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8 Cards in this Set
- Front
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Post-Petition Interest |
General Rule: not an allowed claim pursuant to 502(b)(2) Exception 1: 506(b) creditor entitled to receive interest, attn’y fees, and other charges to the extent the creditor’s claim is oversecured Exception 2: “solvent debtor exception” — part of the “best interest” test of 1129(a)(7), which requires creditors to receive at least as much as they would receive in a liquidation under chapter 7— 726(a)(5) entitles creditors to interest on their claims at the “legal rate” If eligible to receive post petition interest under either exception, the rate at which such interest accrues depends on jurisdiction. Could be contract rate, default rate, federal judgment rate, rate determined by state law, etc. |
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1125(a) — disclosure statement must provide “adequate information” to make judgement about plan 1126(b) — pre-petition solicitation must comply with applicable non-bankruptcy law (i.e., securities laws) |
In pre-packs, the Debtor asks the Court to confirm the adequacy of the disclosure statement and she stance with 1126(b) at the confirmation hearing |
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Straddle Pack |
Commence solicitation prior to filing but voting continues during proceedings, as compared to a pre-pack where voting is complete prior to filing |
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Control (mechanism for perfecting collateral deposit accounts) |
(1) collateral agent is the bank where borrower has the deposit account (2) account control agreement between bank, collateral agent, borrower |
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Debtor cannot contract away it’s rights in bankruptcy—either to file a voluntary petition or discharge its debt—to a creditor; this principle cannot be circumvented by granting a creditor a blocking shares/voting right as part of forbearance/waiver |
See In re Intervention Energy Holdings and cases cited therein. |
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Real estate lenders will generally require borrower to create separate entity (LLC), known as BRE, to isolate the property that will secure the loan and make bk a more remote possibility. Operational documents will generally require unanimous consent of members to file bk and the appointment of independent director. If done at the outset, rather than as part of forbearance agreement, such transaction and structure will generally be enforceable in bk; independent director should not forfeit fiduciary duties |
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Record Date Motion |
Record date motion replaced straight injunction. Debtor asks court to establish a record date, after which, if there is an ownership change for tax purposes, the borrower can ask the court to unwind post-record date trades (i.e., issue a sell-down order) |
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Deferred Cash Payments |
When payment to a secured creditor is deferred under a plan (typically the debtor issues replacement notes), a creditor is entitled to the present value of its claim (i.e., the amount of its Allowed Claim plus an appropriate rate of interest). In Momentive, the Second Circuit determined that the appropriate rate of interest, where there is an “efficient market,” is the “market rate.” Where no efficient market exists, the appropriate rate is the formula rate—rate set by using the risk-free rate (national prime rate) plus a plan specific adjustment. The market rate will almost always be higher. |
