Author Archives: Michael Klein

Circuit Court Affirms Bankruptcy Court’s Broad Discretion to Re-Value Collateral in Determining Creditor’s Entitlement to Post-Petition Interest

The First Circuit held in a recent decision that bankruptcy courts have wide discretion to apply a flexible approach when valuing (and potentially re-valuing) collateral for purposes of determining whether a secured creditor is oversecured and therefore entitled to receive postpetition interest pursuant to section 506(b) of the Bankruptcy Code.    Continue reading

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Delaware Bankruptcy Court Denies Derivative Standing to Creditor Seeking Recharacterization

A recent decision by Judge Shannon of the U.S. Bankruptcy Court in Delaware, In re Optim Energy, LLC, et al., No. 14-10262 (BLS) (Bankr. D. Del. May 13, 2014), highlights a shift in Delaware recharacterization jurisprudence. Continue reading

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Court Rejects Effort to Transfer Venue of Energy Future Holdings Bankruptcy From Delaware to Texas

In a ruling yesterday, Judge Christopher Sontchi of the United State Bankruptcy Court for the District of Delaware denied a motion by a bond trustee to transfer venue of the Dallas-based Energy Future Holdings from Wilmington, Delaware to the Northern District of Texas, citing broad support from many creditors for keeping the case before the Delaware court.

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Virginia Bankruptcy Court Applies Fisker to Limit Lender’s Credit Bid

Three months ago, the U.S. District Court in Delaware upheld the bankruptcy court’s decision in In re Fisker Auto. Holdings, Inc., which limited, for “cause,” the amount that the purchaser of a secured lender’s claim could credit bid in connection with an asset sale under section 363 of the Bankruptcy Code. Last month, another bankruptcy court – this time in Virginia – followed suit under closely analogous circumstances.  Continue reading

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District Court Strikes Down Plan Provision Providing for Payment of Individual Committee Member Professional Fees

The District Court for the Southern District of New York recently issued an opinion in Davis v. Elliot Management Corp. (In re Lehman Brothers Holdings Inc.), 2014 U.S. Dist. LEXIS 48102 (S.D.N.Y. Mar. 31, 2014) that will have important implications for individual members of official creditor committees in future cases.  Continue reading

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Recent Decision Underscores Difference in Treatment of Landlord Claims Arising Under Section 503(b) versus 365(d)(3)

In past print editions of Absolute Priority, we regularly reported on developments concerning the application of Bankruptcy Code provisions to the rights of landlords that lease non-residential real property to debtors operating in Chapter 11.  While these discussions typically focused on the treatment of a debtor’s rental obligations (and in particular, so-called “stub rent” owed by a debtor for the period beginning on the day that the bankruptcy petition is filed through the end of the month), considerable non-rental charges can also accrue under a lease on a postpetition basis.  It is not always clear under the Bankruptcy Code whether these charges should be entitled to administrative priority over general unsecured claims.  Continue reading

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Bankruptcy Judge Criticizes Bankruptcy Code Section 546(e)

The House Judiciary Subcommittee on Regulatory Reform, Commercial, and Antitrust Law recently held hearings regarding certain provisions of the Bankruptcy Code, including the safe harbor from preference and fraudulent conveyance claims for “settlement payments.” Continue reading

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8th Circuit Expands Application of New Value Defense in Preference Actions

On March 20, 2014, the Court of Appeals for the Eighth Circuit issued an important decision in Stoebner v. San Diego Gas & Electric Co. (In re LGI Energy Solutions Inc.), No. 12-3899, Slip Op. (8th Cir. Mar. 20, 2014) that expands the scope of the “subsequent new value” defense in lawsuits seeking to clawback alleged preference payments. Continue reading

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Spain Reforms Bankruptcy Law to Facilitate Restructurings

On March 7, the Spanish government reformed its bankruptcy law to encourage companies to restructure their debt and avoid liquidation. The decree is one part of an ongoing reform program intended to strengthen and stabilize the Spanish financial sector.  The reforms provide stronger incentives for lenders to accept write-offs, maturity extensions, and debt forgiveness for struggling companies. The new rules also reduce the majority of creditors needed to vote for a restructuring.   Continue reading

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