Bankruptcy

There are some indications that parties may in fact be using the threat of an examiner and its associated costs and complications as a source of leverage, although the jury is still out on the full impact of the FTX decision on examiner motion practice.

For more than six years there has been an ongoing debate regarding the enforceability of governance restrictions, whether blocking rights, golden shares and other provisions designed to manage access to bankruptcy relief. This year, another governance restriction was upheld in dismissing a bankruptcy filing by a debtor that failed to obtain the consent of the lender-approved independent manager as required by its LLC agreement.

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A critical trial in Johnson & Johnson’s talcum powder bankruptcy began on February 18, with several lawyers arguing to dismiss the Chapter 11 case and reject the $10 billion plan.

In In re Sears Holdings Corporation, the Second Circuit apparently ended a multi-year litigation by affirming the district court’s decision that the landlord’s appeal was “moot for lack of a remedy because, although [that] court [had properly] vacated the assignment and assumption of the lease …, the lease would not revert to [the landlord under Code] §365(d)(4), and that [the landlord] had no alternative remedy.”

This article discusses two situations where a lender received payments and later was forced to disgorge them. These opinions illustrate two of the ways the bankruptcy code can present significant risks to lenders even after the lender receives payments in accordance with loan agreements or even a court order.

The Chapter 11 filing statistics clearly show that New Jersey has emerged as a strong venue option. The question is why? The answer, we submit, is consistency and pragmatism.

The objections, filed ahead of a key hearing on whether to confirm the Chapter 11 plan, cite the Supreme Court’s decision in Harrington v. Purdue Pharma, which invalidated nonconsensual releases in the $6 billion bankruptcy plan granted to Purdue’s founders, the Sacklers.