Business Restructuring Review | March–April 2025
In This Issue:
Jones Day's Business Restructuring & Reorganization Practice Named a 2025 "Practice Group of the Year—Bankruptcy" by Law360
Jones Day's Business Restructuring & Reorganization Practice was named a 2025 "Practice Group of the Year—Bankruptcy" by Law360. Now in its 15th year, the Law360 series "honor(s) attorney teams behind the litigation wins and major deals that resonated throughout the legal industry this past year." [read more …]
Fifth Circuit Rules that Serta Simmons Uptier Violated Credit Agreement, Rejects Equitable Mootness as Bar to Review of Chapter 11 Plan Confirmation Order and Excises Plan Indemnification Provision
In In re Serta Simmons Bedding, LLC, 125 F.4th 555 (5th Cir. 2024), as amended, No. 23-20281 (5th Cir. Jan. 21, 2025), revised and superseded, No. 23-20181 (5th Cir. Feb. 14, 2025), reh'g denied, No. 23-20181 (5th Cir. Feb. 18, 2025), the U.S. Court of Appeals for the Fifth Circuit reversed and vacated in part a bankruptcy court order confirming the chapter 11 plan of mattress manufacturer Serta Simmons Bedding, LLC ("Serta"). The Fifth Circuit concluded that a plan provision indemnifying participating lenders in connection with a 2020 "uptier," or "position enhancement," transaction whereby Serta issued new debt secured by a priming lien on its assets and purchased its existing debt from participating lenders at a discount violated the terms of Serta's 2016 credit agreement. The Fifth Circuit also remanded the case to the bankruptcy court for consideration of the excluded lenders' counterclaims in various related adversary proceedings. In so ruling, the Fifth Circuit concluded that: (i) the uptier transaction was not a permissible "open market purchase" under the credit agreement; (ii) the doctrine of "equitable mootness" did not bar review of the plan confirmation order even though the plan had been substantially consummated; (iii) the indemnity relating to the uptier transaction in Serta's chapter 11 plan must be removed because the indemnity claims were disallowed as contingent claims for reimbursement; and (iv) the indemnity violated the "equal treatment" requirement for plan confirmation. [read more …]
New Jersey Bankruptcy Court Ruling Highlights the Utility of Chapter 15 in Enforcing Foreign Bankruptcy Court Orders in the United States as a Matter of Comity
In In re Wayne Burt Pte. Ltd. (In Liquidation), 2024 WL 5003229 (Bankr. D.N.J. Dec. 6, 2024), appeal filed, No. 24-19956 (MBK) (Bankr. D.N.J. Dec. 17, 2024), motion for stay pending appeal filed, No. 24-19956 (Bankr. D.N.J. Dec. 18, 2024) (hearing adjourned to Apr. 16, 2025), the U.S. Bankruptcy Court for the District of New Jersey recognized a Singapore liquidation proceeding under chapter 15 of the Bankruptcy Code. It also granted as a matter of adjudicative comity the foreign representative's motion for an order recognizing and enforcing a judgment of the Singapore bankruptcy court directing a lender to surrender stock pledged to secure the loan for administration in the debtor's liquidation proceeding. [read more …]
New Jersey Bankruptcy Court: Motion Not Necessary to Assume Unexpired Lease
In In re Rite Aid Corp., 23-18993, 2024 WL 4715336 (Bankr. D.N.J. Nov. 6, 2024), the U.S. Bankruptcy Court for the District of New Jersey ruled that, under the unambiguous terms of the Bankruptcy Code and in line with its underlying purpose, a trustee or chapter 11 debtor-in-possession need not file a motion to assume an unexpired nonresidential real property lease. Instead, the court concluded, a less formal notice filed with the court, even as part of a chapter 11 plan supplement, sufficed under the circumstances. [read more …]
Second Circuit: Bankruptcy Code's Lease Assumption and Assignment Provisions Apply Only to "True Leases"
In MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corp.), 2024 WL 5113165 (2d Cir. Dec. 16, 2024), the U.S. Court of Appeals for the Second Circuit affirmed a district court ruling that the Bankruptcy Code's deadline for assuming or rejecting a nonresidential real property lease did not apply to a shopping center "lease" because the agreement was not a true lease, and neither the debtor nor the purported assignee of the agreement waived or forfeited the argument that the lease was not bona fide. [read more …]
U.S. Bankruptcy Court Directs Turnover of Chapter 15 Debtor's Assets for Administration in Foreign Bankruptcy Proceeding
In In re ECM Straits Fund I, LP, 2024 WL 4712995 (Bankr. S.D.N.Y. Nov. 7, 2024), the U.S. Bankruptcy Court for the Southern District of New York approved a settlement between chapter 15 debtors' foreign representatives and an entity that nominally held stock owned by the debtors whereby the stock would be transferred to the foreign representatives for administration in the debtors' Cayman Islands liquidation proceeding. [read more …]
Ninth Circuit: No Injury to Creditors Required for Avoidance of Intentionally Fraudulent Transfer
In In re O'Gorman, 115 F.4th 1047 (9th Cir. 2024), the U.S. Court of Appeals for the Ninth Circuit considered as a matter of first impression whether a trustee or chapter 11 debtor-in-possession may avoid an intentionally fraudulent transfer in the absence of injury to creditors. The Ninth Circuit joined the Fourth and Eight Circuits in ruling that demonstration of damage to creditors is not required to avoid a fraudulent transfer under the Bankruptcy Code. The court also held that injury to creditors is not necessary for a bankruptcy trustee to have constitutional standing to assert an avoidance claim because the trustee has a "judicially cognizable interest" in avoiding the transfer on behalf of the bankruptcy estate. [read more …]
Newsworthy:
Corinne Ball (New York) and Dan T. Moss (Washington and New York) received a 2025 Readers' Choice Award from content aggregator JD Supra in the field of Bankruptcy.
Roger Dobson (Sydney) was included in the "Hall of Fame" in the practice area "Restructuring & Insolvency" in the 2025 edition of The Legal 500 Asia-Pacific.
An article written by Brad B. Erens (Chicago) titled "Hertz: Third Circuit Weighs in on Make-Whole Premiums and the 'Solvent-Debtor Exception'" was published in Vol. 38, No. 1-2025 of the AIRA Journal.
Bruce Bennett (Los Angeles), Corinne Ball (New York), Ben Larkin (London), and Heather Lennox (Cleveland and New York) were ranked by Chambers Global 2025. The Restructuring/Insolvency practice is one of nine practices receiving a global-wide practice ranking.
Part I of a two-part article written by Corinne Ball (New York) and Christopher DiPompeo (New York) titled "Rediscovering Section 157(b)(5) Transfers in Mass Tort Bankruptcies" was published in the March 2025 edition of the ABI Journal.
An article written by Corinne Ball (New York) titled "Distressed M&A: Mass Torts, Bankruptcy and Furthering the Search for Consensus: Another Purdue Decision" was published in the December 23, 2024, edition of the New York Law Journal.
An article written by Heather Lennox (Cleveland and New York), Corinne Ball (New York), Gregory M. Gordon (Dallas), Dan T. Moss (Washington and New York), and Gary L. Kaplan (Miami) titled "The Year in Bankruptcy: 2024" was published on February 1, 2025, by Lexis Practical Guidance.
An article written by Brad B. Erens (Chicago) titled "Cramdown of Equity in Chapter 11 Plan Requires Assessment of Equity's Value to Satisfy 'Fair and Equitable' Standard" was published on February 1, 2025, by Lexis Practical Guidance.
An article written by Dan T. Moss (Washington and New York), Corinne Ball (New York), David S. Torborg (Washington), and Michael C. Schneidereit (New York) titled "Ninth Circuit: Reversal on Appeal of Order Denying Chapter 15 Recognition Does Not Retroactively Trigger Automatic Stay" was published on February 1, 2025, by Lexis Practical Guidance.
An article written by Corinne Ball (New York) titled "Distressed M&A: Safe Harbor Protection Extends to Overarching Transfer" was published in the January 27, 2025, edition of the New York Law Journal.
