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Second Circuit Affirms Designation of Secured Lender's Vote and Effective Cram Down
The U.S. Court of Appeals for the Second Circuit, on Dec. 6, 2010, summarily affirmed a bankruptcy court's designation of a secured lender's vote on a reorganization plan in a two-page order, effectively enabling the debtor to cram down the lender's claim. In re DBSD North America, Inc., __ F.3d __, 2010 WL 4925878 (2d Cir. Dec. 6, 2010) (held, lower courts did not err in designating secured lender's vote, but “plan violated the absolute priority rule” in its treatment of a separate unsecured creditor). As a result, the secured lender who bought all of the debtor's senior first lien secured debt at par will be paid only interest over a period of four years before its loan matures. See In re DBSD North America, Inc., 419 B.R. 179, 207-08 (Bankr. S.D.N.Y. 2009) (confirming debtors' proposed plan). According to the Second Circuit, an “opinion” explaining its reasoning “will follow in due course.”
The DBSD ruling is important to would-be acquirers of Chapter 11 debtors. As shown below, a lender's so-called “loan to own” strategy may still be valid, but acquirers cannot overreach. Consistent with other decisions discussed below, DBSD means that a competitor's manipulating the reorganization process to block a reorganization or to destroy the debtor's business will not work.
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.
Law Firms are Reducing Redundant Real Estate by Bringing Support Services Back to the Office
A trend analysis of the benefits and challenges of bringing back administrative, word processing and billing services to law offices.
Bit Parts
Summary Judgment Denied Defendant in Declaratory Action by Producer of To Kill a Mockingbird Broadway Play Seeking Amateur Theatrical Rights
Risks of “Baseball Arbitration” in Resolving Real Estate Disputes
“Baseball arbitration” refers to the process used in Major League Baseball in which if an eligible player's representative and the club ownership cannot reach a compensation agreement through negotiation, each party enters a final submission and during a formal hearing each side — player and management — presents its case and then the designated panel of arbitrators chooses one of the salary bids with no other result being allowed. This method has become increasingly popular even beyond the sport of baseball.
One Overlooked Element of Executive Safety: Data Privacy
Executives have access to some of the company's most sensitive information, and they're increasingly being targeted by hackers looking to steal company secrets or to perpetrate cybercrimes.