Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Claims Trading Restrictions Dealt Setback

By Todd A. Feinsmith and John C. Elstad

In recent years, debtors in large corporate bankruptcies have sometimes sought and obtained, in varying degrees, authority at the outset of bankruptcy cases for severe restrictions on trading in claims against the debtors by substantial claimholders. These restrictions have included prohibitions against trading absent consent of the debtor, forced consent to a debtor-ordered 'sell down' of debt securities later in the case and deprivation of the right to participate meaningfully in plan formulation and negotiation (no matter how large one's holdings might be). The purported purpose of these restrictions has been to preserve the debtor's ability to deduct its past net operating losses (NOLs) from future revenues. In practice, however, these debt-trading orders have chilled the market for trading in debt securities and served to entrench existing management by effectively precluding substantial investors from acquiring meaningful positions in the debtor's debt securities.

Recently, in the Dana Corp. et al. case (Case No. 06-10354 Bankr. S.D.N.Y.), creditors fought back and won a substantial victory. The claims trading order entered in the Dana case dramatically limited the debtors' interference in claims trading. In the future, creditors should rely on the example set in the Dana case to resist any attempt to impose claims trading restrictions at the outset of bankruptcy cases.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs Image

A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.

Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Blockchain Domains: New Developments for Brand Owners Image

Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.

Coverage Issues Stemming from Dry Cleaner Contamination Suits Image

In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.