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Section 510 of the Bankruptcy Code recognizes that agreements between creditors of a debtor that one creditor’s claim will be subordinated in payment to another creditor’s claim will be enforceable in a bankruptcy case. As is often the case, over the years bankruptcy and finance practitioners expanded the concept of payment subordination in these agreements to include many terms anticipating any and every action and right the subordinated creditor may take or have in the bankruptcy case. So what provisions in a subordination agreement can be enforced, and can the subordinated creditor participate in the reorganization process if there is no prospect it will receive any distribution as a result of being subordinated?
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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.
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