CR&B Alert - Commercial Restructuring and Bankruptcy News - September 2011, Issue 3

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In this Issue: CRAB Bites – Bad Boy Guaranties; CR&B Alert Case Update – Seventh Circuit Upholds Lenders’ Credit Bidding Rights in River Road Decision; Shareholders Permitted to Retain Ownership Under ‘New Value Exception’ to ‘Absolute Priority Rule’; Split in Courts Continues — Private Stock Purchase Payments Not Protected by Section 546 Safe Harbor; Drafting Tips for Trademark Licenses: Is Your Trademark Agreement a Trademark License, a Service Agreement — Or Both? The Answer Could Affect the Ability of a Licensee in Bankruptcy to Assign Rights Regarding the Trademark; Credit Swap Agreement Ipso Facto Clause Struck; Subrogation to ‘Claims’ Entitles Subrogee to Vote on Behalf of Itself and Subrogor; In a Case of First Impression, Court Holds Severance Pay is ‘Earned’ in Full on Date of Qualification, Not Pro Rata Throughout Employment; Director’s Motion to Dismiss Breach of Duty of Good Faith Claim Denied; Parent Company’s Motion to Dismiss Claim of Breach of Fiduciary Duty Denied; Counsel’s Corner: News From Reed Smith; and more.

We all know that many large commercial real estate loan transactions include “bad boy” guaranties from the principals of the borrower which spring into action upon the occurrence of certain events, like the filing of a bankruptcy petition. Some borrowers do not take these guaranties seriously since they think that they are in violation of public policy and/or constitute an unenforceable penalty. The public policy argument is that the springing recourse nature of the guaranty creates a conflict of interest between the guarantor’s self-interest and the fiduciary duty that the guarantor owes to the borrower’s shareholders, and perhaps creditors as well, as the borrower enters the zone of insolvency.

Please see full publication below for more information.

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