Handling the Non-Profit Workout/Bankruptcy
August 30, 2005
Last month, we discussed how to handle the non-profit workout/bankruptcy with an analysis of one of the largest not-for-profit bankruptcy cases even filed -- <i>In re: the National Benevolent Association of the Christian Church (Disciples of Christ) et al.</i>, (Bankr. W.D. Texas), Case No. 04-50948 (RBK). As we explained, the National Benevolent Association of the Christian Church (Disciples of Christ) (NBA) was founded in 1887 as a Missouri-based nonprofit corporation. Its mission was to provide services to disadvantaged families and others. Prior to bankruptcy, the NBA was the parent company of approximately 25 affiliated nonprofit entities that owned and operated 11 senior care facilities, four children's care centers, and three special care facilities in 12 states, among other things. We presented a great deal of analytical background on the nonprofit corporation and its path toward bankruptcy. This month, we discuss the bankruptcy case itself.
Ninth Circuit Ruling on Preference Avoidance Power
August 30, 2005
Last month, we discussed <i>Sherwood Partners, Inc., Assignee for the Benefit of Creditors of International Thinklink Corporation v. Lycos, Inc.</i>, 394 Fed11198 (9th Cir. 2005). In that case, the Ninth Circuit Court of Appeals, by a divided court, held that a state statute authorizing an assignee for the benefit of creditors to void a preferential transfer is preempted by the federal Bankruptcy Code. This month, we discuss the ruling in depth.
Collecting D&O Insurance Proceeds
August 30, 2005
In the race between a debtor and a third party to recover the proceeds of a directors' and officers' insurance policy (a "D&O Policy"), it is critical that the debtor employ the correct strategy for the applicable jurisdiction in order to enjoin its competitor from reaching the proceeds first. Choosing the wrong strategy could mean the difference between collecting tens of millions of dollars and obtaining a judgment not worth the paper upon which it is written. Indeed, the proceeds of the D&O Policy ("D&O Proceeds") may be the largest asset of the estate. As a result, a successful reorganization could depend upon filing in the right jurisdiction and implementing the correct litigation strategy.
Handling the Non-Profit Workout/Bankruptcy
July 27, 2005
On April 15, 2005, one of the largest not-for-profit bankruptcy cases ever filed, <i>In re: The National Benevolent Association of the Christian Church (Disciples of Christ) et al.</i>, (Bankr. W.D. Texas), Case No. 04-50948 (RBK), came to an extraordinary conclusion when the joint plan of reorganization of the Debtors and the Unsecured Creditors' Committee became effective. Under the Plan, all of the Debtors' creditors were paid the full amount of their pre-petition principal and interest, plus a stipulated amount of post-petition interest, together with reimbursement of the full amount of their pre- and post-petition legal fees. After paying their creditors in full on the effective date, the Debtors, a separately constituted arm of the Disciples of Christ Church, retained certain of their assets and will continue their charitable mission. This unusual outcome, in which creditors were paid in full and the Debtors continued certain of their operations, marked the end of a process that began with the Debtors' unsuccessful attempts to negotiate a substantial write-down of their debts outside bankruptcy, was followed by a year-long bankruptcy case in which the Debtors argued that their charitable status and mission should take priority over their bankruptcy law duty to maximize creditor recovery, and was finally resolved when the Debtors were compelled to sell the bulk of their real estate assets in order to fund full payment to creditors.
You Just Can't Give It Away
July 27, 2005
Last month, we explained that the proposition that a creditor can do whatever it wants with its recovery from a Chapter 11 debtor may seem to be a fundamental right -- but that in the context of confirmation of a Chapter 11 plan, that right may not be unqualified. It may, in fact, violate well-established bankruptcy principles. We went on to explain that one such principle that applies only in the context of non-consensual confirmation of a Chapter 11 plan, or "cramdown," is commonly referred to as the "absolute priority rule," a pre-Bankruptcy Code maxim that established a strict hierarchy of payment among claims of differing priorities.
Assignee's Preference Avoidance Power
July 27, 2005
In <i>Sherwood Partners, Inc., Assignee for the Benefit of Creditors of International Thinklink Corporation v. Lycos, Inc.</i>, 394 F.3d 1198 (9th Cir. 2005), the Ninth Circuit Court of Appeals, by a divided court, recently held that a state statute authorizing an assignee for the benefit of creditors to void a preferential transfer is preempted by the federal Bankruptcy Code.
Divorce and the New Bankruptcy Law
June 27, 2005
Among the more arduous tasks for an attorney handling a matrimonial case is the negotiation of the financial aspects, primarily support and maintenance and the division and distribution of marital property. In many cases, exhaustive financial disclosure is necessary; evaluations of property are obtained and challenged, and months of negotiations and legal services result, finally, in a resolution of the financial issues.
