The United States Court of Appeals for the Seventh Circuit held that payments made by a debtor’s customers to its lender converting a pre-petition loan to a post-petition loan constituted
Continue Reading Increase in Regulatory Expense for Debtor-In-Possession Revolving Credit Facilities
Robert Sahyan
Lenders Cannot Prevent Borrowers From Filing Bankruptcy By Owning Minority Equity With Veto Power Over Borrower’s Decision To File Bankruptcy
In a recent decision, the U.S. Bankruptcy Court for the District of Delaware refused to enforce a provision in the debtor’s LLC operating agreement requiring a unanimous vote of the debtor’s members to authorize the debtor to file for bankruptcy. In re Intervention Energy Holdings, LLC, et al., 2016 Bankr. LEXIS 2241 (Bankr. D. Del. June 3, 2016). The provision at issue required the consent of all the debtor’s LLC members to file for bankruptcy, including the consent of a member that was a secured creditor holding one unit of ownership in the debtor’s LLC which it bargained for and received pursuant to a forbearance agreement. In refusing to dismiss the debtor’s bankruptcy case, the Court concluded that such an arrangement giving the secured lender a so-called “golden share” was “tantamount to an absolute waiver” of the debtor’s right to seek bankruptcy protection and therefore void as a matter of federal public policy.
Continue Reading Lenders Cannot Prevent Borrowers From Filing Bankruptcy By Owning Minority Equity With Veto Power Over Borrower’s Decision To File Bankruptcy
When Goods Are Shipped from Overseas, When Are They Considered “Received by the Debtor” for Purposes of Asserting a Section 503(b)(9) Administrative Claim?
A bankruptcy court in Pennsylvania recently held that trade creditors who supplied goods to a debtor prior to its bankruptcy filing were not entitled to administrative priority status under Bankruptcy Code section 503(b)(9) because the goods were “received by the debtor” at the time they were placed on the vessel at the port overseas more than 20 days before the debtor’s bankruptcy filing, although the debtor took possession of the goods within the 20 day period. In re World Imports, Ltd. — B.R. —-, 2014 WL 2750258 (Bankr. E.D. Pa., June 18, 2014).
Continue Reading When Goods Are Shipped from Overseas, When Are They Considered “Received by the Debtor” for Purposes of Asserting a Section 503(b)(9) Administrative Claim?
The Ninth Circuit Holds that Bankruptcy Courts Have Authority to Recharacterize Debt as Equity
On April 30, 2013, the United States Court of Appeals for the Ninth Circuit held that the bankruptcy court has authority to recharacterize as equity, rather than debt, advances of funds made purportedly as a loan to the recipient prior to its bankruptcy. In re Fitness Holdings International, Inc., — F.3d —-, 2013 WL 1800000 (9th Cir. 2013). The Ninth Circuit, in reversing the district court, held that the fact that the same result of recharacterization can be obtained through the statutory remedy of equitable subordination under section 510 of the Bankruptcy Code does not deprive the bankruptcy court of the authority to employ the separate and distinct remedy of recharacterization.
Continue Reading The Ninth Circuit Holds that Bankruptcy Courts Have Authority to Recharacterize Debt as Equity