The Texas Two-Step is Alive and Well
See a related update, published Feb. 16, 2023. In re LTL Mgmt. LLC, No. 21-30589 (MBK) [Docket No. 1572] (Bankr. D.N.J. 2021) Other than being a dance, what is the Texas Two-Step, in terms of corporate mergers? The “Texas Two-Step” has proved to be a lifeline allowing companies to [...]
Capped Landlord Claim Could Become a Non-Dischargeable Claim
re: Wigley v. Lariat Cos. (In re Wigley), No. 20-3132 (8th Cir. Oct. 18, 2021). The Bankruptcy Code provides for a statutory cap on a landlord’s claims against a tenant arising from a lease rejection in bankruptcy. But subject to certain exceptions, that only applies to claims that result [...]
A Guide on How to Avoid a Clawback of a Settlement Payment of Securities
Discussing: Holliday v. Credit Suisse Securities (USA) LLC, No. 20-5404 (S.D.N.Y. Sept. 13, 2021) Subject to certain defenses, in a bankruptcy proceeding, transfers made to a creditor within 90 days of the transferor filing bankruptcy can be clawed back as a preference under the Bankruptcy Code. In addition, transfers [...]
Classifying Claims in a Plan of Reorganization – Creating an Accepting Class
Section 1122(a) of the Bankruptcy Code provides that “a plan may place a claim … in a particular class only if such claim … is substantially similar to the other claims … of such class.” Among other things, Section 1129(b) provides that to confirm a plan of reorganization the [...]
A Secured Creditor’s Right to Credit Bid in a Bankruptcy Sale
Generally speaking, when a debtor or trustee in bankruptcy seeks to sell certain assets, a secured creditor has a right to "credit bid" the secured portion of its claim. Section 363(k) of the Bankruptcy Code provides that a creditor with a lien on assets to be sold outside the [...]
Circumstances Justifying the Dischargeability of Student Loans Under the Bankruptcy Code
re: Homaidan v. Sallie Mae, Inc., et al., No. 20-1981 (2d Cir. July 15, 2021) Generally speaking, student loans are extremely difficult to discharge in bankruptcy even under dire circumstances when guaranteed by a government unit or a non-profit institution. In some cases, as much as bankruptcy judges have [...]
Recent Fifth Circuit Case Gives Lender Green Light to Change Management
The Fifth Circuit Court of Appeals recently upheld a lower court ruling permitting a lender to change management pursuant to a negotiated agreement notwithstanding the debtor’s allegation that it was only under duress that it permitted the lender to do so. As noted by the Fifth Circuit, [U]sing leverage [...]
Sales in Bankruptcy – No Stay, No Pay
Official Comm. v. Walker Cty. Hosp. Dist. (In re Walker County Hospital Corp.), No. 20-20575, 2021 U.S. App. LEXIS 20610 (5th Cir. July 12, 2021) The Fifth Circuit Court of Appeals recently reaffirmed the general rule that if an objecting party to a bankruptcy sale fails to seek a [...]
The Purpose of Special Purpose Entities
The American Bankruptcy Institute describes a Special Purpose Entity (SPE) as an entity formed concurrently with, or immediately prior to, the closing of a financing transaction…to isolate the financial assets from the potential bankruptcy estate of the original entity, the borrower, or originator. When a lender requires the creation [...]
A Recent Decision Recharacterizing Debt to Equity Under Delaware Law Could Have Far-Reaching Implication
A recent decision out of the Bankruptcy Court for the Southern District of New York1 interpreting Delaware law will probably impact other decisions throughout the country in light of the impact Delaware corporate law has in other jurisdictions. In re: Live Primary, LLC Insider investors loaned $6 million [...]
