Bankruptcy restructuring

IntroductionIn an opinion dated June 26, 2015, the U.S. District Court for the Middle District of Florida ruled that the bankruptcy court administering the Bayou Shores SNF, LLC (“Debtor” or “Bayou Shores”), chapter 11 proceeding lacked subject matter jurisdiction to enjoin the termination of the Debtor’s Medicare and Medicaid provider agreements or to order the assumption of the provider agreements.[1] Specifically, the district court held that the Medicare jurisdictional bar under 42 U.S.C. § 405(h) limits the authority of the bankruptcy court to interfere with efforts by the Centers for Medicare & Medicaid Services (“CMS”) to terminate the provider agreements except to provide judicial review under section 405(g) after administrative remedies have been exhausted. Bayou Shores has expressed its intention to appeal the district court’s decision, but if the decision is affirmed, it could have broad implications for … [Read more...] about Medicare Jurisdictional Bar Limits Bankruptcy Court Authority in Health Care Bankruptcy

In my last post I discussed the Meridian Sunrise Village v. NB Distressed Debt Investment Fund Ltd. opinion handed down by the United States District Court for the Western District of Washington in March of this year.  The prior blog post focused on the Court’s holding that distressed loan investors are not “financial institutions” and therefore, cannot exercise rights and remedies under a loan agreement as permitted assignees. The Court didn’t stop there, however.  Within the opinion, the Court also signed off on the debtor’s gerrymandering of votes in respect of its plan of reorganization.  Today’s blog post discusses this second significant ruling.As previously reported, Meridian Sunrise Village (“Meridian“) borrowed approximately $75 million from U.S. Bank for the construction of a shopping center.  Shortly after closing, U.S. Bank sold off pieces of the loan to other institutional lenders, … [Read more...] about The Meridian Sunrise Village Opinion Redux Re: Bankruptcy and Distressed Debt Investors

On April 29, 2014, Energy Future Holdings filed what it claims is a pre-packaged chapter 11 bankruptcy in Delaware. The bankruptcy, which ranks among the largest cases ever with over $36 billion in assets and nearly $50 billion in debt, is the product of an agreement with senior bondholders on the terms of a debt-for-equity swap.Second lienholders, who claim to have been frozen out of the discussions, oppose the deal and were prepared with lengthy papers filed almost immediately seeking to transfer the bankruptcy case to Texas, and requesting extensive discovery from the debtors, lenders, and management. In their papers, the second lienholders contend that the proposed deal is designed to benefit senior bondholders at the expense of junior creditors, highlight alleged pervasive conflicts of interest in the debtor’s corporate governance structure and complain of collusion between the Debtor’s management and the senior bondholders to … [Read more...] about Energy Future Holdings Files for Bankruptcy; Second Lienholders Oppose Deal

Despite the improvement in the economy since the advent of the “Great Recession,” many businesses nevertheless continue to struggle. Accordingly, lenders are well advised to stay up to date on  “best practices” when facing a potential restructure of a troubled loan. In a series of posts, we will address a number of considerations in dealing with a post default loan situation.  Part 1. Good Faith ObligationsEvery contract, whether consumer or commercial, has an implied obligation of good faith and fair dealing. The obligation stems from two sections in the Uniform Commercial Code (“UCC”), section 1-304 and section 1-201, as well as from case law.Court decisions that address, in the context of a loan workout, the issue of whether there was a breach of the implied covenant of good faith tend to focus on whether the lender’s acts or failures to act deprived the borrower of the benefit of its contractual bargain.In this regard, courts … [Read more...] about Considerations For Lenders in Workouts & Loan Restructurings

It is no surprise to anyone involved in the restructuring community that bankruptcy filings continue to decline. As reported by the American Bankruptcy Institute, corporate chapter 11 filings have decreased 34 percent since 2013.The theories for the decreased filings abound, including concerns over the cost, the unpredictability and the improving economy. While each of these views has merit, one additional market phenomena that cannot be overlooked is the continued strength in the high-yield [née, junk bond] market and its interplay with the other factors mentioned above.Despite recent withdrawals from the high-yield market by retail investors, large institutional investors continue to view the high-yield market as a buying opportunity. Even with recent market interruptions caused by international events in Israel, Ukraine and Iraq, the prices on high-yield bonds have risen lately, likely indicating a further move into the junk bond market by large … [Read more...] about High Yield Debt and the Decrease in Bankruptcy Filings