Bankruptcy & Restructuring: Structured Dismissals, Out-of-Court Workouts, and Safe Harbors

There have been many significant court decisions recently that will impact corporate restructurings far into the future. Earlier this year in Czyzewski v. Jevic Holding Corp., the Supreme Court limited the utility of "structured dismissals" in Chapter 11 cases, which have become an increasingly popular method of effecting corporate reorganizations or liquidations, particularly in cases where a Chapter 11 plan cannot be confirmed. The Jevic decision thus narrowed the range of restructuring alternatives for very distressed Chapter 11 debtors. In addition, the Second Circuit Court of Appeals in Marblegate Asset Management, LLC v. Education Management Finance Corp. restored clarity to the capital markets regarding the question of whether distressed companies may conduct out-of-court restructurings that do not by their terms alter core payment terms of indentures for publicly-issued debt securities.

The Second Circuit's decision reversed an earlier lower court opinion that had introduced significant uncertainty into a very popular restructuring method. Finally, a number of influential courts recently opined on the scope of the Bankruptcy Code's "safe harbor" against preference and certain fraudulent transfer avoidance actions. That safe harbor protects certain transfers arising in connection with securities contracts, commodity contracts and forward contracts involving specific types of financial intermediaries from these "claw-back" actions, which benefits defendants and hinders plaintiffs.

Michael J. Riela, a partner in the Creditors' Rights and Business Reorganization practice group at the law firm of Tannenbaum Helpern Syracuse & Hirschtritt LLP, will discuss these significant recent cases, as well as their potential effect on future restructuring strategies and options.

Learning Objectives:

1. Understand the recent cases regarding corporate bankruptcies, as well as their effect on strategies and options in future restructuring matters
2. Discuss the future of structured dismissals of Chapter 11 cases
3. Consider the effect of out-of-court workouts involving public debt securities
4. Examine the Bankruptcy Code's "safe harbor" from preference and certain fraudulent transfer avoidance actions