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Plan support agreements are often an essential component of a successful complex Chapter 11 reorganization and provide a framework for a debtor’s financial restructuring. These agreements have increasingly been used to induce core groups of major lenders and bondholders to support a debtor’s restructuring in return for enhanced recoveries. In re Peabody Energy, 933 F.3d 918 (8th Cir. 2019). Recently, the U.S. Court of Appeals for the Eighth Circuit in the Peabody Chapter 11 cases affirmed confirmation of a plan of reorganization built around a plan support agreement that afforded certain noteholders party to the agreement the exclusive right to purchase a disproportionate amount of the equity in reorganized Peabody sold pursuant to the plan. A group of non-signatory bondholders (the ad hoc group) had objected and argued that the right to participate in the in the new equity raise was not offered on the same terms to all bondholders, thereby rendering the plan unconfirmable under the U.S. Bankruptcy Code.
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Seventh Circuit Applies Safe Harbor to Private Securities Transaction
By Michael L. Cook
“… [T]he term ‘securities contract’ as used in [Bankruptcy Code] §546(e) unambiguously includes contracts involving privately held securities,” The Seventh Circuit held in Petr v. BMO Harris Bank, N.A.
By Lawrence J. Kotler and Elisa Hyder
In Lafferty v. Off-Spec Solutions, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit held that the discharge exceptions under Section 523(a) do not apply to corporate debtors under Subchapter V of Chapter 11 of the Bankruptcy Code.
Merchant Cash Advances Could Be More Trouble Than They’re Worth
By Joseph Pack and Jessey Krehl
As small-business owners have continued to struggle in an uncertain economy, a growing number have begun the dangerous practice of relying on merchant cash advances — essentially seeking financial shelter in a lion’s den.
Biotech Industry Bankruptcy Case Update: ‘Zymergen’ and ‘Humanigen’
By Edward E. Neiger, Marianna Udem and Joo Hee Park
This Bankruptcy Case Update focuses on the recent biotech industry bankruptcy cases of Zymergen and Humanigen.