As I’ve mentioned before, Kentucky law is quirky in many respects.  Unlike most states, Kentucky’s fraudulent transfer statute is essentially bespoke, adopting neither the Uniform Fraudulent Transfer Act or the Uniform Fraudulent Conveyance Act.  Kentucky’s Constitution requires that lawyers swear an oath that they’ve never participated in (or seconded) a duel.  Kentucky’s Constitution also adopts wholesale the common law in effect in Virginia on the day that Kentucky became a state.  While interesting, these are not likely to cause most commercial lawyers any alarm.

The Kentucky statute that ought to cause alarm, and which has created abundant litigation in Kentucky for regional or national creditors, is Kentucky’s statute regarding the enforceability of guaranty agreements.  To be valid, guaranty agreements in Kentucky must comport with KRS 371.065, which provides:

Creditors' Sidebar
(posted 2 days 12 hours ago)

International treaties take years to complete as it is, so imagine the complexities at play in a hypothetical international insolvency treaty.
But at least people are starting to talk about it.
On Friday, at the International Global Restructuring Organization’s annual conference in Modena, Italy, Chief New York Bankruptcy Judge Cecelia Morris will speak about the bankruptcy of the city of Detroit, insolvency risk in Puerto Rico and the ongoing problems in Argentina. Judge Morris told Bankruptcy Beat that while formal international insolvency agreements related to sovereign states may be a few years off, getting the restructuring experts in the same room as the financial players is a huge part of moving closer.
“Financial people want to know that they’re protected,” Judge Morris said.
The U.S. is of course a long way ahead of many countries in terms of corporate restructuring, and even has Chapter 15 of the Bankruptcy Code in place for foreign companies with U.S. interests. Educating people in other countries on working with a group of creditors, especially when politics are involved, can be difficult. Bankruptcy Beat
(posted 2 days 12 hours ago)
The Backstreet Boys perform during a concert at the City Hall in Vienna on July 15.
European Pressphoto Agency

The Backstreet Boys’ bankruptcy battle is over.
New court filings show the pop singers have settled their claims against their creator, Lou Pearlman, whose bankruptcy filing preceded the onetime music mogul’s arrest on fraud charges.
The Boys (all of whom are well over the age of 30) said Mr. Pearlman and his Trans Continental Records owed them roughly $3.5 million. As we previously reported, those claims were challenged last year by a bankruptcy trustee on the grounds that they lacked the necessary proof to back them up.
The fighting continued into this year when a bankruptcy judge ordered lawyers for the band and the trustee to work it out. And so they did, according to papers filed Tuesday in a Florida bankruptcy court. Bankruptcy Beat
(posted 2 days 13 hours ago)

The Volcker Rule's data-intensive requirements are creating headaches for banks that still rely on manual processes and use multiple, disparate systems for securities and different derivatives trading.

(posted 2 days 13 hours ago)

Authored by Scott J. Kennelly and Scott St. Amand and Scott J. Kennelly and Scott St. Amand of Rogers TowersThe advent of social media has brought about many changes in the world of litigation, not the least of which is the availability of information that previously would have been impossible to discover.  It is hardly an exaggeration that between Facebook, Instagram, Twitter and other social media platforms, millions of people post their every move online.  In fact, there are “apps,” such as Foursquare, that update a user’s location in real time.  With this potentially unlimited record of a litigant’s daily behavior, practitioners are chomping at the bit to acquire such information.
Because the discovery of social media in litigation is so new, there is limited case law on the subject.  As the case law emerges, however, one of the leading questions revolves around what information can be considered “public” and what information is “private”.  Is a Facebook post public if the user has selected privacy settings which allow only a limited group of friends to read the post or see his or her pictures?

Florida Banking Law Blog
(posted 2 days 13 hours ago)

24 companies have adopted fee-shifting bylaws since May, according to Professor John Coffee in his testimony before the SEC Investor Advisory Committee. Fee-shifting bylaws impose a “loser pays” rule that transfers a company’s costs and expenses in shareholder litigation to the plaintiff shareholder if the plaintiff is unsuccessful.  

(posted 2 days 13 hours ago)

Debt holder losses on defaulted debt were in line with Moody’s Investor Service predictions, a new analysis of hundreds of bankruptcies by the credit ratings agency showed. Read the Daily Bankruptcy Review article here.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
GT Advanced Technologies Inc. will stop making sapphire materials under its agreement with supplier Apple Inc., Reuters reports.
A Brazilian court accepted a request for bankruptcy by MMX Sudeste Mineracao SA, part of businessman Eike Batista’s mining company, The Wall Street Journal reports.
An expert said Detroit can survive after bankruptcy, but there are risks, Reuters reports. Bankruptcy Beat
(posted 2 days 14 hours ago)

Receiving Wide Coverage ...

New Mortgage Rules: Two Republicans on the Securities and Exchange Commission objected to relaxed mortgage rules, but the SEC approved the new rules regardless on Wednesday, as did the Federal Reserve and the Department of Housing and Urban Development. "Today's rule-making takes the untenable housing policy that injected irrational exuberance into mortgage lending and, as a result, caused a catastrophic financial crisis and chisels that failed policy into the stone tablets of...

(posted 2 days 14 hours ago)

The long awaited credit risk retention rules for securitization are out. The big question--whether the qualified residential mortgage or QRM exemption would be narrower than the CFPB's qualified mortgage or QM safe harbor to the Ability to Repay requirement for mortgages is no. QRM=QM. The short version is that the rule doesn't require meaningful credit risk retention where it counts, and imposes significant market-shaping safe-harbor requirements where skin in the game isn't so important.

The basic rule is that 5% credit risk must be retained, unhedged, by the securitization sponsor, either as a pro rata vertical slice of the deal or as a horizontal slice equal to 5% of the fair market value of the deal as of the closing date. But there are lots of exceptions: CMBS B-pieces suffice, Ginnie Maes, Fannie/Freddie (as long as they have "capital support form the United States" (they can still qualify with the QRM exception and other exceptions for multi-family even without US capital support), etc. Commercial loans, commercial mortgages, and auto loans all have their own QRM-type safe harbors.

In fact, as far as I can tell from a quick perusal of the rule, there is only a meaningful credit risk retention requirement without exemptions for (1) credit card securitization, (2) non-pass-through CDOs, and (3) auto and equipment leases and less common sorts of securitizations. Everything else has either a blanket safe harbor or a safe harbor provided that the underlying assets meet certain requirements.

Credit Slips
(posted 3 days 2 hours ago)

The American Bankruptcy Institute (ABI) will hold its Tenth Annual International Insolvency and Restructuring Symposium on Oct. 30-31 at The Savoy Hotel in London. The educational program has been developed to provide attendees with an interactive learning experience led by a faculty of prominent international insolvency practitioners, and attendees have the opportunity to earn up to 6/7 hours of CLE/ CPE hours of credit! Sessions at the Symposium will include:

  • America Now!
  • Judicial Forum
  • Eurozone Update 2014
  • Current Issues in International Restructuring
  • Cooperation in Cross-Border Cases: Has the Universalist Bubble Burst?

Click here to register.

(posted 3 days 4 hours ago)