Here’s an aggregation of 28 of my Twitter posts from mid-June 2018, with links to important cases, articles, and news briefs that restructuring professionals should find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!

BK RELATED CASES:

• Avoidance Actions – Heightened Pleading Standards – BK-WD-MI:  “The Complaint’s allegation that the ‘Debtors’ made an aggregate amount or series of transfers over time to unidentified transferees, without further detail, doesn’t satisfy the heightened pleading standard for actual fraudulent transfer claims. In re Great Lakes Comnet Inc
• Bank Holding Co. – Tax Allocation Agreement – 10th Cir:  A tax allocation agreement creates an agency between the bank holding company and the bank so that the agreement’s treatment of tax refunds doesn’t differ from the general rule that a refund in a joint return belongs to the loss generator. Consequently, the FDIC, as receiver, gets the bank’s $4.8M refund. In re United Western Bancorp Inc
• Collateral – 506(c) Surcharge – BK-ND-WV:  Court refuses to surcharge lender’s collateral for unpaid chapter 11 attorney’s fees since they were not incurred primarily to protect or preserve the collateral, didn’t provide the lender with a direct & quantifiable benefit, & were not reasonable and necessary to preserve or dispose of the collateral. In re Tara Retail Group Inc
• Commercial Leases – Expiration – BK-ED_MI:  When has a non-residential real property lease “been terminated by the expiration of the stated term of the lease” per 362(b)(10)? Court here holds not if lease was terminated early based on lessor’s right to terminate it if the debtor-lessee defaults. In re Indiana Hotel Equities LLC
• Conversion – Intangible Rights – BK-ND-IL:  In recounting sordid facts as few can, Judge Cox notes that Illinois court don’t recognize an action for conversion of intangible rights. Conversion of commercial paper, however, is an exception to the general rule on the theory that the intangible right associated with commercial paper is merged into the specific document. In re Santilli
• Disclosure Statement – Unconfirmable Plan – Retention of Equity – BK-ED-NC:  Court refuses to approve disclosure statement where plan, on its face, is not confirmable in light of its proposal that the owner retain his equity interest in the Debtor without adding “new value” to the Debtor. In re CHL LLC
• Fiduciary Duties – LLC Managers to Members – BK-ED-TX:  Under Texas law, “a formal fiduciary relationship does not exist between managers and members. As such, a fiduciary relationship, if any, must exist via an informal relationship.” Higher Perpetual Energy LLC v Higher Power Energy LLC
• Fraudulent Transfer – Collapsing Transactions – Resultant Situs of Transfer as Domestic or Foreign – BK-SD-NY:  “The Court is not aware of any case considering the implications of collapsing a multi-step transaction on a determination of the situs of an alleged fraudulent transfer. However, it is clear that in directing courts analyzing fraudulent transfer claims to consider the “composite implications” in collapsing a multi-step transfer, the Second Circuit did not limit that review only to the implications for assessing reasonably equivalent value.” In re CIL Limited
• Liquor Licenses – Security Interests – BK-D-AK:  Case here proves that maintaining security interests or priorities to proceeds from the sale of a liquor license requires much care and consideration. In re Aqua Pesca LLC
• Structured Dismissal – Effect on Pending Adversaries – BK-D-NM:  A bankruptcy court can retain jurisdiction after case dismissal over non-core, related proceedings commenced before dismissal, though ordinarily non-core, related-to proceedings are also dismissed upon dismissal of the underlying bankruptcy  case. “In a structured dismissal where a plan is not confirmed, claims to unclaimed funds only arise after the case is dismissed and are not governed by any provision of the BK Code. As such, claims to unclaimed funds do not arise in or arise under and so are non-core.” In re Dees FoodService ABQ Inc
• Turnover Motions – Procedural Requirements – BK-CD-CA:  Fed. R. Bankr. P. 7001 requires an adversary to recover money or property from third parties who are not the debtor. Thus, a 542 turnover motion is procedurally deficient to recover property in which tenants are living and rents that they’re withholding. In re Grand View Financial LLC
• Unjust Enrichment – Pleading Standards – BK-WD-MI:  “[T]he law operates to imply a contract in order to prevent unjust enrichment, and . . . this will not occur if there is already an express contract on the same subject matter. . . . In order to state a claim for unjust enrichment, the Trustee must plead some benefit was derived separate & apart from the [contract between the parties].” In re Great Lakes Comnet Inc

INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:

• Power Purchase Agreements – Thorny Contractual Provisions Dissected – ND-IL:  Court holds that the PPAs unambiguously require NIPSCO to pay the “cost to cover.” Court also dissects thorny contractual provisions regarding “metered output,” “unexcused failure to take,” “force majeure,” “voluntary curtailments” in NIPSO’s battle with Iberdrola, the second largest wind power company. Barton Windpower LLC v Northern Indiana Public Service Company
• Veil Piercing – Summary Judgment – IL-AP-1st:  “Plaintiffs failed to establish any genuine issue of material fact on plaintiffs’ corporate veil-piercing claim as to whether adhering to the corporate fiction would promote an injustice.” Buckley v Abuzir

LAW RELATED NEWS & ARTICLES:

• Athletic Injuries – Premises Liability:  The results in Bush’s and Ryan’s suits could cause the NFL owners try to expand the scope of the collective bargaining agreement to further prevent these sorts of lawsuits. Jenner’s Nelson says: “I am not sure they will be successful,” he said. “But given now that you have had two lawsuits, I suspect they will want to nip it in the bud.” Reggie Bush Injury Award Likely To Spur Pro-Athlete PI Suits, by Zachary Zagger at Law360
• Collateral Transfers – Lender Response to a Debtor’s “Pulling a J. Crew”:  Resignation comes as PetSmart’s lenders challenge the company’s transfer of more than 1/3 of the equity in Chewy.com to separate entities, putting it beyond creditor reach. A lender instructed Citigroup not to release the liens & guarantees on the Chewy stake. Citigroup Resigns as PetSmart’s Term Loan Agent, by Katherine Doherty and Eliza Ronalds-Hannon at Bloomberg
• Sandbagging – Delaware:  Dealmakers may be surprised at the doubts cast in recent judicial comments on the “pro-sandbagging” reputation of Delaware. Parties may wish to account for comments by the Delaware Supreme Court in negotiating sandbagging-related purchase agreement provisions. Sandbagging in Delaware, by Daniel Wolf of Kirkland & Ellis, via Harvard Law School Forum on Corporate Governance and Financial Regulation

LIFE, BUSINESS, AND THE WORLD GENERALLY:

• Advertising – Creative Vision:  There’s a place for creative advertising as the cornerstone for a digital campaign that offers versions of the same message in little pieces. But money is scarcer for grand visions. Anything on which the return cannot be measured is vulnerable. Advertising’s creative vision is old fashioned: The industry struggles to adapt to the rise of brands that target consumers directly, by John Gapper at Financial Times
• Corporate Bonds – Demand – BBB Rated:  The bonds issued to fund the Bayer purchase “illustrates the ability of companies at the bottom of the investment-grade rating scale (BBB+/BBB/BBB) to continue to fund large acquisitions in the debt markets.” So too with AT&T’s $80B takeover of Time Warner. Worries of the long-term implications of the appetite for BBB debt persist. “The bigger concern is unannounced M&A we’re not aware of. M&A has been heating up [and the market] continues to finance these larger deals, esp from BBB issuers.” Bond investors fail to blink as megadeals fan leverage: Bayer benefits as investors buy into deals from weaker investment grade borrowers, by Alexandria Scaggs at Financial Times
• Corporate Debt – Risks:  Per McKinsey Global Institute’s Susan Lund, if the financial crisis taught us anything, it’s that risks emerge where least expected. Regulators and policymakers should monitor existing and potential risks (i.e., credit default swaps and complex bond securitizations). Are We in a Corporate-Debt Bubble?, via Project Syndicate
• Energy – Outlook 2018:  Bloomberg NEF’s annual long term economic analysis of the world’s power sector out to 2050. New Energy Outlook 2018: BNEF’s annual long-term economic analysis of the world’s power sector out to 2050
• Malls – New Construction:  Seems a good idea for owners to get ahead of the curve and transform emptying malls into destination, mixed-use, scaled-down versions of these entertainment models. Triple Five, controlled by the Ghermezians, also own the W. Edmonton Mall and the of America. Florida Officials Approve Plan to Build Largest U.S. Mall: Residents, other mall owners raise concerns about traffic, environmental impact and possible subsidies, by Esther Fung at Wall Street Journal
• Private Equity – “Pass the Parcel”: The practice of private equity passing co’s between them is a timeless one. It helps keep the deals machine churning in an era of cheap money & rising pressure to deploy it. In recent months so-called “pass the parcel” acquisitions in Europe have taken off. “ ‘If private equity passing around an asset between cousins and playing the cycle, then there will be tears when the music stops,’ says a banker who works on some of the largest leveraged buyouts in Europe.” Private equity’s pass the parcel deals raise concern: The practice of PE groups selling companies to each other brings risks, by Javier Espinoza at Financial Times
• Private Equity – Time Horizons:  With bargains hard to find & assets increasingly overpriced, staying put may be more attractive than putting cash to work. One big draw to a long outlook is the lack of more attractive investment options in a low-yield environment. Private-Equity Firms Rethink Their Short-Term Focus: Some look to stay invested in companies for unlimited periods, by Dawn Lee and Laura Cooper at Wall Street journal
• Car Rentals – Private Owner Rentals – Competitive Impact:  Airports are where car-sharing is hurting car-rental cos the most because the service can cost 1/2 the rental price and be more convenient. Airport rentals make up about half of the car-rental industry’s $29 billion in annual revenue. Want to Rent Out Your Car? You Might Be Regulated: Turo and Getaround pitch themselves as platforms connecting people to services; car-rental companies call them direct competitors, by Adrienne Roberts at Wall Street Journal
• Richard Valeriani – RIP:  “He took great pride he was on Nixon’s enemies list, attended Yale on full scholarship, and wasn’t considered a ‘pretty boy’ of TV news, but that never bothered him. He was an on-the-street real reporter.” RIP Richard Valeriani. Richard Valeriani, Veteran NBC News Correspondent, Dies at 85, by Jaclyn Peiser at New York Times
• TV Streaming Habits: “The average Netflix user is already watching the streaming service for more than 10 hours a week, ‘nearly double its nearest competitors. Amazon and Hulu which is closer to 5 hours per week, an eye-popping disparity.” Netflix earns $500 price target as analyst sees ‘iron-like strength to grow’: Netflix shares hit $400 for first time, by Mamta Badkar at Financial Times
• Venezuela:  Including debt owed to governments and official lenders, Venezuela’s foreign debt is about $140B, with China owed $20-25B & Paris Club creditors $5.8B. But any restructuring is nearly impossible now because of US sanctions, which could view the restructuring as an illegal financing. Venezuela’s creditors working on eventual debt restructuring, via Reuters

©2018, Steve Jakubowski