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Consider the following: a lender and manufacturer enter into an inventory financing program for dealers of the manufacturer’s products. Pursuant to the agreement reached between the manufacturer and the lender, the lender agrees to finance the purchase of more than $100 million worth of the manufacturer’s products by various dealers, which will then sell the products to commercial and consumer third parties (depending on the type of products). The manufacturer begins experiencing supply chain issues, increases in its production costs and workforce shortages brought on by a global pandemic. The manufacturer seeks relief from its financial pressures by filing a Chapter 11 bankruptcy petition and, after filing, contends that the lender must continue to perform under the inventory financing program agreement by making loans to the dealers, notwithstanding the manufacturer’s material covenant defaults and significant uncertainty about the manufacturer’s future viability, including its ability to honor warranties for the purchased inventory.
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Delaware District Court Could Guide Supreme Court Purdue Pharma Decision
By Michael L. Cook
A bankruptcy court properly held that derivative claims based on “piercing the corporate veil theory of liability [were] released under” a confirmed reorganization plan, but that direct “claims for negligent undertaking” were not released and “could be asserted” in state court against the debtors’ equity sponsors.
Court Caps Landlord's Bankruptcy Claim Against Lease Guarantor
By Andrew C. Kassner and Joseph N. Argentina Jr.
A big issue in real estate and retail bankruptcies, among others, involves the disposition of commercial real estate leases, given the potential magnitude of landlord damage claims under state law resulting from a tenant’s default under a long-term lease.
Delaware Bankruptcy Court Rejects Equity Holder's Challenge to Revoke Confirmation Order
By Lawrence J. Kotler
The equity owner asserted that the confirmation order previously entered by the court should be revoked based on the equity owner’s claim that value was lost due to improper sale and marketing efforts by the debtors and its professionals both pre- and post-bankruptcy and, as such, they should have been “in the money” and entitled to a distribution under the confirmed plan.
By George Williams
One of the major catalysts of the “Crypto Winter” that began in 2022 was the collapse of Terraform Labs’s native token LUNA in May 2022. Now two years and a dozen crypto-related bankruptcies later, Terraform Labs has filed for Chapter 11 protection.
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