Shumaker Manufacturing

A Legal & Industry Review


Bracing for Takata Bankruptcy

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.

We hope you found this useful and informative.  Please contact us if you have any questions about this or any other matter. Takata[1]

 


Recent Article on the Nuts and Bolts of Section 503(b)(9) Claims in Chapter 11 Cases

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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.

We hope you find this useful and informative. Please contact us if you have any questions about this, or any other matter.

The Chapter 11 Vendor Game Changer: Section 503(b)(9) Claims

 


Winners and Losers: They Call Alabama the Crimson Tide, Call Me Deacon Blues

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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


Unsecured Creditor Carve-Outs: Chapter 11 Misery Makes Strange Bedfellows

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I am pleased to share my article “Unsecured Creditor Carve-Outs: Chapter 11 Misery Makes Strange Bedfellows”, regarding a vendor remedy in Chapter 11 cases…the secured creditor carve-out. The U.S. Supreme Court will soon decide the fate of this remedy. I hope you find this informative and helpful.

DHC Newsletter – Unsecured Creditor Carve-Outs: Chapter 11 Misery