Everyone, including the least empathic in our society (aka, lawyers), knows that we should seek to uphold the golden rule and “do unto others…” with respect to family, friends, and acquaintances, but does this also apply in the corporate world? Apparently so, as a Delaware bankruptcy court just ruled that preferred shareholders with a bankruptcy-filing … Continue Reading
A recent decision out of the District Court for the Southern District of New York may bring greater certainty to the interpretation of what constitutes a “financial institution” in connection with the safe harbor in section 546(e) of the bankruptcy code. The decision, In re Tribune Fraudulent Conveyance Litig., 2019 U.S. Dist. Lexis 69081 (S.D.N.Y. … Continue Reading
Note: This was republished on June 6, 2019 to reflect factual updates. Sutton 58 Associates LLC v. Pilevsky et al., is a New York case which gets to the heart of the enforceability of classic single-purpose entity restrictions in commercial real estate lending. At issue is how far a third-party may go to cause a … Continue Reading
Last year, a California Bankruptcy Court wiped out $10.2 million in default interest (“DRI”) when it ruled that a 5% DRI was an unenforceable penalty in a Chapter 11 bankruptcy case where the construction lender fully recovered principal, interest, and other costs of collection. In acting as the borrower’s fairy godmother, the Court noted that … Continue Reading
The doctrine of substantive consolidation (generally- the power of a bankruptcy court to consolidate the assets and liabilities of affiliated entities in bankruptcy) is a recognized remedy exercised by bankruptcy courts – one that strikes fear into the hearts of many lenders. Justifiably so. The doctrine can be employed to order the substantive consolidation of … Continue Reading
This is all about the difficulty of taking the punch bowl away from a roaring good party. Over the past several weeks a number of major banks folded under enormous pressure from the US DOJ to settle fraud claims resulting from the sale of bonds prior to the financial crisis of 2008. The allegations here … Continue Reading
An overvalued property may now have a bigger impact on a secured creditor’s bottom-line during bankruptcy. Splitting with the Seventh Circuit, the Fifth Circuit in Southwest Securities, FSB v. Segner (In the Matter of Domistyle, Inc.), 2015 WL 9487732, held that a bankruptcy trustee may surcharge its expenses for maintaining a property even before moving … Continue Reading
What happens when a debtor, whose loan is pooled and securitized, files for bankruptcy? Are payments made to investors recoverable as fraudulent transfers or preferences? Until recently, no published court opinion addressed this issue. However, in what is sure to be welcome news for investors in securitization vehicles, late last month, a Bankruptcy Court in … Continue Reading
Just when you thought we were out of the housing crisis weeds of ’07—think again. Apparently when an abundance of people buy homes they can’t afford and predictably fall behind on their payments, the judicial foreclosure process becomes log-jammed. Enter our latest housing crisis nemesis: the statute of limitations. Lenders must generally file a foreclosure … Continue Reading
In Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 575 U. S. ____ (2015), the Supreme Court clarified issuer liability under §11 of the Securities Act. Section 11 provides that issuers are liable for registration statements that contain “an untrue statement of a material fact or omit to state a material fact required … Continue Reading
Never a dull moment. We at Crunched Credit are probably guilty of excess and perhaps myopic focus on our federal government and its regulatory apparatus; it is such a consistently reliable source of commentary and outrage. So here’s one out of left field, but no less important for that. … Continue Reading
Typically, from deal to deal, I don’t (and can’t imagine many of my colleagues do) get too worked up about Article 9 of the UCC…I know what it says, I know what to do, especially when it comes to creating and perfecting creditors’ security interests in collateral. But this year, I have reason to pause, … Continue Reading
A recent decision out of the Bankruptcy Court for the Northern District of New York has brought greater certainty to the interpretation of what qualifies as an “interest” when determining the scope of a Section 363(f) “free and clear” sale in bankruptcy. The decision in In re Tougher Industries, Inc. became the latest in a … Continue Reading
Last October, I wrote about a scheme employed, in three separate bankruptcy cases, by debtors seeking to evade the absolute priority rule in order to keep the real property owned by the debtor in the hands of the ‘family’ at the expense of the debtors’ creditors.… Continue Reading
This is about bad law in the bankruptcy courts, but let us instructively begin with Charlie Brown. Bear with me. Everyone knows the classic Peanuts comic strip, which features the running joke of Lucy and Charlie Brown playing football – Charlie Brown goes to kick the football, only to have Lucy pull it away at … Continue Reading
May a Chapter 11 plan permit a debtor to auction property free and clear of a creditor’s lien while preventing that creditor from credit-bidding the amount of its debt? A question that split the U.S. Circuit Courts was settled when earlier this week the Supreme Court came out 8-0 on the side of the secured … Continue Reading
Recently, the Ninth Circuit Court of Appeals brought smiles to the faces of many lenders (especially Bank of America, the appellee and secured lender) when it refused to combine the assets of related debtors without a substantive consolidation order and held that a single asset real estate debtor will be treated as a single asset real … Continue Reading
For those of us with a rooting interest in Sunday’s festivities, it’s been a long two weeks. By Superbowl Saturday, Coach Belichick’s game plan will be set, the Material Girl’s setlist will be planned and the most famous ankle since Curt’s Bloody Sock will (hopefully) be mended, and it is with that in mind that … Continue Reading
