November 09, 2018
Cadwalader advised the Structured Finance Industry Group (SFIG) in the involuntary chapter 11 petition filed against Taberna Preferred Funding IV, Ltd in June 2017 in the U.S. Bankruptcy Court for the Southern District of New York. SFIG filed an amicus curiae brief in support of noteholders and various other parties-in-interest opposing the petitioning creditors’ involuntary petition and their qualifications under the Bankruptcy Code to have commenced the involuntary case. In pertinent part, SFIG asserted that involuntary chapter 11 petitions against securitization vehicles, like Taberna, serve no valid reorganizational purpose, violate public policy, and threaten industry expectations that such vehicles are bankruptcy-remote. Further, SFIG argued that investors in non-recourse and bankruptcy remote securitizations should not be eligible to commence involuntary cases.
After months of motion practice between the petitioning creditors and the parties opposing the involuntary petition, on November 8, 2018 Judge Vyskocil issued an opinion dismissing the petition and finding that (1) the petitioning creditors did not meet the requirements of the Bankruptcy Code to have commenced the case, (2) the involuntary case served no legitimate bankruptcy purpose, and (3) it was in the best interests of the creditors and the estate that the case be dismissed. Judge Vyskocil cited to SFIG’s amicus brief to support the proposition advanced therein that if the Petitioning Creditors’ tactics were permitted and rewarded with an entry of an order for relief, it could create significant uncertainty across the capital markets.
The Cadwalader team was led by partners Neil Weidner and Michele Maman, Senior Counsel Mark Ellenberg and Howard Hawkins, and associates Nicholas Vislocky and Andrew Greenberg.