February 23, 2017 - This week the LSTA hosted the fourth installment of our quarterly roundup of Recent Developments in Bankruptcy Law. Rich Levin of Jenner & Block once again focused on a number of recent key cases for loan market participants. Among the most interesting issues was the “extraterritorial” reach of the avoiding powers of Section 547 of the bankruptcy code. The bankruptcy court in New York court ruled that payments made in Israel to an Israeli vendor within 90 days of a debtor’s U.S. bankruptcy filing were not avoidable as a preference because Section 547 did not extend to payments made entirely outside the United States. Another interesting case involved the question of “carve-out” payment limitations. In this case, the Delaware bankruptcy court ruled that secured creditors had to pay the legal fees of the creditors’ committee’s lawyers even though they far exceeded the carve-out negotiated in the DIP order. The court ruled that the secured creditors had sought plan confirmation based on a settlement negotiated with the creditors and so had impliedly consented to the legal fees. Thus, even without the express consent of the secured creditors, the court ordered that the fees be paid from the secured creditors’ collateral proceeds.
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