David Conaway’s article, “When Worlds Collide: Article 2 of the Uniform Commercial Code and Chapter 11” was the lead article in the American Bankruptcy Institute’s Unsecured Trade Creditors Newsletter, July 2016.
The Wall Street Journal, June 16, 2017 edition, reports that Takata Corporation is preparing a bankruptcy filing, as soon as next week, in both Japan and the United States. A key reason for the United States’ Chapter 11 filing is to utilize the strategic tool, a Section 363 sale, to consummate a “takeover” deal with rival Key Safety Systems, Inc. Section 363 allows a Chapter 11 debtor to sell all of its assets to a third party, free and clear of certain liabilities. Key issues for creditors in the Chapter 11 case will include the allocation of the purchase price paid; the liabilities assumed by Key Safety Systems, Inc.; and the allocation and impact of the recall costs among Takata’s stakeholders, including the affected automakers.
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The so-called 20-day administrative priority claim (set forth in Section 503(b)(9) of the Bankruptcy Code) is perhaps the best remedy available to vendor creditors in Chapter 11 cases.
In 2005, Congress amended the U.S. Bankruptcy Code and added Chapter 15 (cross-border insolvency), and the game-changing Section 503(b)(9) claim, which functionally eclipsed the reclamation claim. At its essence, Section 503(b)(9) claims allow vendors to convert a portion of their pre-petition claims (arising from goods delivered within 20 days prior to filing) from near valueless general unsecured claims to administrative priority claims, which are generally paid in Chapter 11 cases. Section 503(b)(9) claims have had a major impact on Chapter 11 cases because they add a significant financial obligation that must be paid. Naturally, Chapter 11 debtors and their lenders have challenged such claims to minimize the financial impact of Section 503(b)(9). Since 2005, there have been a number of reported and unreported cases that provide guidance on successfully utilizing the remedy.
Below is an excellent article by my partner David Grogan on the nuts and bolts of Section 503(b)(9) claims in Chapter 11 cases.
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Sharing my article, “Everything Must Go: Retail Chapter 11 Filings”, published in the Spring 2017 edition of Eurofenix, a publication of INSOL Europe, the premier association of insolvency professionals in Europe.
I am pleased that the National Association of Credit Management’s January, 2017 edition of Business Credit magazine included my article, “Unsecured Creditor Carve-Outs: Continue reading
Thank you to the National Association of Credit Management Northwest for publishing my article, Winners and Losers: They Call Alabama The Crimson Tide, Call Me Deacon Blues, about Chapter 11 Section 363 sales of assets, and how various Chapter 11 stakeholders fare in such sales. For music fans, the title is from Steely Dan’s Grammy winning album Aja. Continue reading
Sharing my article on a recent Delaware Bankruptcy Court ruling regarding the right of reclamation of goods sold to a company that files Chapter 11. The case held that the vendor’s reclamation claim had priority over the DIP lender’s liens on inventory.