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In June 2017, affiliated holders of the most senior class of notes in a CDO known as Taberna Preferred Funding IV, a CDO that held various issues of trust preferred securities known as TruPS, filed an involuntary petition under the Chapter 11 of the Bankruptcy Code. That noteholders did so on the purported ground that the CDO was in default and in need of immediate reorganization in order to preserve value. That justification, however, was a ruse, put forward by the noteholders in an attempt prematurely to force liquidation of all the CDO’s collateral in order to earn an extraordinary return at the expense of every other class of noteholders. The filing of the petition understandably prompted a group of junior noteholders, the collateral manager and an industry group vigorously to oppose the filing and to seek dismissal of the petition.
By Mark Page
Mission Product Holdings, Inc. v. Tempnology, LLC
The question is whether a debtor’s rejection of its agreement granting a license “terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.”
By Theresa A. Driscoll
With increasing frequency, Chapter 7 trustees are looking to insolvent parents as well as colleges and universities to avoid and recover for estate creditors payments made by insolvent debtors for the benefit of the debtors’ dependents. These cases are premised on the theory that the tuition payments being made by insolvent parents for the benefit of their children are avoidable as constructively fraudulent transfers because the parents do not receive reasonably equivalent value in exchange for the payment of such tuition. Courts are divided as to whether the payment of a child’s tuition provides reasonably equivalent value to the insolvent parents.
By Stephanie Lieb and Dana Robbins
In its recent opinion in Taggart v. Lorenzen, the Supreme Court decided that “[a] court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.” Although this standard appears to be new, it is more than a century old and “brings the old soil” from civil contempt with it.
By Michael L. Cook
A bankruptcy court decision recently detailed how courts applying Bankruptcy Code §303(i) can sanction creditors who “abuse … the power given to [them] … to file an involuntary bankruptcy petition.” The decision shows why the filing of an involuntary bankruptcy requires careful pre-filing legal judgment.