code

FCStone, a New York-based commodities brokerage firm, was recently ordered to return a transfer of $15.6 million to the bankruptcy estate of Sentinel Management Group. Approximately $1.1 million of this amount constituted a prepetition transfer of proceeds the debtor obtained from the sale of securities, which proceeds the debtor distributed to a certain segment of its customers, including FCStone. Judge James B. Zagel of the United States District Court for the Northern District of Illinois in Grede v. FCStone LLC, No. 09 C 136, 2013 WL 68662 (N.D. Ill. 2013), determined that this prepetition transfer constituted a preference that was not protected under the safe harbor of section 546(e), which immunizes certain settled financial transactions from avoidance.
Continue reading →



From Restructuring Review Blog
Posted 10 weeks 2 days ago

Vitro Update: “Savings Clause” Fails to Save Vitro Subsidiaries From Involuntary Bankruptcy

Shortly after the U.S. Court of Appeals for the Fifth Circuit refused to enforce Vitro SAB’s Mexican plan of reorganization in the United States, Judge Harlin D. Hale of the U.S. Bankruptcy Court for the Northern District of Texas dealt another major blow to the embattled Mexican glassmaker by placing ten of its U.S.-based guarantor subsidiaries into involuntary bankruptcy at Vitro’s noteholders’ request. At a hearing on the involuntary petitions, the Vitro subsidiaries argued that a “savings clause” in the indenture governing the notes created a bona fide dispute as to the amount of the noteholders’ claims, and that creditors with disputed claims are not permitted to file involuntary petitions under Bankruptcy Code section 303. However, Judge Hale held that the savings clause at issue was designed to protect noteholders from attempts to void the subsidiaries’ guarantees as fraudulent transfers and could not be used to manufacture a disputed claim and invalidate an involuntary bankruptcy petition. This decision helps ensure that savings clauses, which appear in many indentures and credit agreements, serve their intended purpose—to protect lenders, rather than serve as a defense to involuntary bankruptcy or other creditor remedies. In re Vitro Asset Corp., et al., No. 11-32600-hdh-11 (Bankr. N.D. Tex. Dec. 4, 2012). Continue reading →



From Restructuring Review Blog
Posted 11 weeks 2 days ago

SDNY Denies Payment of Administrative Expense Claim by Relying on the Operative Document as a Whole and Rejecting a Statutory Rule of Construction

On December 13, 2012, Judge Vincent L. Briccetti from the United States District Court of the Southern District of New York denied the appellant Notes Trustee’s request to compel payment of an administrative expense claim. Upholding the bankruptcy court’s decision, Judge Briccetti ruled that rules of construction, such as the last antecedent rule, should not be applied because to do so would undermine the intent of the plan, and noted that such rules of construction “are less an ironclad rule than a guide to interpreting the [Plan], as are other interpretation guides and [are] subservient to the clearer meaning of the provision in the context of the entire agreement.” The case is Wilmington Trust Company v. The Great Atlantic & Pacific Tea Company, Inc., Case No. 12-CV-5969 (VB) (S.D.N.Y. Dec. 13, 2012). Continue reading →



From Restructuring Review Blog
Posted 11 weeks 4 days ago

Gaming Alert – New Jersey Governor Chris Christie Conditionally Supports Online Gambling – Boyd Gaming and Caesars Stocks Rally as a Result

On February 7, 2012, New Jersey Governor Chris Christie issued a conditional veto of a bill that would legalize online gambling in New Jersey, but indicated that he would approve the bill if a few changes were implemented, including an increase in the tax rate from 10% to 15% and the inclusion of a provision that would allow the legislature to reevaluate the bill after 10 years. The legislature is expected to promptly incorporate these revisions and resubmit the bill to Governor Christie in mid-March. This signifies a significant step forward for online gaming in New Jersey and throughout the U.S. Continue reading →



From Restructuring Review Blog
Posted 13 weeks 5 days ago

In re Hostess Brands, Inc.: Southern District of New York Bankruptcy Court Refuses to Send Cash Collateral Dispute to Arbitration

On January 7, 2013, the Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that a dispute concerning the debtors’ use of cash collateral was not subject to arbitration, notwithstanding a broad arbitration clause in the parties’ underlying agreement, because the decision to allow a debtor to use cash collateral constituted a “core” issue and was a fundamental aspect of the bankruptcy process. In re Hostess Brands, Inc., No. 12-22052 (RDD), 2013 WL 82914 (Bankr. S.D.N.Y. Jan. 7, 2013). Continue reading →



From Restructuring Review Blog
Posted 14 weeks 5 days ago

Stern v. Marshall Update – Ninth Circuit Holds That Bankruptcy Courts Lack Constitutional Authority To Finally Determine Fraudulent Transfer Claims Against Non-Claimants

On December 4, 2012, the United States Court of Appeals for the Ninth Circuit added to the growing body of case law delineating the extent of bankruptcy courts’ jurisdiction in the wake the Supreme Court’s decision in Stern v. Marshall. In In re Bellingham Insurance Agency, Inc., the Ninth Circuit held that (i) non-Article III courts lack the Constitutional authority to enter final judgments in fraudulent transfer actions against non-claimants, (ii) bankruptcy courts may hear and enter findings of fact and conclusions of law in fraudulent transfer actions, and (iii) a defendant may waive its Constitutional right to be heard before an Article III court. Continue reading →



From Restructuring Review Blog
Posted 16 weeks 2 days ago

Fifth Circuit Crafts New Test For Foreign Debtor Relief

On Nov. 28, 2012, the U.S. Court of Appeals for the Fifth Circuit in In re Vitro S.A.B. de C.V. issued a groundbreaking decision under Chapter 15 of the Bankruptcy Code, which provides the mechanics for U.S. bankruptcy courts to deal with cross-border insolvency proceedings. Although deference to judgments of foreign courts is the norm under Chapter 15, in this instance the Fifth Circuit refused to enforce a court-approved Mexican plan of reorganization on the ground that it contained non-consensual non-debtor releases of noteholders’ claims against the debtor’s non-debtor subsidiaries. Unlike the bankruptcy court below, the Fifth
Circuit did not hold that non-consensual nondebtor releases are “manifestly contrary” to U.S. public policy. Instead, the court held that such releases could theoretically be approved in Chapter 15 cases, but only upon a showing of the same type of “exceptional circumstances” that are deemed to justify such releases in U.S. based cases under Chapter 11.

The Fifth Circuit also developed an impressive new analytical framework for interpreting and reconciling the various provisions of Chapter 15. If adopted by courts in other jurisdictions, the Fifth Circuit’s systematic approach to the application of Chapter 15 could prove even more influential than the specific holdings of the case.

Continue reading →



From Restructuring Review Blog
Posted 17 weeks 5 days ago

UPDATE: Court Rejects CalPERS’ Efforts to Lift Stay In San Bernardino Case

In a ruling predicted by the Restructuring Review Blog last month, Judge Meredith A. Jury of the U.S. Bankruptcy Court for the Central District of California rejected arguments by CalPERS that the Bankruptcy Court should lift the automatic stay and … Continue reading →



From Restructuring Review Blog
Posted 19 weeks 3 days ago

2012 Year in Review – Part 2

To our readers:

From the Supreme Court weighing in on a chapter 11 case to Bankruptcy Court opinions that may profoundly impact venue selection, many important bankruptcy developments occurred in Restructuring Review’s inaugural year. Below is Part II in our first annual year-end list of the most significant decisions and developments in 2012. This list is presented chronologically. We’d love to hear your feedback as to what you think are the most important events of the year.

We appreciate you visiting Restructuring Review this year and look forward to providing you with frequent insight and analysis in 2013.

Best wishes for a happy and healthy holiday season.

Continue reading →



From Restructuring Review Blog
Posted 20 weeks 2 days ago

2012 Year In Review – Part 1

To our readers:

From the Supreme Court weighing in on a chapter 11 case to Bankruptcy Court opinions that may profoundly impact venue selection, many important bankruptcy developments occurred in Restructuring Review’s inaugural year. Below is Part I in our first annual year-end list of the most significant decisions and developments in 2012. Part II will be posted shortly. This list is presented chronologically. We’d love to hear your feedback as to what you think are the most important events of the year.

We appreciate you visiting Restructuring Review this year and look forward to providing you with frequent insight and analysis in 2013.

Best wishes for a happy and healthy holiday season. Continue reading →



From Restructuring Review Blog
Posted 21 weeks 1 day ago