By: Ramona Ortega In a “cramdown” reorganization involving the sale of the debtor’s assets, does a secured creditor have an absolute right to use its outstanding claim against a debtor to purchase its own collateral? The Supreme Court will answer this question in April. The contested use of credit bidding under 1129(b) of the Bankruptcy Code turns on the interpretation of a single “or” and the meaning of “indubitable equivalent.” In December of 2011, the Supreme Court granted certiorari in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166 (cert. granted Dec. 12, 2011), a Seventh Circuit case that denied…
Author: Online Managing Editor
By: Thomas E. Holber This blog post will compare and contrast recent claw-backs of executive compensation in England with statutory remedies available under United States securities laws. This February, two British financial institutions, Lloyds Banking Group and HSBC, made headlines by announcing “claw-backs” of previously awarded executive bonus compensation. A claw-back eliminates the award and returns the money to the bank. It is not known at this time how the financial institutions determined that a claw-back was appropriate in these cases. Presumably, each of the claw-backs was facilitated by employment agreement provisions. Each of the compensation claw-backs was preceded by…
By: Jared Sorin The much anticipated Facebook IPO is nearly upon us. After months of speculation, Facebook finally filed a registration statement on February 1st that will, if and when declared effective by the SEC, allow Facebook to undertake its initial public offering of its common stock. The company, eight years old and the world’s largest social network, seeks to raise $5 billion. The capital to be raised represents a mere 5% of the company’s estimated enterprise value of $100 billion. Assuming this astounding valuation holds, Facebook will be valued at four times Google’s valuation when it went public back…
By: Italia Almeida Legislation entitled Jump Start Our Business Startups Act (JOBS) passed the House of Representatives on Tuesday, March 27 with a majority vote . The JOBS Act loosens some of the restrictions of 2002’s Sarbanes-Oxley law and other strict regulations implemented in the wake of Enron and Worldcom scandals. The newly signed bill is also meant to ease the rules and regulations of initial public offerings in American markets. The move from congress comes at an opportune time since the average number of companies with less than fifty million in annual sales that listed publicly dropped from 165 steadily…
By: Adam Levy Yahoo publically alleged recently that social-networking giant Facebook infringed on 10 to 20 of its patents, demanding license fees or alternatively face a lawsuit. Facebook, still in the “quiet period” following the February filing of its S-1 (a required SEC filing for companies going public to register their corporate securities), is still evaluating Yahoo’s claims. Yahoo’s aggression is somewhat out of character, even for a company called Yahoo! If Yahoo’s threat escalates into a full-blown lawsuit, it would be Yahoo’s first offensive patent litigation against a large public company. At any rate, Facebook’s options seem limited. Other…
By: Kirill Kan The current proposed Volcker Rule (“Rule”), has divided regulators, threatened bank’s international competitiveness, and failed to meet Wall Street reform groups’ demands for creating substantive changes in bank practice and culture. Despite such discord, regulators are set on creating a workable provision, having posed 394 questions for the industry and the public to consider. Monday, February 13 marked the final day of the comment period throughout which representatives for the world’s largest banks commented that the prohibitions imposed by the proposal to ban proprietary trading would increase risk, raise costs for investors, and be vulnerable to legal…
By: MD As is common in bankruptcy proceedings, the recent Chapter 11 bankruptcy of AMR Corp., the parent company of American Airlines, has created uncertainty as to the value creditors can hope to collect from the restructured entity in the future. Secured and unsecured creditors alike are wondering what type of value they will be able to recover if and when the entity reemerges from bankruptcy as a going concern. However, certain secured creditors of American Airlines, in particular, face an interesting new legal challenge to recovery as the legitimacy of certain collateral is being called into question. In order…
By: Thomas E. Holber In recent months, the Securities and Exchange Commission (the “SEC”) has made two key investor protection reforms as a consequence of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). In general, securities regulations employ the concept of an exempt “sophisticated investor,” capable of bearing certain investment risks and requiring relatively less protection from those securities acts. While the concept of “sophistication” can be used as a term of art, rules promulgated under the Securities Act of 1933 (the “33 Act”) and the Investment Advisers Act of 1940 (the “Advisers Act”) and collectively…
By: Jared Sorin In a rare example of bipartisan cooperation, Congress created a 100% exclusion from federal tax liability for gains on sales of qualified small business stock (“QSBS”), provided that the stock was acquired between September 23, 2010 and December 31, 2010. This long overdue display of positive government action, rather than gridlock, was partly motivated by the desperate need to stimulate the U.S. economy and create jobs. Politicians and pundits alike concluded that the federal tax exclusion would encourage job creation, innovation, revenue, profits, and wealth accumulation by motivating investors to invest in smaller companies, such as the…
By: Italia Almeida 2012 has begun with a strong uptick in investor interest in high yield bonds, and the launching of a smattering of bond strategy funds, including many aimed at capitalizing a seemingly risky market. Despite the negative title, junk bonds are identical to standard bonds, except for the distinct credit class of the issuer. To be deemed a junk bond, the issuer generally has a low a credit rating, usually below a “B,” from Standard & Poor’s, Moody’s, or another other rating agency. The bonds offer higher returns because low-grade issuers have fewer options for acquisition of capital…