The United States Court of Appeals for the Seventh Circuit held that payments made by a debtor’s customers to its lender converting a pre-petition loan to a post-petition loan constituted disbursements for the purposes of calculating the statutory fees payable pursuant to 28 U.S.C. 1930(a)(6). In re Cranberry Growers Coop., 2019 U.S. App. LEXIS 21121 (7th Cir. July 17, 2019). This decision, coupled with the increase in the quarterly fees for the U.S. Trustee Program, is likely to increase the cost of certain DIP loans, and lenders may wish to utilize alternative structures when lending to debtors in bankruptcy. Continue Reading
In 2018, securitization provided an estimated $13.1 trillion in financing. Contrast that with the US $10.24 trillion issued at the end of the 2nd quarter of 2008, and we can see that the securitization market is back. However, the market, particularly the market participants, has seen a significant change during years that it took for the securitization market to recover from the financial crisis. Continue Reading
The recently released Department of Justice (“DOJ”) opinion (“DOJ Opinion”) concluding that the Wire Act prohibits both sports and non-sports related Internet betting and wagering, leaves the industry with the burning question of “what about intrastate Internet gambling?” On its face, the Wire Act prohibits using a wire communication facility for the transmission in “interstate or foreign commerce” of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of such wagers, for information assisting in the placing of bets or wagers. In its analysis the DOJ Opinion applies the modifier of interstate or foreign commerce to all four prohibited types of transmissions. Continue Reading
The intricate syndicated loan market has recently triggered attention from competition authorities internationally. Recently, the Spanish competition authority fined €91 million a syndicate of four Spanish banks. The Directorate General for Competition (DG COMP) of the European Commission launched a study on the topic in April 2017 (COMP/2017/008 – EU loan syndication and its impact on competition in credit markets). In anticipation of the results of this study, which are expected by the end of 2018 or early 2019, we highlight some of the competition law risks that may cause greater concern. Continue Reading
The California Supreme Court ruled on Monday, August 18, that an interest rate on a consumer loan in California could be deemed illegally high even if the loan is not subject to the state’s usury law.
Consumer loans of $2,500 or more in California that are made by licensed California Finance Lenders are not subject to the state’s usury law. However, the California Finance Law includes a provision which states that a loan found to be unconscionable is deemed to be in violation of the Finance Law. Nonbank lender CashCall Inc. had a primary product which was an unsecured $2,600 loan payable over a 42-month period, and carrying an annual percentage rate of either 96% or 135%. Plaintiffs filed an action against CashCall claiming that these loans violated California’s unfair competition law because they were unconscionable. CashCall raised a number of defenses, including that a licensed California Finance Lender can charge any rate it wants on consumer loans of $2,500 or more, and that these loans cannot be unconscionable. Continue Reading
In In re Spanish Peaks Holdings II, LLC, Case No. 15-35572 (9th Cir. Sept. 12, 2017), the Ninth Circuit Court of Appeals held that a bankruptcy trustee may use Section 363(f) of the Bankruptcy Code to sell real property free and clear of unexpired leases without affording the non-debtor lessees the right to retain possession of the property. In reaching its decision, the Ninth Circuit also rejected an argument made by the buyer that the appeal was moot under Section 363(m) of the Bankruptcy Code, holding that Section 363(m) only applies to the transfer itself, as opposed to the free and clear aspect of the sale. A copy of the opinion may be found here. Continue Reading
In In re Lehman Bros. Holdings Inc. 855 F.3d 459 (2d Cir. 2017), the United States Court of Appeals for the Second Circuit affirmed a district court order subordinating the claims of former Lehman Bros. (“Lehman”) employees for undelivered equity-based compensation to those of the defunct bank’s general creditors. The Court determined the compensation benefits were securities that had been purchased by the former employees when they agreed to receive them in exchange for their labor and the asserted damages arose from those purchases, requiring the claims’ subordination under the Bankruptcy Code. The decision is important to employees and employers weighing the value of hybrid compensation packages and creditors seeking to safeguard their priority position among bankruptcy claimants. Continue Reading
In a May 15, 2017 Bankruptcy Court decision (Gardens Decision) from California’s Central District (In re Gardens Regional Hospital and Medical Center, Inc. (Bankr. C.D.Cal., May 15, 2017, No. 1617463), Judge Ernest M. Robles wrote that the grant of oversight and approval authority given to California’s Attorney General over buy/sell and change-in-control transactions between nonprofit sellers of health facilities and for-profit buyers of health facilities (see, California Corporation Code Section 5914 (Section 5914)) is limited to those situations in which a nonprofit seller has an active California health facility license at the time of closing. As written by Judge Robles, the Gardens Decision concludes that transactions between nonprofit sellers and for-profit buyers fall outside the scope of Section 5914 if the assets at hand do not include an operating, California-licensed health facility. As a nonoperational, unlicensed health facility, the transaction at issue is not a health facility transaction subject to Section 5914 and, in turn, Attorney General oversight and approval. Continue Reading
On March 22, 2017, the Supreme Court in Czyzewski v. Jevic Holding Corp., 580 U.S. __ (2017) held that a bankruptcy court does not have the power to approve a structured dismissal of a bankruptcy case that violates the Bankruptcy Code’s priority scheme unless the affected parties consent.
In a recent November 17, 2016 opinion, Delaware Trust Co. v. Energy Future Intermediate Holding Company LLC, Case No. 16-1351, the Third Circuit Court of Appeals reversed two lower court opinions by holding that make-whole premiums can be enforceable even if the debt was automatically accelerated by a voluntary bankruptcy filing. The Third Circuit’s opinion is significant because it now puts borrowers on notice that under New York law, a debtor filing for bankruptcy may not necessarily be allowed to avoid redemption provisions and any related make-whole premiums similar to those involved in this case. Instead, in specifically examining the intent and language of those provisions, courts may, as the Third Circuit did here, read such automatic acceleration provisions and optional redemption provisions in harmony.