We know that our readers are busy during this time of year with vacation travel, holiday parties, and deals closing before year end.  And we know that it’s easy to fall behind on your essential bankruptcy reading.  Our gift to you this holiday season is this look back at our last six weeks of Weil Bankruptcy Blog posts, wrapped up into three neat little packages (or posts, that is).  So grab your glass of eggnog, and put your feet up, as we recap what you may have missed. 
Insiders:  A Perennial Favorite
Like It’s a Wonderful Life, which we could watch over and over this time of year, we never get tired of court cases analyzing who qualifies as a statutory or non-statutory insider for purposes of avoidance actions.  In the post entitled Making a Clean Break, Part I: Tenth Circuit Sheds Light on When Terminated Officer Ceases to Be Insider, I wrote about whether a terminated officer continues to be an insider following termination.  In that case, the Tenth Circuit found that the former officer made a “clean break” and ended his status as a statutory insider after termination.  Similarly, the officer did not possess either the type of control of – or relationship to – a company necessary to make him a non-statutory insider, and negotiated at arms’-length with the company’s board on his severance package.  Therefore, the longer statutory “lookback” period for avoidance actions against insiders did not apply.
Jessica Diab also discussed the issue of non-statutory insiders in her post, Another Case Involving a Truck, But Not to Worry – This One Is Not About Interest Rates!  In that case, the court found that modest personal relationship of a counterparty to an allegedly preferential transfer with the debtors, which involved sharing meals and attending basketball games, did not amount to the kind of influence or control that would make the counterparty a non-statutory insider.  The case reminds us, again, that in determining insider status, courts will look at whether the counterparty exercised control and influence over the debtor, and whether the parties failed to negotiate at arms’-length.
Reasonably Equivalent Value:  Another Perennial Favorite
Jessica Diab’s post also reminds us that where a party transfers value for the benefit of a related third party, the indirect benefit received by the transferee may constitute value, but only if such benefit is sufficiently concrete and identifiable.  The case Jessica discussed involved transfers of real estate and equity in personal property in exchange for the ability of transferors to see if the financial situation of the LLC of which they were members could be saved.  This, according to the court, was not a transfer of reasonably equivalent value.
Reasonably equivalent value also was the focus of my second post, Making a Clean Break, Part II: Tenth Circuit Sheds Light on Reasonably Equivalent Value for Severance.  That post covered the court’s conclusion that a terminated officer’s severance, in exchange for an agreement not to compete, a promise not to derail the company’s negotiations over $80 million of financing, and a waiver of potential wrongful claims over his termination was a “fair deal.”  The court determined, among other things, that the non-compete agreement was not just “free money” to a former insider — the officer was compensated for money he legitimately could have earned at a competitor, and he did not already owe a fiduciary duty to the company not to compete with it.
Class Warfare
Kevin Bostel explored the impaired accepting class requirement for chapter 11 plans in his post, S.D.N.Y. Explores Impairment of a Secured Creditor Retaining its Collateral.  Kevin discussed a case where a secured creditor was found to be impaired although it retained its interest in its collateral.  The court found that because the secured creditor had also agreed to pay the administrative claims of the chapter 11 cases under the proposed plan, the secured creditor was receiving less than it was entitled to, and its claim was impaired.  Kevin concludes that a contribution for the benefit of other creditors can render a secured creditor retaining its collateral under plan impaired, although it is an open question how significant the contribution must be.
More News on Make-Whole Premiums
You can never have too much of a good thing… or coverage of make-wholes.  Jessica Liou’s post, What the Future Holds for Make-Whole Claims in Bankruptcy (Redux): Examining the Energy Future Holdings EFIH Second Lien Make-Whole Decision, covers the latest decisions from Judge Sontchi denying the EFIH Second Lien Noteholders and EFIH PIK Noteholders their make-whole claims after automatic acceleration of the debt upon the bankruptcy filing.  With respect to those claims, Judge Sontchi found the language in the indentures was not clear or specific enough that the make-whole claims must be allowed upon automatic acceleration.  Jessica concludes that lenders seeking to increase the odds that that their make-whole claims will survive judicial scrutiny should negotiate for language explicitly stating (i) the amount and type of premium that would come due, (ii) that the premium is due upon automatic acceleration, and (iii) that, if a premium is triggered upon a voluntary prepayment, any repayment of the debt after acceleration is deemed a voluntary prepayment.
We’ll post additional look-back pieces for the next two days, so stay tuned!
Debora Hoehne is an Associate at Weil Gotshal & Manges, LLP in New York.