Law Commons^™

Is It Fair To Discriminate In Favor Of Pensioners In A Chapter 11 Plan?, Summer B. Chandler

Summer Chandler

“A number of U.S. cities are plagued with debt obligations that cannot be met. As municipalities¹ have turned to chapter 9 protection to ease their financial burdens, various creditor constituencies have found themselves pitted against each other as they realize that they might be forced to share a finite amount of assets and funds that are insufficient to cover all of the a municipality’s debts. The ultimate goal of a chapter 9 filing is the confirmation of an adjustment plan that implements a feasible and comprehensive restructuring of a municipality’s obligations. A municipality’s proposed plan must be approved by …

Between Dialogue And Decree: International Review Of National Courts, Robert B. Ahdieh

Robert B. Ahdieh

Recent years have seen dramatic growth in the number of international tribunals at work across the globe, from the Appellate Body of the World Trade Organization and the International Tribunal for the Law of the Sea, to the Claims Resolution Tribunal for Dormant Claims in Switzerland and the International Criminal Court. With this development has come both increased opportunity for interaction between national and international courts and increased occasion for conflict. Such friction was evident in the recent decision in Loewen Group, Inc. v. United States, in which an arbitral panel constituted under the North American Free Trade Agreement found …

Business Insolvency And The Irish Debt Crisis, Paul B. Lewis

Paul Lewis

No abstract provided.

Sales Or Plans: A Comparative Account Of The "New" Corporate Reorganization, Stephanie Ben-Ishai, Stephen J. Lubben

Stephanie Ben-Ishai

In this article, Professors Stephanie Ben-Ishai and Stephen Lubben explore the recent surge in popularity of “quick-sales,” essentially the pre-reorganization plan sale of an insolvent debtor’s assets. In their examination of quick sales, the authors use the recent examples of Lehman Brothers and Chrysler to illustrate the popularity and relevance of the pre-plan sales. The authors then move on to a more detailed discussion of the quick sales process in both Canada and the United States, isolating the differences and similarities between both countries, and weighing the costs and benefits of each approach. Ultimately, the authors argue that questions of …

Chapter 11 Case Management And Delay Reduction: An Empirical Study, Samuel Bufford

Hon. Samuel L. Bufford

Chapter 11 bankruptcy cases will drag on interminably if judges let them. The recent nine-month O.J. Simpson trial was short compared to the careers of some chapter 11 bankruptcy cases. The typical duration of chapter 11 cases can be reduced remarkably, however, through moderate judicial case management. The data in this study show that relatively modest judicial case management can squeeze a substantial amount of delay out of chapter 11 cases within the context of the present bankruptcy law. The case management program in this study, applied to 81.2% of the chapter 11 case load, shortened by 24.1% the time …

Why Do Distressed Companies Choose Delaware? An Empirical Analysis Of Venue Choice In Bankruptcy , Kenneth M. Ayotte, David A. Skeel Jr.

Kenneth Ayotte

We analyze a sample of large Chapter 11 cases to determine which factors motivate the choice of filing in one court over another when a choice is available. We focus in particular on the Delaware court, which became the most popular venue for large corporations in the 1990s. We find no evidence of agency problems governing the venue choice or affecting the outcome of the bankruptcy process. Instead, firm characteristics and court characteristics, particularly a court's level of experience, are the most important factors. We find that court experience manifests itself in both a greater ability to reorganize marginal firms …

The Value Of Soft Variables In Corporate Reorganizations, Michelle M. Harner

Michelle M. Harner

When a company is worth more as a going concern than on a liquidation basis, what creates that additional value? Is it the people, management decisions, the simple synergies of the operating business, or some combination of these types of soft variables? And perhaps more importantly, who owns or has an interest in these soft variables? This article explores these questions under existing legal doctrine and practice norms. Specifically, it discusses the characterization of soft variables under applicable law and in financing documents, and it surveys related judicial decisions. It also considers the overarching public policy and Constitutional implications of …

The Bankruptcy Of Golfers' Warehouse, Inc.: A Lesson In How To Sell A Business In Chapter 11, Briton Collins, Will Smith, David Choi

David Y Choi

No abstract provided.

Activist Investors, Distressed Companies, And Value Uncertainty, Michelle M. Harner, Jamie Marincic Griffin, Jennifer Ivey-Crickenberger

Michelle M. Harner

Hedge funds, private equity firms, and other alternative investment funds are frequently key players in corporate restructurings. Most commentators agree that the presence of a fund can change the dynamics of a chapter 11 case. They cannot agree, however, on the impact of this change—i.e., do funds create or destroy enterprise value? This essay contributes to the dialogue by analyzing data from chapter 11 cases in which funds are in a position to influence the debtor’s exit strategy. The data shed light on what such funds might achieve in chapter 11 cases and the potential implications for debtors and their …

Introduction: The Future Of Chapter 11: A Symposium Cosponsored By The American College Of Bankruptcy, Ingrid Michelsen Hillinger

Ingrid Michelsen Hillinger

Professor Ingrid Michelsen Hillinger offers introductory remarks to the Symposium: The Future of Chapter 11, cosponsored by the American College of Bankruptcy and the Boston College Law Review and held at the Boston College Law School on April 22, 2005.

The Uncertainty Of “True Sale” Analysis In Originator Bankruptcy, Stephen P. Hoffman

Stephen P. Hoffman

While much of law is complex or unclear, it is unusual for a judge to comment that a legal doctrine is so unsettled that courts “could flip a coin” to decide an issue. Unfortunately for practitioners, determining what constitutes a “true sale” for bankruptcy purposes is such an issue. Add to this the recent novel and innovative processes of structured finance and asset-backed securitization, and you have the stuff of law students’—and corporate counsels’—nightmares. As a result, courts and legislatures need to provide clarity in this area so that originators can safely structure investments and transactions, not only for the …

The Potential Value Of Dynamic Tension In Restructuring Negotiations, Michelle M. Harner, Jamie Marincic

Michelle M. Harner

No abstract provided.

Dip Lending And The Death Of Emergence: Reorganization Outcomes Post-Crisis, Aditya Habbu, Nikhil Abraham

Nikhil Abraham

We examine bankruptcy successes and failures before and after the credit crisis for those debtors that sought DIP loans. We found that post-crisis, for companies that filed for bankruptcy stand alone emergences decreased (percentage-wise), while sales increased. Additionally, we found that post-crisis private equity fund involvement in debtor in possession (“DIP”) loans increased, and DIP loan interest rates increased as well. To supplement the analysis we surveyed practitioners, interviewing two Federal bankruptcy judges, a restructuring investment bank managing director, as well as DIP lenders. These interviews and our data support the view that while DIP loans were once a path …

Cleaning Up Bankruptcy: Limiting The Dischargeability Of Environmental Cleanup Costs, Sonali P. Chitre

Sonali P Chitre

This article reconciles the joint aims of environmental and bankruptcy law after Judge Posner’s myopic opinion in the Seventh Circuit’s resolution of U.S. v. Apex Oil. These two areas of law represent alternative means to the same end—the equitable distribution of limited resources—and share equity’s traditional emphasis of function over form. Ignoring these principles, Judge Posner ruled in Apex that a cleanup order constitutes a dischargeable “claim” when styled as a legal judgment but not when styled as an equitable injunction. This despite the fact that in either case the liability amounts to the same thing-payment must be made for …

Interpreting The Supreme Court’S Treatment Of The Chrysler Bankruptcy And Its Impact On Future Business Reorganizations, Fred N. David

Fred David

On June 9, 2009, the Supreme Court terminated its stay of Chrysler’s sale of substantially all of the company’s assets to a new entity, dubbed “New Chrysler” with the backing of European automaker Fiat. The effect of that ruling was to permit the sale to close the next day and bring to an end a chaotic period that determined Chrysler’s future. However, critics of the sale to Fiat argued that the Supreme Court’s ruling would also have a detrimental effect on secured credit and undermined the creditor protections normally afforded by Chapter 11 going forward.

But the Supreme Court was …

Trends In Distressed Debt Investing: An Empirical Study Of Investors' Objectives, Michelle M. Harner

Michelle M. Harner

Increased creditor control in chapter 11 cases has generated considerable debate over the past several years. Proponents of creditor control argue that, among other things, it promotes efficiency in corporate reorganizations. Critics assert that it destroys corporate value and frequently forces otherwise viable entities to liquidate. The increasing involvement of professional distressed debt investors in chapter 11 cases has intensified this debate. In this article, I present and analyze empirical data regarding the investment practices and strategies of distressed debt investors. Based on this data and actual case reports, I reach two primary conclusions. First, although relatively few in number, …

The Corporate Governance And Public Policy Implications Of Activist Distressed Debt Investing, Michelle M. Harner

Michelle M. Harner

Activist institutional investors traditionally have invested in a company's equity to try to influence change at the company. Some of these investors, however, are now purchasing a company's debt for this same purpose. They may seek to change a company's management and board personnel, operational strategies, asset holdings or capital structure. The chapter 11 bankruptcy cases of Allied Holdings, Inc. and its affiliates exemplify the strategies of activist distressed debt investors. In the Allied cases, Yucaipa Companies, a distressed debt investor, purchased approximately 66% of Allied's outstanding general unsecured bond debt. Yucaipa used this debt position to exert significant influence …

Bankruptcy Reorganizations And The Troubling Legacy Of Chrysler And Gm, Ralph E. Brubaker, Charles J. Tabb

Ralph E. Brubaker

BANKRUPTCY REORGANIZATIONS AND THE

TROUBLING LEGACY OF CHRYSLER AND GM

Ralph Brubaker

University of Illinois College of Law

Charles Jordan Tabb

University of Illinois College of Law

Abstract:

The Chrysler and General Motors bankruptcy reorganizations represent the culmination of a sea-change in corporate restructuring practice that has occurred largely over the course of just the past decade. A bankruptcy reorganization has traditionally been effectuated though a chapter 11 plan of reorganization, with elaborate requirements for disclosure, creditor voting, and allocation of stakes in the reorganized debtor entity’s new capital structure among creditors and owners. Such an internal boot-strap reorganization, though, …

Bankruptcy Reorganizations And The Troubling Legacy Of Chrysler And Gm, Ralph E. Brubaker

Ralph E. Brubaker

BANKRUPTCY REORGANIZATIONS AND THE

TROUBLING LEGACY OF CHRYSLER AND GM

Ralph Brubaker

University of Illinois College of Law

Charles Jordan Tabb

University of Illinois College of Law

Abstract:

The Chrysler and General Motors bankruptcy reorganizations represent the culmination of a sea-change in corporate restructuring practice that has occurred largely over the course of just the past decade. A bankruptcy reorganization has traditionally been effectuated though a chapter 11 plan of reorganization, with elaborate requirements for disclosure, creditor voting, and allocation of stakes in the reorganized debtor entity’s new capital structure among creditors and owners. Such an internal boot-strap reorganization, though, …

Glamis Gold Ltd. Vs United States Of America Award And Its Implication On The Scope Of Article 1105 Minimum Standard Of Treatment., Pravesh M. Gungah

Pravesh M. Gungah

The note is a guide to understand the latest NAFTA Chapter 11 award- the Glamis Gold award. The award rendered in June 2009 is made up of 360 pages, probably the thickest Chapter 11 award. The facts, points of law, and special emphasis on the fair and equitable treatment claim are covered in 13 pages. The note ends with a critical analysis of the Tribunal’s stance on fair and equitable treatment, and places it in the jurisprudential context.

Simultaneous Distress Of Residential Developers And Their Secured Lenders: An Analysis Of Bankruptcy & Bank Regulation, Sarah P. Woo

Sarah P Woo

With falling home prices and home foreclosures currently acknowledged as a severe problem in the U.S., more attention needs to be paid to the contributing phenomenon of residential developers undergoing liquidation, which has left behind a trail of partially-completed or abandoned properties. In order to understand this phenomenon, we analyzed 222 residential developers that filed Chapter 11 bankruptcy petitions between November 2007 and December 2008. We find that only a very small proportion of these developers, as compared to previous similar large studies, confirmed a reorganization plan. Most cases ended in liquidations. In the sample, 72.5% of the cases showed …

The Shadow Bankruptcy System, Jonathan C. Lipson

Jonathan C. Lipson

This article exposes and explores a puzzle at the heart of the current economic crisis: The surprising under-use, and increasing misuse, of Chapter 11 of the United States Bankruptcy Code, the principal legal system for salvaging troubled businesses.

The answer offered here: The rise of the shadow bankruptcy system. “Shadow bankruptcy” describes the severely under-regulated non-bank financial institutions (e.g., hedge funds, private equity funds and investment banks) that increasingly dominate and manipulate Chapter 11 reorganizations.

Like the “shadow banking” system for which it is named, shadow bankruptcy thrives on and promotes opacity and undisclosed, possibly perverse, incentives. Shadow bankruptcy players …

Failure's Futures: Controlling The Market For Information In Corporate Reorganization, Jonathan C. Lipson

Jonathan C. Lipson

This Article identifies and explores an important gap in bankruptcy theory and policy, with significant implications for the coming wave of major business failures: How to manage information about financially distressed businesses?

The paper makes three claims. First, Chapter 11 of the United States Bankruptcy Code plays a unique informational role, as it creates mechanisms to explain a debtor’s failure and to promote reinvestment. Second, the information functions performed by this system face internal and external threats. Internally, bankruptcy reorganization increasingly resembles an unregulated securities market, dominated by sophisticated, wealthy investors whose motives and strategies are often highly opaque. Their …

The Doctrine Of Necessity In Bankruptcy Reorganizations, Rahul K. Sharma

Rahul K. Sharma

Necessity is an old concept used in many fields of law. In criminal law and torts, it is a defense. In property law, its reasoning is used to support eminent domain. This paper will analyze the use of the doctrine of necessity in bankruptcy reorganizations. In bankruptcy, necessity has also been used as a justification for paying certain creditors earlier than they would have otherwise been paid. This has become controversial as such payments became routine. A decision by the Seventh Circuit in the 2004 Kmart case strongly criticized such payments and criticized reliance upon the doctrine of necessity. This …

Collective Bargaining Agreements And Chapter 9 Bankruptcy, Ryan Preston Dahl

Ryan P Dahl

The recent cycle of automotive and aviation bankruptcies is ending. The next major restructuring cycle may come from a very different quarter. Municipalities throughout the United States will face the very real prospect of insolvency. The treatment of collective bargaining agreements will play a significant role in this process. Unaffordable collective bargaining obligations may be the efficient cause of such filings. Alternatively, rejecting such agreements may be the most effective means of restoring a municipal debtor’s financial health.

Statutory gaps, the absence of significant caselaw, and limited scholarly commentary raise serious questions as to how courts should treat collective bargaining …

Rio Grande Designs: Texans’ Nafta Water Claim Against Mexico, Paul Stanton Kibel, Jonathan R. Schutz

Paul Stanton Kibel

No abstract provided.

Grasp On Water: A Natural Resource That Eludes Nafta's Notion Of Investment, Paul Stanton Kibel

Paul Stanton Kibel

No abstract provided.

Bankruptcy And Sport Management, Adam Epstein

Adam Epstein

A discussion of the relationship between bankruptcy law and sport studies including sports management and sports law. A history of bankruptcy laws is presented, including relevancy between today and its ancient Roman roots. A list of teams and individuals (through 2003) who have filed for bankruptcy provides a springboard for further research. The differences between Chapter 7, Chapter 11 and Chapter 13 bankruptcy is presented in the context of sport. Particular emphasis is given to the bankruptcy filings by Cannondale bicycle manufacturer and sports agent David Dunn.