Business Restructuring Review
In this issue:
- Delaware Bankruptcy Court Denies Debtors the Ability to Assume and Reject Individual Leases Under A Master Lease Agreement
Arecent ruling by a Delaware bankruptcy court indicates that a debtor’s discretion to assume or reject its unexpired leases may not exist in situations where an individual lease is part of a master agreement.
- Oversecured Creditor Entitled to Default Interest if Collateral Sold Under Section 363(b)
The Ninth Circuit held that a bankruptcy court erred by applying the Bankruptcy Code’s plan confirmation provisions in a situation where cure and reinstatement of the secured creditor’s debt were neither contemplated nor possible.
- Contract Rejection Claims Eligible for Setoff Under Section 553: Rejecting the Delta Approach
A Delaware bankruptcy court held that a claim arising from the rejection of a prepetition contract can be set off against the debtor’s prepetition obligation to the nondebtor party, repudiating a competing (and widely criticized) approach taken by a New York bankruptcy court.
- Ruling Confirming Primacy of Federal Bankruptcy Law Over State Law Prohibiting Assignment of Insurance Policies Good News for Chapter 11 Plan Asbestos Trusts
A Delaware bankruptcy court ruled that assignment of insurance policies to a chapter 11 plan asbestos trust was proper because the Bankruptcy Code preempts any contrary state law anti-assignment provisions.
- Absence of Actual Harm to Creditors Defeats Equitable Subordination Bid
The Fifth Circuit reversed an order equitably subordinating secured claims for the repayment of "eleventh hour" insider financing, holding that subordination was inappropriate, given the lack of any evidence that other creditors were injured in any way.