When a company files for bankruptcy, creditors often wonder if they will get paid. The answer depends on the priority and treatment of each claim in the bankruptcy process. Troutman Pepper's Creditor’s Rights Toolkit...more
This practice note discusses how a bankruptcy court may recharacterize documents that purport to create a loan transaction and determine that the transaction, despite labels, is something else—a transaction providing for a...more
It is generally recognized that a bankruptcy court has the power—either equitable or statutory—to recharacterize a purported debt as equity if the substance of the transaction belies the labels the parties have given it. A...more
When is a loan not a loan? The SDNY Bankruptcy Court in In Re: Live Primary, LLC held that a $6 million start-up loan was actually an equity contribution after analyzing the terms of the transaction and the intent of the...more
In a recent decision, the Bankruptcy Court for the Southern District of New York held that a purported debt held by an entity with a near-majority membership interest in the Debtor was actually equity disguised as a loan. ...more
Recently, in Official Comm. of Unsecured Creditors v. Victory Park Capital Advisors, LLC (In re Katy Indus., Inc.), Case No. 17-50937 (Bankr. D. Del. July 6, 2018), the Bankruptcy Court for the District of Delaware dismissed...more
On August 10, 2017, the U.S. Supreme Court rescinded the grant of certiorari in PEM Entities LLC v. Levin on the grounds that review had been “improvidently granted.” The case seemingly provided a perfect vehicle to resolve...more
The Supreme Court recently granted certiorari in PEM Entities LLC v. Levin, in which it will decide whether federal or a state law should apply when a debt claim held by a debtor’s insider is sought to be recharacterized in...more
One critical issue affecting complex restructuring cases are efforts by the estate or creditors to recharacterize debt into equity. This can happen in a variety of factual contexts, including where an existing equity...more
The Supreme Court has granted certiorari to decide the question of whether bankruptcy courts should apply state law or a federal rule of decision when determining whether to recharacterize a debt claim as a capital...more