Sharia law prohibits interest, naturally putting financial minds to work on how to build structures around this religious prohibition. But a recent ruling has found that such investment agreements do not qualify for safe harbor provisions of the bankruptcy code. Shmuel Vasser breaks down the 100 page long complex opinion concisely and clearly sharing with
Dechert OnPoint: Does Tribune Make Merit Management Obsolete?
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
Substantive Consolidation: It’s Alive and Well (or Maybe Just Alive)
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 related-debtor entities in bankruptcy and it can also be employed to substantively consolidate the assets of a debtor in bankruptcy with those of a related entity that is not a debtor in bankruptcy. Picture this: A parent entity files for bankruptcy and all the goodies are in a series of subsidiaries and the companies have never respected corporate niceties. The bankruptcy court presiding over the bankruptcy of the debtor-parent entity orders that the non-bankrupt SPE borrower will be dragged into bankruptcy and its assets used to satisfy the creditors of both the SPE borrower and the parent. Ta da.
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Bail-In, or Just Bailing?
You know, there’s never a dull moment when one reports on the regulatory states’ endless and so often fruitless and wrong-headed tinkering with the global economy. So now… let’s talk bail-in. The bail-in regime, which was adopted by all European Union countries (other than Poland) and implemented on January 1, 2016 (European Economic Area (EEA) members Norway, Iceland and Lichtenstein are required to adopt the regime by December 31, 2016), permits European financial regulators to “bail-in” a failing institution by cancelling, writing-down, or converting into equity certain of the institution’s unsecured liabilities. Affected institutions must include a contractual recognition clause in its non-European-law governed contracts, so that all counterparties acknowledge that the institution’s liabilities are potentially subject to bail-in and agree to be bound by them.
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Secured Creditors Beware: Overvalued Properties in Bankruptcy
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 to abandon the property.
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Grexit Deferred: The End of the Beginning for Greece?
For want of a baker, a job was lost. For want of a job, the economy was lost. For want of an economy, the banking system collapsed. For want of a banking system – well, ultimately Grexit.
Grexit, Grexit, Grexit, Grexit, Grexit, Grexit, (China), Grexit, Grexit. The Greeks will be fine, right? There is no such thing as contagion, right? Your lips to God’s ear, please. As I write this, the Greek Parliament has approved the bailout and it looks like an immediate Grexit is off the table, (although the Germans are none too pleased)! Wonderful.
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Section 546(e) Protects Two Tiered Securitization Structures
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
Dechert OnPoint: NDNY Bankruptcy Court’s Broad Interpretation of the Definition of “Interests” in 363 Sale
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
When Lenders are the Losers in Bankruptcy Court…Well, Not so Fast
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 When Lenders are the Losers in Bankruptcy Court…Well, Not so Fast
Fool Me Once…: When Lenders are the Losers in Bankruptcy Court
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 the last second, leaving Lucy laughing and Charlie Brown on his back. Every time, Lucy promises Charlie Brown that this time she will let him kick the ball. Charlie Brown, blithely ignoring the obvious, goes to kick the football. Lucy, of course, pulls the ball away again, every time.Continue Reading Fool Me Once…: When Lenders are the Losers in Bankruptcy Court
