BCLP Global Restructuring & Insolvency Developments

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Fifth Circuit Rules for PACA Claimants, and Weakens PACA, All in One Curious Ruling

Set of colored vegetables for kids

Most restructuring practitioners are aware, either vaguely or through punishing experience, of the power of PACA creditors.  PACA (or the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq. for those who hate brevity) requires that buyers of produce hold such produce – and their proceeds – in trust for the benefit of produce sellers.  General creditors of the produce buyer receive nothing, even if they hold a lien on the buyer’s assets, until produce sellers are paid in full on any valid PACA claims (including their interest and attorneys’ fees in most instances).

But sometimes, or many times, the PACA trust assets needed to pay produce sellers are not present.  Accounts must be collected, by use of employees, lawyers, collection agents, or

A Lender’s Federal Post-Judgment Interest Quandary

Post-judgment interest is not something most lenders consider when making a loan. In fact, it is not ordinarily the subject of significant analysis even when litigation becomes necessary.  Where the United States District Court is the preferred venue, however, parties easily can fall into the quandary of being stuck with the federal statutory post-judgment interest rate, which is currently less than 1% per annum.

Pre-judgment, a lender often has solid rights to contract interest and potentially very high default interest rates, which often approach double-digits, added to a recovery when a solvent obligor is on the other side. But a final judgment may be a game-changer on the rate of interest a lender is able to receive.  Recent circuit court decisions are developing the law on post-judgment interest in a way contrary to the economic recovery of contracting parties, and lenders in particular.  It may be possible, however, to draft

The Little Airline That Couldn’t

July 27, 2016

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The Little Airline That Couldn’t

July 27, 2016

Authored by: Clif Burns

Editor’s Note:  Our colleagues at Bryan Cave’s Export Law Blog, your one stop shop for helping clients navigate export matters, customs, cross-border, and all the daily evolutions in those practices, allowed us to cross-post this piece on the intricacies of Article 4A of the UCC (it covers funds transfers – we at the Bankruptcy Cave had to look it up!).  Anyone dealing with funds transfers (which is just about everyone) should read this great post.  

[Copyright © 2016 Clif Burns. All Rights Reserved.]

sabena

Remember Sabena, the ill-fated Belgian airline that declared bankruptcy in 2001?  Well, to quote Ford Madox Ford, this is the saddest story I have ever heard.

One of the things that Sabena did, other than fly people back and forth to Brussels, was to

Banks and Marketplace Lenders Absorb a Blow Under the Supreme Court’s Refusal to Hear Madden v. Midland Funding, LLC

July 21, 2016

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Editor’s Note:  Our great friends at BankBryanCave, one of the top blogs out there for banking, regulatory, financial institution M&A, and related banking matters, allowed us to cross-post this compelling post on the impact of  the Supreme Court’s denial of cert of the 2nd Circuit’s decision in Madden.  We think this is pretty important stuff, especially for parties in the consumer debt secondary market.  

In a blow to banks and the marketplace lending industry, on June 27, 2016, the U.S. Supreme Court denied the petition by Midland Funding to hear the case Midland Funding, LLC v. Madden (No. 15-610).  That case involves a debt-collection firm that bought charged-off credit card debt from a national bank.  The borrower’s legal team argued that a buyer of the debt was subject to New York interest rate caps even though the seller of the debt, a national bank, was exempt from those state law rate caps due

From Across the Pond – An Unsecured Creditor, Even with Contractual Rights Against the Secured Creditor, Cannot Enforce Common Law Duties on the Manner of Enforcement Against the Collateral

April 6, 2016

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Editor’s Note:  Our good London colleague Ed Marlow recently published this as a Bryan Cave client advisory.  When we Yanks saw it, we found it fascinating, not only based on the arcane facts, but also to realize that British tribunals struggle with the same things we do here in the States – whether (or how) to protect junior creditors which allege that a secured creditor did not maximize value in disposing of the collateral.  Different countries, same insolvency challenges!  Our sincere thanks to Ed for this analysis; for a introduction to how Bryan Cave can assist with your corporate trust matters in England, France, Germany, or other EU countries, please click here.

Summary and Holding:

Including an unsecured creditor in an agreed payments waterfall does not by itself confer on that unsecured creditor the benefit of a mortgagee’s usual duties on enforcement

Second Circuit Decision Reminds Us to Double-Check Documents

March 13, 2015

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Official Committee of Unsecured Creditors v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.), Appeal No. 13-2187 (2nd Cir. Jan. 21, 2015)

Second Circuit Decision Reminds Us to Double-Check Documents

In a decision that sent a shiver down the spine of attorneys and lenders alike, on January 21, 2015, the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) ruled that JPMorgan Chase Bank, N.A. (“JPMorgan”) had released its security interest on a $1.5 billion loan to General Motors (“GM”) by inadvertently filing a UCC-3 termination statement. The Second Circuit held that although JP Morgan and GM did not intend to terminate the security interest at issue, the termination was effective because JP Morgan authorized the filing of the UCC-3 termination statement.

In October 2001, GM entered into a synthetic lease financing transaction (“Synthetic Lease”), by which it obtained approximately $300 million in financing from a syndicate

A Look At Committee v. JP Morgan

By now, every secured lender and attorney that represents secured lenders should be familiar with the opinion from the Second Circuit Court of Appeals styled Official Committee of Unsecured Creditors of Motors Liquidation Company v. JP Morgan Chase Bank, N.A. (In Re Motors Liquidation Co.) Covered in articles with titles such as “JP Morgan Loses $1.5 Billion Feud with Creditors of GM Forerunner,”[1] the opinion sent a shock wave through the lending community. As our finance colleagues have rightly noted, this case is a stark reminder that best practices require transactional attorneys to “measure twice, cut once.”[2] However, the case also offers important lessons for workout and restructuring professionals, who are often in the position to correct documentation mistakes before a subsequent bankruptcy filing makes the mistakes devastatingly permanent.

Factual Background

To recap the Motors Liquidation/General Motors case, in September 2008, the lender and

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