Business Restructuring Review | November–December 2020

In This Issue:

Cram-Down Chapter 11 Plan Need Not Strictly Enforce Subordination Agreement

In the latest chapter of more than a decade of contentious litigation surrounding the 2007 leveraged buyout and ensuing bankruptcy of media conglomerate Tribune Co. ("Tribune"), the U.S. Court of Appeals for the Third Circuit in In re Tribune Co., 972 F.3d 228 (3d Cir. 2020), affirmed lower court rulings that Tribune's 2012 chapter 11 plan did not unfairly discriminate against senior noteholders who contended that their distributions were reduced because the plan improperly failed to strictly enforce pre-bankruptcy subordination agreements. [read more …] 

New Appellate Court Ruling on Priority of Straddle-Year Taxes in Bankruptcy

In In re Affirmative Ins. Holdings, Inc., 620 B.R. 73 (D. Del. 2020), the U.S. District Court for the District of Delaware ruled as a matter of apparent first impression at the appellate level that "straddle-year" corporate income taxes that become due during a bankruptcy case are entitled to administrative priority. In so ruling, the court reversed a bankruptcy court's adoption of the "bifurcation" approach to this issue, which can have a major impact on a company's chances for a successful reorganization. [read more …]

DIP Financing Agreement Initially Rejected as Sub Rosa Chapter 11 Plan

In In re LATAM Airlines Grp. S.A., 2020 WL 5506407 (Bankr. S.D.N.Y. Sept. 10, 2020), the U.S. Bankruptcy Court for the Southern District of New York initially refused to approve a proposed financing agreement involving insider shareholders, finding that the agreement was a prohibited "sub rosa" chapter 11 plan because it provided that the debtor could elect to repay the shareholder loan with discounted stock in lieu of cash and effectively prevented confirmation of any plan other than the debtor's. However, after the parties modified the financing agreement to remove the equity election feature, the bankruptcy court approved it. [read more …]

New York's Highest Court Upholds Minority Noteholders' Rights Under Trust Indenture Act

In CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc., 2020 WL 6163305 (N.Y. Oct. 22, 2020), the New York Court of Appeals reversed the courts below to rule that the actions of the majority noteholders and an indenture trustee to foreclose on collateral, as expressly authorized under the indenture and a collateral trust agreement, did not override the individual noteholder's legal right to payment or suit under the "consent" provision of the indenture based on Section 316(b) of the Trustee Indenture Act of 1939. [read more …]

Tenth Circuit BAP: Bankruptcy Courts Have Exclusive Jurisdiction to Determine Whether Claims Are Estate Property

In Hafen v. Adams (In re Hafen), 616 B.R. 570 (B.A.P. 10th Cir. 2020), a bankruptcy appellate panel from the Tenth Circuit ("BAP") held that the bankruptcy court is the only court with subject matter jurisdiction to decide whether a claim or cause of action is property of a debtor's bankruptcy estate. As a consequence, the BAP held that the bankruptcy court abused its discretion by permitting a state court to determine whether creditors had "standing" to sue third-party recipients of allegedly fraudulent transfers. The decision illustrates the distinction between "bankruptcy standing" and "constitutional standing" to sue in federal courts. [read more …]

New York District Court Expands the Scope of the Bankruptcy Safe Harbor for LBO Payments

In In re Nine W. LBO Sec. Litig., 2020 WL 5049621 (S.D.N.Y. Aug. 27, 2020), appeal filed, 20-3290 (2d Cir. Sept. 25, 2020), the U.S. District Court for the Southern District of New York dismissed $1.1 billion in fraudulent transfer and unjust enrichment claims brought by a chapter 11 plan litigation trustee and an indenture trustee against shareholders, officers, and directors of women's clothing retailer Nine West Holding Inc. The court ruled that the payments were protected by the section 546(e) safe harbor because they were made by a bank acting as Nine West's agent. [read more …] 

First Impressions: Tenth Circuit BAP Rules that Section 364 of the Bankruptcy Code Does Not Apply to Chapter 11 Exit Financing

In GPIF Aspen Club LLC v. Aspen Club Spa LLC (In re Aspen Club Spa LLC), 2020 WL 4251761 (B.A.P. 10th Cir. July 24, 2020), a divided Tenth Circuit bankruptcy appellate panel ruled that section 364(d)(1) of the Bankruptcy Code could not be used to approve chapter 11 plan exit financing that primed the liens of an existing secured lender, and remanded the case to the bankruptcy court to determine whether the cram-down plan provided the primed lender with the "indubitable equivalent" of its secured claim. [read more …] 

Tenth Circuit: Bankruptcy Trustee May Recover Only the Actual Property (Not Proceeds) Fraudulently Transferred to Subsequent Transferees

In Rajala v. Spencer Fane LLP (In re Generation Resources Holding Co.), 964 F.3d 958 (10th Cir. 2020), reh'g denied, No. 19-3226 (10th Cir. Aug. 24, 2020), the U.S. Court of Appeals for the Tenth Circuit held that, according to the plain language of section 550(a) of the Bankruptcy Code, a recipient of proceeds traceable to fraudulently transferred property does not qualify as a "transferee" because the recipient does not possess the fraudulently transferred property itself. [read more …]

Legislative Update: New Dutch Restructuring Law Enacted

On October 6, 2020, the Dutch Senate approved long-anticipated restructuring legislation allowing for court confirmation of extrajudicial restructuring plans. [read more …]


Jones Day received a National Tier 1 ranking for its "Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization Law" and "Litigation-Bankruptcy" practices in the 2021 U.S. News - Best Lawyers® "Best Law Firms" list published jointly by U.S. News and World Report and Best Lawyers®.

Ben Larkin (London), Kay Morley (London),and Sion Richards (London) were named "Leaders in Their Field" for Restructuring/Insolvency by Chambers UK 2021.

Corinne Ball (New York) received the 2020 Lifetime Achievement Award from the New York Law Journal for making "an impact on the legal community and the practice of law over an entire career." The NYLJ featured the 2020 recipients in its Professional Excellence Magazine. Ms. Ball has nearly 40 years of experience in business finance and restructuring, with a focus on complex corporate reorganizations and distressed acquisitions. She co-leads the New York Office of Jones Day's Business Restructuring & Reorganization Practice and leads the Firm's European Distress Investing and Alternative Capital Initiatives. She also leads the Firm's distressed M&A efforts and is the featured "Distress M&A" columnist for the NYLJ.

Ben Larkin (London) was named to the Legal 500 Hall of Fame in the 2021 edition of The Legal 500 United Kingdom guide in the practice area "Finance–Corporate restructuring and insolvency."

Corinne Ball (New York), Todd R. Geremia (New York; Issues & Appeals), Ben Rosenblum (New York), Andrew M. Butler (New York), and Benjamin J. Thomson (New York) are representing the Roman Catholic Diocese of Rockville Centre, New York, in connection with its October 1, 2020, chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of New York.

An article written by Mark G. Douglas (New York) titled "Oversecured Creditor's Right to Contractual Default-Rate Interest Allowed Under State Law" was posted on the September 29, 2020, Harvard Law School Bankruptcy Roundtable.

An article written by Daniel J. Merrett (Atlanta) and Mark G. Douglas (New York) titled "Another Bankruptcy Court Rules that a Traded Claim Can Be Disallowed if the Seller Received a Voidable Transfer" was published in the November 6, 2020, edition of the International Law Office Newsletter.

An article written by Mark G. Douglas (New York) titled "Cram-Up Chapter 11 Plans: Reinstatement and Indubitable Equivalence" was published in the October 23, 2020, edition of the International Law Office Newsletter

An article written by Dan T. Moss (Washington) and Mark G. Douglas (New York) titled "Creditors' Committee Denied Standing to Bring Derivative Claims on Behalf of LLC Debtor in Bankruptcy" was published in the October 30, 2020, edition of the International Law Office Newsletter

An article written by Paul M. Green (Houston) and Mark G. Douglas (New York) titled "Secured Creditor's 'Net Economic Damages' Estimate of Disputed Claims 'Plainly Insufficient' to Establish Collateral Value" was posted on the September 8, 2020, Harvard Law School Bankruptcy Roundtable.

An article written by Corinne Ball (New York) titled "Bankruptcy Court Denies Proposed DIP Financing Despite Entire Fairness of Process and Price" was published in the October 21, 2020, edition of the New York Law Journal.

An article written by Charles M. Oellermann (Columbus) and Mark G. Douglas (New York) titled "Flip-Clause Payments to Lehman Brothers Noteholders After Termination of Swap Agreement Safe Harboured in Bankruptcy" was published in the October 16, 2020, edition of the International Law Office Newsletter.

An article written by Timothy Hoffmann (Chicago) and Mark G. Douglas (New York) titled "Assets May Be Sold in Bankruptcy Free and Clear of Successor Liability" was published in the September 4, 2020, edition of the International Law Office Newsletter.

Insights by Jones Day should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request permission to reprint or reuse any of our Insights, please use our “Contact Us” form, which can be found on our website at This Insight is not intended to create, and neither publication nor receipt of it constitutes, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.