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The General Growth Properties Bankruptcy and the Future of Securitizations
Do the recent rulings in the General Growth Properties bankruptcy spell doom for equipment debt securitizations? Not necessarily so, according to the recent rulings of Southern District of New York Bankruptcy Judge Allan Gropper in the $27 billion General Growth Properties Chapter 11 bankruptcy ' at least with respect to the issue of substantive consolidation. Judge Gropper's denial of motions to dismiss certain solvent special purpose entity (“SPE”) subsidiaries from the General Growth Properties bankruptcy confirms, however, that creditors of a solvent “bankruptcy remote” SPE should not assume that the SPE's “independent” director or manager will refrain from putting the SPE into bankruptcy when its parent also files. In denying the motions to dismiss, Judge Gropper ruled that the managers of the SPEs, including the independent managers, were within their rights and breached no law or duty when they decided to cause the SPEs to file for bankruptcy along with their parents, General Growth Properties, Inc. and General Growth Properties LP (“General Growth”), and nearly 400 of their affiliated companies. He made it clear in his published opinion, however, that permitting the solvent SPEs to remain in bankruptcy does not mean that they will be substantively consolidated with their affiliates.
Judge Gropper's ruling on the motions to dismiss and his prior approval of debtor-in-possession (“DIP”) financing allowing General Growth access to cash collateral generated by subsidiary SPE assets and pledged to the SPEs' lenders has sent shock waves through the debt securitization and structured finance markets. While not necessarily killing off those markets, the General Growth Properties rulings will have a direct effect on the way rating agencies, lenders, underwriters, and other creditors view traditional bankruptcy remote structures in equipment, as well as real property financings, particularly with respect to two of the basic tenets of securitizations and structured debt: 1) the owner of the securitized assets or collateral will remain out of reach of the equitable powers of a bankruptcy court, and 2) such assets will not be used to support the bankruptcy estate of such owner's parent.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
The DOJ's New Parameters for Evaluating Corporate Compliance Programs
The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.
Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
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.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.