This week the LSTA hosted the fifth 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. The most important issue covered was the recent Supreme Court decision in In re Jevic where the Court ruled that non-consensual structured dismissals that distributed an estate’s property in violation of the absolute priority rule are prohibited.
Last week, in In re Jevic, the U.S. Supreme Court reaffirmed the most fundamental principle in bankruptcy – the absolute priority rule – while at the same time recognizing that flexibility in the bankruptcy process itself is essential. It was a very important win for secured lenders.
Yesterday, in In re Jevic, a case of enormous importance to the loan market, the U.S. Supreme Court ruled 6-2 that non-consensual “structured dismissals” that distribute estate assets in violation of the “absolute priority rule” are not permitted under the bankruptcy code. The decision underscores the importance of the absolute priority rule as a bedrock principle of U.S. bankruptcy, a principle that is at the heart of secured lending.
In the past year the LSTA weighed in as amicus curiae (friend of the court) in four cases of enormous importance to the loan market. Happily, the results in the two cases decided so far have been decidedly good. The two other cases have been fully briefed and argued and await decision in the next few months. The cases are recapped below.
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