Business Restructuring Review

In This Issue:

Eighth Circuit Expands Subsequent New Value Preference Defense in Cases Involving Three-Party Relationships
In Stoebner v. San Diego Gas & Electric Co. (In re LGI Energy Solutions, Inc.), 2014 BL 76796 (8th Cir. Mar. 20, 2014), the Eighth Circuit, in a matter of first impression, ruled that “new value” (either contemporaneous or subsequent) for purposes of section 547(c) of the Bankruptcy Code can be provided by an entity other than the transferee.

Fourth Circuit Weighs In on Good-Faith Defense to Avoidance of Fraudulent Transfer
In Gold v. First Tenn. Bank N.A. (In re Taneja), 2014 BL 47157 (4th Cir. Feb. 21, 2014), a Fourth Circuit panel ruled in a split decision that: (i) the same standard applies in assessing good faith under sections 548(c) and 550(b) of the Bankruptcy Code; and (ii) a transferee bank met its burden of demonstrating good faith without introducing evidence of standard practices in the mortgage warehousing industry.

In Brief: Debt Purchaser’s Credit Bid Limited Post-Fisker
In In re The Free Lance-Star Publishing Co. of Fredericksburg, Va., 2014 BL 103869 (Bankr. E.D. Va. Apr. 14, 2014), the court found “cause” under section 363(k) to limit a credit bid by an entity that purchased $39 million in face amount of debt with the intention of acquiring ownership of the debtors, which owned various radio stations and newspapers.

Taking Sides—Lyondell Limits the Use of the Section 546(e) Safe Harbor in Fraudulent Transfer Litigation
In Weisfelner v. Fund 1 (In re Lyondell Chem. Co.), 503 B.R. 348 (Bankr. S.D.N.Y. 2014), the court held that the “safe harbor” under section 546(e) of the Bankruptcy Code for settlement payments does not preclude claims brought by a chapter 11 plan litigation trustee under state law to avoid as fraudulent transfers pre-bankruptcy payments to shareholders in a leveraged buyout of the debtor. The court contributed to a split among the courts in the Southern District of New York, aligning itself with the district court in In re Tribune Co. Fraudulent Conveyance Litig., 499 B.R. 310 (S.D.N.Y. 2013), and against the district court in Whyte v. Barclays Bank PLC, 494 B.R. 196 (S.D.N.Y. 2013).

In Brief: Chapter 11 Plan Payment of Official Committee Members’ Legal Fees Disallowed Absent Showing of Substantial Contribution
In Davis v. Elliot Mgmt. Corp. (In re Lehman Bros. Holdings, Inc.), 2014 BL 92862 (S.D.N.Y. Mar. 31, 2014), vacating 487 B.R. 181 (Bankr. S.D.N.Y. 2013), the district court construed the lack of explicit authority in section 503(b) of the Bankruptcy Code to mean that the fees and expenses of individual official committee members may not be paid as administrative expenses and that, absent a showing of “substantial contribution,” such fees and expenses may not be paid pursuant to a chapter 11 plan.

Claims Traders Alert
In Meridian Sunrise Village, LLC v. NB Distressed Debt Investment Fund Ltd. (In re Meridian Sunrise Village, LLC), 2014 BL 62646 (W.D. Wash. Mar. 6, 2014), the court ruled that hedge funds which acquired syndicated bank debt after the borrower filed for chapter 11 protection were not “eligible assignees” under the loan agreement and therefore had no right to vote on a proposed chapter 11 plan.

Upcoming Conference(s)

On June 9, Jones Day’s Miami Office will host a conference entitled “OGX and OSX Reorganization Proceedings—Developments, Challenges, and Opportunities for Cross-Border Restructurings in Brazil.” The high-profile collapse of EBX’s oil and gas empire and the ensuing reorganization proceedings of OGX and OSX provide the backdrop for the panel’s discussion on Brazil’s new insolvency law, the challenges for creditors of Brazilian debtors, and how the OGX and OSX reorganization proceedings will provide additional color on what to expect in future domestic and cross-border Brazilian insolvency proceedings. The panelists will include Pedro A. Jimenez (Miami and New York), S. Wade Angus (New York and São Paulo), Marcello Hallake (São Paulo and New York), Marcos Leite de Castro (partner, Stocche Forbes), Luis de Lucio (managing director, Alvarez & Marsal), and Domingos Fernando Refinetti (partner, Stocche Forbes). For additional information, please contact Nikki Girard at ngirard@jonesday.com.