Business Reorganization and Financial Restructuring

By Catherine Beideman Heitzenrater and Marie Bauer

In East Texas Machining & Manufacturing, LLC v. STV Engine 011, LLC, et al., the United States Bankruptcy Court for the Eastern District of Texas considered a motion for partial summary judgment filed by plaintiff-debtor East Texas Machining & Manufacturing LLC against STV Engine 001 LLC, Axle Box Innovations LLC and Texas Tactical Machining & Manufacturing LLC in an adversary proceeding within ETMM’s Chapter 11 bankruptcy case. The court granted ETMM’s motion based on a one-letter mistake in STV’s UCC-1 financing statement and found that STV’s $500,000 security interest was unperfected and therefore invalid and avoidable.

Read the full Alert on the Duane Morris LLP website.

By Marcus O. Colabianchi and Hunter C. Blume

Recently, the U.S. Bankruptcy Court for the Southern District of New York confirmed the Chapter 11 plan of liquidation for Broadway Realty I Co. LLC and affiliated debtors and approved the sale of a large portfolio of rent-stabilized residential properties to Summit Gold Inc., overruling objections by the City of New York. The decision provides guidance on the limits of housing-based objections and clarifies how bankruptcy courts may apply the “adequate assurance of future performance” standard to large, distressed residential portfolios.

Read the full Alert on the Duane Morris LLP website.

By Catherine Beideman Heitzenrater and Nathan Yeary

The United States District Court for the Southern District of New York recently addressed a transferee’s attempt to use corporate veil-piercing to defend against an avoidance action by a Chapter 7 trustee. The transferee-defendant argued that its potential liability for a challenged payment from the debtor could be offset by the value that it had provided to the debtor’s nondebtor affiliate. The Bankruptcy Court for the Southern District of New York dismissed the trustee’s action and agreed with the transferee-defendant that a nondebtor special purpose vehicle formed to acquire and hold real estate for the debtor was the debtor’s alter ego. The District Court reversed on appeal and concluded that the transferee did not have a reasonable equivalent value defense based on consideration provided to the special purpose vehicle, nondebtor affiliate of the debtor in exchange for a downpayment from the debtor.

Read the full story on the Duane Morris LLP website.

By James Billingsley and Drew S. McGehrin

A lapsed financing statement may not extinguish a creditor’s secured position in a bankruptcy case, according to the recent decision Utah Bankruptcy Court styled Thomson v. Short (In re Short). Secured lenders are nevertheless well advised to monitor and timely file continuation statements under any circumstances, especially in the case of a borrower bankruptcy.

Read the full story on the Duane Morris LLP website.