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| vol 20, num 1 | MARCH 2022 |
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| Sales “Free and Clear” Through an Assignment for the Benefit of Creditors |
| Now more than ever, companies have been in distress and facing financial troubles since the COVID-19 pandemic struck the globe. Following the expiration of federal and state financial assistance to businesses, such as the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), and other grants and loan programs, companies must understand their options for reorganizing or liquidating their businesses in an orderly manner.
Background
An assignment for the benefit of creditors (ABC) is an effective tool, and a common law or statute alternative to bankruptcy, for companies to consider in order to liquidate their business and assets. An ABC is a state court liquidation procedure in which an assignee, similar to a trustee in a bankruptcy case, serves as a court-appointed fiduciary to administer assets in the ABC to maximize value for creditors and the estate.
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| Chicago Bankruptcy Judge Rules Fulton Does Not Compel Dismissal of Automatic Stay Violation Claims |
| In the much-discussed decision of City of Chicago v. Fulton, the Supreme Court ruled that a creditor’s continued retention of estate property that was seized pre-petition does not violate the automatic stay under § 362(a)(3) of the Bankruptcy Code. Yet the majority opinion and Judge Sotomayor’s concurrence emphasized that the Court’s ruling was limited to § 362(a)(3). The Court left open the possibility that continued retention of an estate property may violate provisions of the automatic stay other than § 362(a)(3).
In Cordova v. City of Chicago, Hon. Timothy A. Barnes of the U.S. Bankruptcy Court for the Northern District of Illinois provided a partial answer to the question that was left open by the Court. In a motion to dismiss by the defendant City of Chicago (the “City”), Judge Barnes rejected the City’s argument that the Court’s decision in Fulton forecloses claims under other provisions of the automatic stay, as a matter of law. As a result, the plaintiffs’ claims under § 362(a)(4) and (6) survived.
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| Announcing Our Committee's Panel at the Annual Spring Meeting! |
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| ABI is pleased to announce the in-person return of the Annual Spring Meeting. Always one of the most significant annual gatherings of bankruptcy and insolvency professionals in the country, ABI's Annual Spring Meeting provides the ultimate in learning and networking opportunities for the insolvency community — both in person and online.
The Young & New Members Committee will be partnering with the Unsecured Trade Creditors Committee for a panel titled, "Reconsidering Value Allocation: Tools for Junior Stakeholders." This panel will discuss how § 506(c) and 552(b) waivers have become a staple in the pre-petition-lender-turned-DIP-lender toolbox. But what are the unsecured creditor’s tools for pushing back, and the arguments for why value that accrued post-petition might properly be reserved for junior creditors? Apart from collateral battles, this panel will explore the types of securities or other considerations that some plans have distributed to the class junior to the fulcrum security in acknowledgment of the potential asset appreciation not fully realized at the time of plan negotiation, as well as the ABI Commission’s recommendation to implement a “Redemption Option Value” — and the
challenges that such structures pose.
Speakers for this panel include:
- James Millstein, Guggenheim Securities; New York
- Hon. Michelle Harner, U.S. Bankruptcy Court (D. Md.); Baltimore
- Omar Alaniz, Reed Smith LLP; Dallas
- Jeannie Kim, Sheppard Mullin; San Francisco
- Susan Poll Klaessy, Foley & Lardner LLP; Chicago
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