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Regulators have cautioned that LIBOR - which serves as a reference rate for approximately $35 trillion dollars of debt and derivatives - will be phased out as early as the end of 2021. As a result, countless instruments will have to be amended to provide for a new reference rate. If these amendments are treated as "material modifications," they could significantly affect the parties to the instruments.
This practice note provides an overview of the law and legal standards governing the imposition of criminal liability on officers, directors, and corporations for the acts of employees. The practice note discusses the federal government’s policies and procedures in corporate criminal investigations and prosecutions, and the most common areas of corporate civil liability under the federal securities laws.
This excerpt from Lexis Practice Advisor®, a comprehensive practical guidance resource providing insight from leading practitioners, is reproduced with the permission of LexisNexis. Reproduction of this material, in any form, is specifically prohibited without written consent from LexisNexis.
This article discusses a few of the more important provisions that are anticipated to affect the pharmaceutical industry in its interactions with the U.S. Drug Enforcement Administration.
The authors provide guidance on defending frivolous and bad faith claims in employment actions. While the article generally covers federal employment law claims, many of the strategies discussed also apply to state employment law claims. (Note: This excerpt from Lexis Practice Advisor®, a comprehensive practical guidance resource providing insight from leading practitioners, is reproduced with the permission of LexisNexis. Reproduction of this material, in any form, is specifically prohibited without written consent from LexisNexis.)
Jason Schwartz, Gary Silverstein, and Daniel Ng discuss the tax considerations applicable to the growing market for commercial real estate collateralized loan obligations (CRE-CLOs). The authors analyze CRE-CLO structures that can be used for securitizing pools of assets that are inappropriate for acquisition by a real estate mortgage investment conduit (REMIC).
Todd Blanche and Stephen Weiss explain that with the government placing more emphasis on holding individuals responsible for corporate wrongdoing, unique styles and approaches to interviews with prosecutors are a necessity.
Jodi Avergun and Joseph Moreno provide analysis on the implications of the Second Circuit’s ruling in United States v Hoskins.
In this comprehensive Q&A, the authors review notable recent developments in the provision of private client and offshore services, including individual taxation, compliance issues, wills and probate, capacity and power of attorney, and family links.
The authors discuss the tax considerations applicable to the growing market for commercial real estate collateralized loan obligations (CRE-CLOs), and analyze CRE-CLO structures that can be used for securitizing pools of assets that are inappropriate for acquisition by a real estate mortgage investment conduit (REMIC).
Commercial real estate collateralized loan obligations, or “CRE-CLOs,” are growing in popularity as a way to securitize mortgage loans. Market participants have predicated as much as $14 billion of new CRE-CLO issuances in 2018, compared to $7.7 billion in 2017.
Click to read Jodi's full profile write-up in Global Investigations Review.
Read Cadwalader’s perspective on the recent trends and developments in shareholder activism written by Global Litigation co-chair Jason Halper, special counsel Gillian Burns, and associate Ailsa Chau.
Global Litigation co-chair Jason Halper joins a panel moderated by Corporate Disputes Magazine to discuss disputes arising from M&A transactions.
Anne Tompkins outlines five practical tips you can use as a summer associate to make the most of the social and networking events your firm has planned.
Banking and Finance analysis: David Quirolo and Jeremiah M Wagner (partners) and Neil Macleod (special counsel) in Cadwalader’s Capital Markets Group, point out that new criteria aimed at assisting the financial industry in its development of simple, transparent and comparable (STC) short-term securitisations may be too restrictive, and the regulatory benefits may not be sufficiently significant, for the criteria to be widely adopted.
This article was first published on Lexis®PSL Banking and Finance on 6 June 2018.
International arbitration has been a hive of activity in recent times, with the number and value of disputes referred to arbitration continuing to grow. Concurrently, the arbitration community has observed a number of fresh trends and developments, including demands for greater transparency in how arbitration is administered, support for third-party funding across major arbitration jurisdictions and an uptick in arbitration involving sovereign states. An increasingly important tool for international businesses, arbitration, for many, is evolving into the preferred method for dispute resolution across the globe.
Cadwalader's Joseph Moreno, Kyle DeYoung, Keith Gerver, Alexander Hokenson, and Stephen Weiss discuss the Yahoo settlement and changes to SEC expectations on cyber disclosure.
Adam Blakemore and Catherine Richardson reflect on the development of, and practical considerations associated with, the existing legislation, and provide guidance on some of the aspects that may be subject to further amendments.
States could reform their various laws to implement new data protection and breach notification standards, but this would be a piecemeal effort that could be years in the making and would still retain a balkanized system with laws of varying scope and effectiveness.
Neil Weidner and Peter Williams explain the implications of the US Court of Appeals’ risk retention ruling on collateralised loan obligations (CLOs).
The Subscription Credit Facility (each, a “Facility”) and related Fund Finance markets had a fascinating 2017. On the one hand, everything stayed exactly the same. Like virtually every year since the financial crisis, Facility credit performance remained pristine, with no monetary defaults having become public last year. And the out-paced growth rate continued. But, on the other hand, outside of the four corners of the transactions, change seemed to come daily. This chapter summarizes the key trends in the Facility and Fund Finance markets in 2017 and forecasts developments for the coming year.
In this chapter, authors Jodi Avergun and Bret Campbell discuss restrictions in a criminal investigation or trial, the investigatory and pre-trial stage, trial and post-trial stage, discovery of internal corporate communications and much more.
In this chapter, authors Joseph Moreno and Anne Tompkins discuss prosecutorial discretion, principles of federal prosecution, DOJ enforcement priorities and policies, individual accountability for wrongdoing and much more.
The authors examine a tax structure that U.S. collateral managers of collateralized loan obligation issuers commonly use to comply with the U.S. and European “risk retention” rules enacted following the 2007–2008 global financial crisis that require sponsors of securitization vehicles to maintain a financial interest in those vehicles.
The recently enacted Tax Cuts and Jobs Act is causing concerns for advisers of middle-market collateralized loan obligation issuers, or MM CLOs, that are engaged in a U.S. trade or business for U.S. tax purposes.
On February 1, 2018, the Delaware Court of Chancery granted defendants’ motion to dismiss an action brought by minority unitholders of Trumpet Search, LLC. The decision in Christopher Miller et al. v. HCP & Co., et al is a powerful reminder that the broad freedom of contract that Delaware law accords entities such as LLCs offers both the promise of great latitude to contracting parties and the threat of serious pitfalls for parties that fail to carefully protect their interests in the agreement. The decision also underscores the limits on an implied covenant breach claim under Delaware law.
When considering how and when to update the SEC or the DOJ about the status of an investigation, company and outside counsel should weigh whether the risk of a later finding that the update constituted a privilege waiver outweighs the benefit of cooperation.
Universities and their college basketball programs are facing pressure on both ends of the court: first from the U.S. Attorney’s Office for the Southern District of New York (SDNY) and the FBI, and second from the NCAA. This article discusses how universities can take a proactive approach in the wake of the SDNY investigation.
Cadwalader Finance Group co-chair Michael Mascia is the Contributing Editor of Global Legal Insights’ recently released comprehensive guide to the fund finance market, “Fund Finance 2018: Second Edition.” Mascia and Cadwalader Finance partner Tim Hicks also co-authored the chapter “Equity Commitment Facilities: A Primer,” which summarizes the key structural features of an equity commitment facility and outlines the essential considerations for lenders. View the chapter and the book in its entirety here.
In the wake of the 2007-2008 global financial crisis, the United States and Europe enacted “risk retention” rules that require sponsors of securitization vehicles to maintain a financial interest in those vehicles (i.e., “skin in the game”).
Todd Blanche and Kyle DeYoung discuss the criminal liability that outside counsel may face in complex business cases.
Whether you were waiting for a “wall” or a “wave” to hit the commercial mortgage-backed securities market last year, 2017 did not deliver the massive amount of CMBS refinancings predicted by many at the end of 2016. In this article, we will review what happened during 2017 and look ahead to what the industry might see in 2018.
Jason Schwartz, Jean Bertrand and Kara Altman discuss the provisions in the current House and Senate tax reform proposals that could, if enacted in their current form, significantly affect securitization vehicles and investment funds.
Companies that are either located in, or transact business in the United States – even if they are not in highly regulated industries like health care or finance – are subject to an almost ever-increasing array of regulations with which they must comply. Add to that the financial incentives provided by the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (“Dodd-Frank Act”) and companies can find themselves at the center of regulatory or criminal investigations in an instant.
Robert Cannon considers the EU securitisation regulation adopted by the European Parliament on 26 October 2017 and the impact it will have on the European securitisation market.
The authors address United States v. Martoma, which eliminates the need to prove a “close personal relationship” between tippers and tipees who exchange confidential information, and will likely expand the number of criminal insider trading prosecutions by the federal government. It is the latest in a string of important decisions concerning the scope of insider trading liability.
In a secured lending transaction, it is common for a lender to take security over a borrower’s deposit accounts as part of its collateral package. In the United States, such security interest is commonly perfected under the Uniform Commercial Code (UCC) by the entrance of the secured party, the debtor and the thirdparty account bank at which the deposit account is maintained into a deposit account control agreement (a DACA). While effective to perfect a security interest, the process of entering into and maintaining DACAs, and complying with their various terms, can be burdensome on all parties involved. This article takes a closer look at the potential implementation of a blockchain structure on traditional DACAs.
Since the DOJ launched the Pilot Program in April 2016 to encourage companies to self-report FCPA violations and cooperate with the feds, the DOJ has published seven declination letters addressed to companies under investigation. Companies should review and understand the implications of the DOJ’s use of declinations with disgorgement, as we expect the current practice to continue.
The emergence of blockchain technology in commodities trading raises important questions about the future of bills of lading and how these novel technologies fit with the legal concepts surrounding documents of title.
This article examines the successful $1.1bn reorganisation of Roust Corporation in the United States Bankruptcy Court for the Southern District of New York earlier this year. Cadwalader acted as transatlantic adviser to the Ad Hoc Committee of Convertible Noteholders.
The Subscription Credit Facility and related Fund Finance markets continued their outpaced growth in 2016, extending the long-standing industry trend. Mirroring the recent experience both during and after the financial crisis, facility credit performance remained pristine, with no monetary defaults having become public last year. The authors summarize the key trends in the Facility and Fund Finance markets in 2016 and forecasts developments for the coming year. This article appeared in the 2017 edition of The International Comparative Legal Guide to Lending & Secured Finance, published by Global Legal Group Ltd, London.
The authors discuss how to provide due process to higher ed students accused of sexual misconduct.
Cadwalader Finance Group co-chair and Head of U.S. Fund Finance Wesley Mission co-authored the chapter on the U.S. subscription credit facility and fund finance market in Fund Finance 2017, a comprehensive guide to the fund finance market published by Global Legal Insights.https://www.cadwalader.com/uploads/books/cda68bb4b33bf019c3efaee1dc4c3075.pdf
The decision in Merion Capital LP et al. v. Lender Processing Services Inc. is just the latest of several relatively recent decisions equating fair value and merger consideration where the merger was the product of an appropriate sale process consisting of, among other things, an arm’s‑length negotiation conducted by an independent and informed board advised by independent financial advisors.
In recent years, the U.S. Supreme Court has been making it more difficult to obtain and enforce patent protection for computer- and life science-related technologies. However, two recent Federal Circuit cases (Rapid Management Litigation and McRO) suggest there may be reasonable boundaries on the court's principles for excluding patent protection.
Assia Damianova discusses the ISDA and FIA execution agreement, cleared derivatives execution agreement and addendum.
Marijuana might be legal in some places, but as IRS audits increasingly show, just doing business with the legal marijuana industry brings significant compliance challenges, especially for the financial services world.
Gregory Markel and Gillian Burns explain the implications of the Delaware Court of Chancery's decision in In re Trulia, Inc. Stockholders Litigation. The Court sent a forceful signal to the plaintiffs’ bar and corporate defendants by adopting a new standard for judicial approval of disclosure-only settlements in litigation challenging public mergers and acquisitions.
The authors discuss the key issues that college and university administrators should consider when dealing with sexual assault investigations and adjudications.
Nick Shiren discusses the impact on securitisation and CLOs should the UK lose all passporting rights to sell services into the EU following Brexit.
Private Client analysis: Catherine Richardson, associate, and Adam Blakemore, partner, provide an update on the criminal offences and civil sanctions aspects of Finance Bill 2016 (formally known as Finance (No 2) Bill).
This article was first published on Lexis®PSL Private Client on 26 April 2016. Click for a free trial of Lexis®PSL.
The Subscription Credit Facility and related Fund Finance markets continued their outpaced growth in 2015, building upon and continuing a market trend in place since at least 2010. Michael Mascia and Wesley Misson summarize the key trends in the Facility and Fund Finance markets in 2015 and forecast developments for the coming year. This article appeared in the 2016 edition of The International Comparative Legal Guide to Lending & Secured Finance, published by Global Legal Group Ltd, London.
A major challenge to the growing Fintech industry comes from government scrutiny and enforcement actions - particularly as they relate to money laundering and the financing of terrorist activity.
The Cybersecurity Act of 2015 – Congress’s first major piece of cybersecurity legislation –has been years in the making. President Obama signed into law a $1.1 trillion omnibus spending bill that contained the Act late last year. The authors of this article discuss the Act and its implications.
This most recent settlement between the FTC and LifeLock provides another important opportunity for businesses to evaluate their data security practices to ensure the protection of consumer data and the accuracy of their representations regarding those practices.
Despite generating an estimated $4.5 billion in revenue last year, the legal marijuana industry has yet to solve one of its biggest issues—the lack of reliable payments, banking and other financial services.
The mandatory-subordination provision of § 510(b) of the Bankruptcy Code serves the important purpose of preventing disappointed shareholders from assuming the guise of creditors in order to enhance their recoveries in bankruptcy.
Until very recently, abusive litigation related to mergers was all but certain to follow the announcement of a public merger. Last fall, we wrote an article discussing the proliferation of disclosure-only settlements used to resolve merger litigation, which in many cases do not provide any economic benefit to shareholders and foreclose potentially valuable claims that have not been thoroughly vetted.
Despite its astounding growth in recent years, the marijuana industry remains hampered by its own banking crisis. Marijuana businesses' difficulty in accessing financial services has created problems for businesses and government alike.
Corporate Crime analysis: What proposed criminal offences and civil sanctions are included in the draft Finance Bill 2016? Catherine Richardson, associate at Cadwalader, Wickersham & Taft LLP, and Adam Blakemore, partner at the firm, consider the proposed new criminal offences and civil sanctions contained in the draft Finance Bill 2016.
In the past five years, the U.S. Department of Justice (DOJ) has negotiated ever more eye-popping settlements with companies in cases involving violations of the U.S. Foreign Corrupt Practices Act, health-care fraud and financial fraud. With each new corporate resolution, the DOJ announces larger and larger penalties.
The sophisticated Delaware Chancery Court, the home to a great deal of corporate governance litigation, has recently made efforts to curb merger lawsuits that lack merit. Such cases make up a substantial portion of the claims that follow almost every public merger and are often resolved with nothing more than a few meaningless disclosures, a broad release and hundreds of thousands of dollars of plaintiffs attorneys’ fees. Examining these issues now is timely because the Delaware Chancery Court has expressed serious reservations about these lawsuits, warning litigants that the days of automatic approval of disclosure-only settlements, broad releases for defendants, and cash going only to plaintiffs lawyers are over.
Transatlantic regulatory conflicts are hampering OTC derivatives’ recovery. Cooperation is needed to avoid conflicts arising from the extraterritorial reach of EU and US rules.
In an action arising from the huge TCEH Chapter 11 bankruptcy, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York issued an opinion in Delaware Trust Company v. Wilmington Trust N.A. denying plaintiff’s motion to remand the case back to New York state court, and granting defendants’ motion to transfer the case to the District of Delaware, from where it will be referred to the United States Bankruptcy Court for the District of Delaware.
In a recent decision in an appraisal action, the Delaware Chancery Court reaffirmed the court’s reluctance to substitute its own calculation of the “fair value” of a target company’s stock for the purchase price derived through arm's-length negotiations, provided it resulted from a thorough, effective and disinterested sales process. The Oct. 21, 2015, decision, Merion Capital LP and Merion Capital II LP v. BMC Software Inc., not only provides a comprehensive review of the fundamentals of appraisal actions but also serves as a cautionary tale for merger arbitrageurs and other stockholders looking to seek appraisal remedies.
The commercial mortgage-backed securities (CMBS) lending market has, by all accounts, experienced a complete turnaround since its implosion in the years following the 2008 financial crisis. CMBS lending is now back and facing new challenges in a booming market. Practical Law asked William McInerney and Fredric Altschuler of Cadwalader, Wickersham & Taft LLP for their thoughts on how CMBS lending has changed in recent years and the ways they are tailoring their practice to the demands of the current CMBS market.
Although almost eight years have lapsed since the chapter 11 cases of Tulsa, Oklahoma-based SemCrude L.P. were confirmed, many of the issues at the forefront of those cases are re-emerging in light of the recent uptick in oil and gas-related restructurings. The SemCrude cases provided useful guidance for oil and gas producers and purchasers to best address the perfection and management of security interests in oil and gas-related collateral. Perhaps of most significance are the lessons SemCrude taught regarding the repercussions of a secured lender’s failure to timely perfect oil and gas security interests, especially if producers have a basis for asserting a security interest under state law. The lessons have not stopped: on July 30, 2015, the Delaware district court resolved a dispute between producers and purchasers, and affirmed the bankruptcy court’s holding that the purchasers took oil purchased from SemGroup free and clear of the producers&
In its Aug. 27 post-trial opinion, In re Dole Food Co. Inc. Stockholder Litigation, the Delaware Chancery Court held Dole executives David Murdock and C. Michael Carter personally liable for $148 million in damages for undermining and interfering with the special committee’s efforts to obtain a fair price for Dole’s minority stockholders following Murdock’s decision to take the company private in 2013. The decision emphasizes that transactions with a controlling stockholder that employ the dual procedural protections of independent director and “majority of the minority” approval must actually adhere to the substance and purpose of those protections.
On Aug. 25, 2015, the Financial Crimes Enforcement Network proposed regulations that would require certain investment advisers to establish anti-money laundering programs and report suspicious activity to FinCEN pursuant to the Bank Secrecy Act. Under the proposed rule, investment advisers would be considered “financial institutions” under the BSA and, therefore, be subject to many new and burdensome compliance, reporting and record keeping requirements.
Dorothy Auth, Danielle Tully and Peng Lin highlight recent law and provide guidance on the perils of instructions for use with respect to off-label use for drug innovators and generic drug manufacturers alike.
On May 22, 2015, in Madden v. Midland Funding LLC, the United States Court of Appeals for the Second Circuit held that the application of state usury laws to third-party assignees is not preempted by the National Bank Act but rather such assignees remain subject to state usury limits. The Madden decision has potentially far-reaching implications for investors in, and securitizers of, bank-originated loans to the extent that it casts into doubt the ability of an assignee of a bank loan to collect interest at the rate originally provided for in the agreement.
The first four sections of this article discuss the tax consequences of domestic and cross-border tax-free acquisitions and spinoffs. The balance of the article applies these rules to the types of intra-group transactions that multinational groups typically employ before and after acquisitions and dispositions.
This article explores the rules affecting the taxation of multiple step acquisitions, which have changed considerably in the new millennium, in the context of (i) reorganizations in which two or more sequential stock or asset transfers are combined to produce a single, often tax-free, transaction, (ii) single step tax-free reorganizations followed by stock or asset transfers to affiliates, and (iii) F reorganizations that also involve preceding or subsequent stock or asset transfers.
I’m very grateful to Simon Friedman, Stuart Goldring and Carl Jenks for dreaming up some of the most interesting slides that follow and sharing their insights into the byzantine world of bankruptcy tax over the years.
This outline examines the U.S. tax consequences produced by derivative instruments in international financing transactions and highlights the inconsistent U.S. tax treatment that results from the use of different derivative financial instruments with the same economic results in cross-border financing transactions.
This outline examines the U.S. tax consequences surrounding the use of equity based compensation by partnerships and limited liability companies (each, an “LLC”).
Disclosure requirements for participants in “reportable transactions.”
In early 2005, the Treasury Department issued final regulations that employ a hybrid single member, group-wide entity approach to reduce consolidated group members’ tax attributes when a member excludes cancellation of debt income (“COD”) under the bankruptcy or insolvency exceptions to COD (together with the prior temporary regulations, the “Consolidated 108 Regulations”).
This report recommends that Treasury and the IRS amend the regulations under section 368 to permit A reorganization treatment for acquisitions of 100 percent of a target corporation’s stock, followed by Target’s related state law conversion to a limited liability company or election to be treated as a disregarded entity.
Bankruptcies and restructurings involving partners and partnerships raise a number of unique tax issues.
This article focuses on one of the crucial issues in any debt restructuring—whether changes to the terms of outstanding debt typically sought by lenders would constitute a deemed exchange of the debt pursuant to section 1001 and the corresponding Treasury regulations.
A new elective regime was created for large partnerships as part of the Taxpayer Relief Act of 1997 (the “1997 Act”).
On May 24, 2005, the Treasury Department (“Treasury”) published proposed treasury regulations (the “proposed regulations”) and a proposed revenue procedure (the “proposed revenue procedure”) governing the issuance and vesting of capital and profits partnership interests issued in connection with the performance of services (such interests, “compensatory partnership interests”).
The tax shelter regulations include disclosure requirements for participants in “reportable transactions”, and list-maintenance and disclosure requirements for “material advisors” with respect to reportable transactions.
One of the principal tax goals of both a troubled company and its creditors in restructurings is
preserving the company’s net operating losses (“NOLs”) and other tax attributes.
The real estate investment trust (REIT) was originally intended to be a mutual fund for real estate.
Current Law: The Road to the Revenue Procedures
In December 2014 and January 2015, the U.S. District Court for the Southern District of New York issued two separate decisions involving the Trust Indenture Act of 1939 (the ‘‘TIA’’), a statute that has been rarely invoked in its over 75 year old history.
On April 1, 2015, the U.S. Securities and Exchange Commission issued an administrative cease-and-desist order against Houston-based technology and engineering firm KBR Inc., for violating Dodd-Frank whistleblower protection Rule 21F-17 because KBR required internal investigation employee-witnesses to sign confidentiality agreements in which the employee promised not to discuss the substance of their interviews with anyone without the prior approval of KBR’s legal department.
Catherine Richardson examines the aspects of the Finance Act 2015 (FA 2015) which concern targeting avoidance using carried-forward losses.
The Farr-Rohrabacher Amendment to the 2015 Omnibus Appropriations Bill, which was signed into law in December of 2014, was widely hailed as a significant victory for advocates of medical marijuana. While the amendment is a positive step toward giving marijuana industry participants comfort, several factors limit its reach.
A few weeks ago, the United States Court of Appeals for the Third Circuit issued an important, 28-page opinion that confirmed a jury verdict, holding former officers and directors of a not-for-profit health care provider in bankruptcy, jointly and severally liable to the facility’s creditors — in the amount of $2.25 million — for breach of fiduciary duty in failing to properly oversee and manage the nonprofit entity. Official Comm. of Unsecured Creditors ex rel. Lemington Home for Aged v. Baldwin (In re Lemington Home for Aged), No. 13-2707, at *1 (3d Cir. Jan. 26, 2015).
As Cadwalader’s managing partner, Pat Quinn looks for opportunities to serve clients efficiently and creatively. Assembling a team that reflects the broadest and most diverse perspectives, he writes, allows a law firm to develop and maintain the highest standards of service in a dynamic and challenging business environment.
In a blow to insider trading prosecutions against downstream recipients of inside information, on Dec. 10 the U.S. Court of Appeals for the Second Circuit overturned the May 2013 convictions of Todd Newman and Anthony Chiasson (see related story, page 1711).
Are distressed debt investors required to treat their speculative investment gains as ordinary interest income under the market discount rules, while continuing to treat their investment losses as capital losses? Or can they rely on the common law "doubtful collectibility doctrine" to stop accruing market discount as interest income, notwithstanding an IRS memorandum that seems to reject this approach? The recent economic downturn underscores the need for clear, consistent rules that do not artificially deflate investor demand.
Over the past two years, the U.S. Securities and Exchange Commission's Office of Compliance Inspections and Examination (OCIE) has increased its examination efforts and, some commentators surmise, has morphed into a powerful tool for the SEC’s Division of Enforcement.
The U.S. District Court for the Southern District of New York entered a decision in Davis v. Elliot Management Corp., et al. (In re Lehman Bros. Holdings Inc.) addressing the applications for payment of professional fees in the approximate total amount of $26 million submitted by certain members of the official committee of unsecured creditors appointed under Section 1102 of the Bankruptcy Code in the historical and unprecedented bankruptcy cases of Lehman Brothers Holdings Inc. and its affiliated debtors. The authors of this article discuss the case and its implications.
Restructuring & Insolvency analysis: Many European jurisdictions are developing procedures that they hope will rival those of the UK. However, Richard Nevins, senior partner says the UK will likely remain the jurisdiction of choice for bond restructuring.
Pursuant to section 365(d)(2) of the Bankruptcy Code, executory contracts, unexpired residential real property leases, and unexpired personal property leases may generally be assumed or rejected any time before confirmation of the debtor's plan, absent a court order granting a request by the nondebtor counterparty to shorten such time. There are also specific rules under section 365(d)(4) of the Bankruptcy Code governing the timing for the assumption or rejection of nonresidential real property leases in cases in which the debtor is the lessee, which require that assumption or rejection by the debtor-lessee generally be within 120 days after the date of entry of the order for relief or the date of entry of an order confirming the plan. The authors review the potential conflict.
Foreign banking organisations (FBOs) – i.e., non-U.S. banks that maintain a bank branch, agency office or subsidiary in the United States – have been granted some important exemptions to the proprietary trading provisions of the Volcker Rule. However, FBOs and their non-U.S. affiliates engaged in any proprietary trading or private fund activities must meet the conditions for any exemptions availed of, and are obligated to adhere to several administrative requirements.
Secondary actors in securities transactions, such as lawyers, accountants, investment advisers and brokers, should be on alert in the wake of the U.S. Supreme Court’s recent decision in Chadbourne & Parke v. Troice, which limits the application of (and protections provided by) the Securities Litigation Uniform Standards Act of 1998 (SLUSA). In Chadbourne, the Court narrowed SLUSA’s scope, holding that it does not preempt certain state-law class action litigation against secondary actors. In so doing, the Court allowed the state-law claims to proceed against two insurance brokers and two law firms.
The authors provide a broad overview of the current EU risk retention regime as set out in the Capital Requirements Regulation and associated guidance published by the European Banking Authority, and compare the current regime with the previous regime.
Recently, both the Department of Justice (the “Department”) and the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury issued anti-money laundering (“AML”) guidance relating to financial crimes involving marijuana businesses. The Department’s guidance was intended to provide enforcement guidance to prosecutors, while the FinCEN guidance focused on describing new compliance obligations of banks and other financial institutions seeking to provide financial services to marijuana-related businesses.
The currently proposed regulations under section 871(m) of the Internal Revenue Code threaten to impose “dividend withholding” on a broad range of swaps, options, forward contracts, futures contracts, debt, and other financial contracts that reference dividend-paying U.S. stock, even if the contracts do not in fact reference dividends, and even if no party to the contracts ever owned the stock.
From 2005 through 2013, nearly 800 Chapter 15 cases were filed and over 100 published opinions were issued by courts in such cases or related matters. The authors provide an overview of statistical data gleaned from the thousands of pleadings, orders, and other papers filed in the hundreds of pending and closed Chapter 15 cases in the United States.
In January 2014, an SEC administrative law judge sanctioned five Chinese affiliates of major U.S. accounting firms for their failure to produce work papers related to audits of ten China-based U.S. issuers who were under investigation by the SEC. This article describes how the firms attempted to navigate between the SEC and the Chinese government; outlines an approach for mitigating some of the risks of responding to U.S. information requests for Chinese data; and suggests other areas where these issues may impact U.S. public companies.
The Basel Committee on Banking Supervision (the “Basel Committee”) has published a second Consultative Document containing revised proposals for the Basel securitisation framework (the “Revised Proposals”). The Revised Proposals describe a revised set of approaches for determining the regulatory capital requirements in relation to securitisation exposures held in the banking book and include a draft standards text. Market participants will be taking a keen interest in these proposals, which are summarised below.
Charlotte Managing Partner and Capital Markets Group Co-Chair Stu Goldstein discusses commercial real estate finance and the innovative work Cadwalader attorneys are doing in this space in the March 7th edition of Mortgage Observer Weekly.
Cadwalader’s Nick Shiren and Robert Cannon explore the implications for collateralized loan obligations of the risk retention requirement in the European Union’s Capital Requirements Regulation.
Lory Stone and Jodi Avergun review the lively Foreign Corrupt Practices Act (FCPA) panel discussion held at the 25th Annual National Institute on White Collar Crime in San Diego. Cadwalader’s Peter Clark served as moderator.
On August 1, 2013, the Department of Justice (DOJ) submitted an amicus curiae brief asking the First Circuit to reverse a significant False Claims Act (FCA) decision issued in United States ex rel. Helen Ge, MD v. Takeda Pharmaceutical Company Limited, et al.
On September 26, 2013, the Federal Acquisition Regulatory (FAR) Council published a proposed rule to hold federal contractors and subcontractors responsible for preventing the use of trafficked labor in company operations and supply chains. On the same date, the U.S. Department of Defense (DOD) also published a proposed rule to enhance the DOD’s existing trafficking policy. The authors discuss the vast implications for U.S. companies.
Parties to a class action settlement and their counsel must observe certain procedures to gain court approval and withstand heightened public scrutiny.
On 17 July 2013, the European Securities and Markets Authority ("ESMA") published a consultation paper (the "Consultation Paper") on draft regulatory technical standards ("RTS") aimed at implementing certain provisions of the European Markets Infrastructure Regulation ("EMIR") relating to (a) the extraterritorial application of EMIR, and ((b) preventing the evasion of EMIR's provisions.
In a typical intermediation structure, a DPC will enter into a trade with a counterparty and simultaneously enter into an offsetting mirror transaction with the sponsor.
The deferred prosecution agreement (“DPA”) is once again facing criticism, this time in connection with the Department of Justice’s (the “DOJ”) decision to enter into a DPA with HSBC Bank USA, N.A. and HSBC Holdings plc (together, “HSBC”) for violations of the Bank Secrecy Act, the International Emergency Economic Powers Act, and the Trading with the Enemy Act.
Since the publication of our two-part municipal bankruptcy series (see NYLJ, March 4, 2010, and May 6, 2010), the strain of rising pension costs, declining tax revenues, and onerous debt obligations has become more acute for many struggling municipalities.
This article considers the revised proposal made by the European Commission for a European Council Directive on financial transaction tax (the FTT) to be introduced under the EU's enhanced cooperation procedure by 11 participating member states: Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the FTT-zone).
U.S. Bankruptcy Court Judge Robert Drain’s decision in the Hostess case demonstrates that even if a dispute between a debtor and a third party is arguably subject to a pre-petition arbitration clause, that dispute may not be subject to arbitration if it is considered a “substantially” core aspect of the bankruptcy process.
The Foreign Account Tax Compliance Act (FATCA), signed into law on March 18, 2010, was enacted to combat tax evasion by U.S. citizens and residents who have offshore accounts and assets.
On Nov. 28, 2012, the U.S. Court of Appeals for the Fifth Circuit in In re Vitro S.A.B. de C.V. issued a groundbreaking decision under Chapter 15 of the Bankruptcy Code, which provides the mechanics for U.S. bankruptcy courts to deal with cross-border insolvency proceedings.
California has seen a string of three Chapter 9 filings this year and faces a long line of distressed municipalities. Given this backdrop, the California Public Employees’ Retirement System (CalPERS) figures to play a prominent role in the resolution of many of these situations (in or out of bankruptcy).
The Foreign Account Tax Compliance Act (FATCA), signed into law on March 18, 2010, was enacted to combat tax evasion by U.S. citizens and residents who have offshore accounts and assets.
Businesses that have filed for bankruptcy protection under chapter 11 of the Bankruptcy Code often need access to new credit in order to continue operating as going-concerns and to fund their reorganizations.
Bankruptcy Law Client Strategies in Europe provides an authoritative, insider's perspective on best practices for navigating the European bankruptcy system.
There exist two major theories of mortgage law in the United States: the title theory, in which title to the collateral is transferred to the mortgagee until the debt secured by the mortgage has been satisfied; and the lien theory, where legal title to the property remains with the mortgagor and the mortgagee is granted a lien on the collateral until satisfaction of the debt secured by the mortgage.
Edited by Robert Lawrence, this book provides an overview of multinational personal tax planning by examining the gift and death tax property regimes of a number of countries.
Robert Lawrence's International Tax and Estate Planning is directed at practitioners engaged in counseling multinational investors on planning investments so as to conserve assets and transmit them in a manner and to the persons desired, while keeping
Co-authored by Jonathan Hoff, Public Companies is designed to aid directors, officers and general counsel of public companies and those intending to go public on how to operate a responsible public company, offering a comprehensive examination of corpo
The Handbook of Insurance-Linked Securities provides information on a type of securities, which, by combining elements of insurance and capital markets, provide an alternative channel for transferring risk and raising capital.
The bankruptcies of large institutions such as Enron Corp. and Lehman Brothers Holdings Inc. have had lasting effects on financial markets and are now significantly affecting interpretation of laws at the intersection of bankruptcy and securities practice. Specifically, the limitations on avoiding fraudulent transfers and preferences under § 546(e) of the Bankruptcy Code are being molded in the context of these large cases. What does this mean for financial institutions’ and trustees’ future reliance on avoidance powers and, ultimately, the recovery of the bankruptcy estate?
Regulation (EU) No. 648/2012 of the European Parliament and of the Council of July 4, 2012, on OTC Derivatives, Central Counterparties and Trade Repositories, also known as the European Market Infrastructure Regulation (“EMIR”), was introduced to provide a framework to improve the functioning of the over-the counter (“OTC”) derivatives markets in the European Union.
A bedrock principle of the U.S. patent system is the statutory presumption of the validity enjoyed by every issued U.S. patent.
The authors analyze a recent decision that serves as a reminder that courts are unlikely to find an official committee necessary to assure the adequate representation of equity’s interests when equity holders are likely out of the money and their interests are generally aligned with other constituents in the case.
On 26 June 2012 HMRC published a paper on their website entitled ‘The current tax treatment of Instruments designed to be compliant with Capital Requirements Directive 4’ (the HMRC Paper).
The authors discuss the U.S. Bankruptcy Court for the Southern District of New York's recent approval of a $2.875 million key employee incentive plan (KEIP) in the Velo Holdings bankruptcy cases over the objection of the U.S. trustee finding that it was primarily incentivizing and a sound exercise of the debtors' business judgment.
On July 3, 2012, the United States Court of Appeals for the Second Circuit refused to vacate an arbitration award against Goldman Sachs Execution & Clearing LP.
To paraphrase Mao, a revolution, not being a dinner party, is a messy and unpredictable affair with winners and losers emerging in chaotic and sometimes haphazard fashion.
On 24 March 2012, the European Parliament’s Regulation on “short selling and certain aspects of credit default swaps” (the Regulation) came into force.
Proofs of claim play a critical role in bankruptcy cases. Debtors use them to determine their liabilities; creditors use them to preserve their rights to distribution.
In a written Ministerial Statement (the Ministerial Statement), delivered on 27 February 2012, the UK Government has announced measures to counteract two tax avoidance schemes entered into by a UK bank (the Bank), the Bank being a signatory to the Code of Practice on Taxation for Banks.
The proposals made by the EU Commission on 28 September 2011 regarding an EU directive on a common system of financial transaction taxation in the 27 member states of the EU have been debated widely since they were presented.
Early 2011 was a quiet period in the corporate bankruptcy world as many distressed companies turned to fairly robust capital markets to refinance their debt or effectuated out-of-court workouts with their lenders.
UK Prime Minister David Cameron controversially walked out of summit talks last week such was his apprehension about Franco/German plans for a Financial Transaction Tax.
The proposals made by the EU Commission on 28 September 2011 regarding an EU Directive on a common system of financial transaction taxation in the 27 Member States of the EU have been debated widely since being presented.
The significant losses suffered by investors during the recent financial crisis have again left many shareholders clamoring to find someone responsible.
While the U.K. government’s blueprint for corporation tax reform was put forward in June 2010, key elements of the reform program have become much clearer during the summer of 2011.
The on-going progress of the European financial crisis has continued to precipitate measures by financial institutions, funds and market participants to reduce their risk in a wide variety of structured financial transactions.
The modern Chapter 9 predates the Bankruptcy Code by several years, though municipalities rarely take advantage of its potential benefits. In fact, despite the recent economic crisis, only twenty-four entities have filed for Chapter 9 since 2008, and in total, only 241 entities have filed since 1980. See Annual and Quarterly US Bankruptcy Statistics, AM. BANKR. INST., May 31, 2011, http://www.abiworld.org/statcharts/Chapter9through2Q2010.pdf. While this might suggest that Chapter 9 offers little value to municipalities, the truth is Chapter 9 can be a highly effective tool for municipalities to reduce and restructure their debt obligations.
Repurchase agreements or repos are now the legal structure most commonly used for the provision of funding between financial institutions.
While the U.S. Congress currently seems to be at an impasse on bipartisan legislation on a wide variety of important matters, to its credit it has almost reconciled nearly 60 years of debate over how to improve the existing patent statute that it enacted in the 1950s.
On July 27, 2011, the U.S. Bankruptcy Court for the Northern District of Texas in Whittle Development Inc. v. Branch Banking & Trust Co. (In re Whittle Development Inc.) issued an opinion finding that a debtor may avoid as a preferential transfer under Bankruptcy Code section 547 a prepetition real property foreclosure sale, even if the foreclosure sale complied with state requirements for a valid foreclosure.
In two recent decisions, the United States Bankruptcy Court for the Southern District of New York has interpreted narrowly certain of the Bankruptcy Code's safe harbor provisions.
As has previously been noted by other authors in this journal, recent events in the financial markets have resulted in the reassessment of counterparty risk.
In September 2010, the European Commission published a draft proposal (Commission Proposal) for a Regulation of the European Parliament and of the Council on over-the-counter (OTC) derivatives, central counterparties and trade repositories (commonly referred to as the “European Market Infrastructure Regulation” or “EMIR”).
Third Circuit approves discounted cash flow analysis under Code §562.
Envision this: You are sitting in your office one day and the phone rings. It is a former colleague from the office where you were both federal prosecutors.
On March 23, 2011, the Chancellor of the Exchequer announced in the UK Budget a number of measures which will both directly and indirectly affect the UK tax treatment of insurers. Below follows a summary of the relevant changes.
Adam Blakemore and Oliver Iliffe summarise the key tax aspects of the UK Budget held on 23 March 2011 relating to financial sector taxation and the prevention of tax avoidance.
In In re Del Monte Foods Company Shareholders Litigation, Consol. C.A. No. 6027-VCL (Del. Ch. Feb. 14, 2011), the Court of Chancery temporarily enjoined a shareholder vote on a high premium, all-cash merger to require an additional 20-day market check based on a preliminary finding that the sale process was potentially tainted by alleged misconduct by Del Monte’s financial adviser and the private equity buyers.
An area of capital markets that continues to evolve and elicit a healthy interest from investors is the market for insurance-linked securities and derivatives.
Two recent decisions of the UK Courts have provided a valuable insight into how the complex legislation which governs the taxation of stock lending transactions may be interpreted judicially.
Section 2(a)(iii) of the ISDA (International Swaps and Derivatives Association) Master Agreement (‘Master Agreement’) provides that a party’s payment obligations are subject to, inter alia, the condition precedent that there is no continuing event of default with respect to the other party.
In eBay v MercExchange, LLC (547 US 388 (2006)) the Supreme Court changed the landscape of available remedies awarded in patent infringement cases by overturning the longstanding rule – endorsed by the Federal Circuit – of routinely issuing permanent injunctions following a finding of patent infringement.
Draft legislation on the UK’s new levy on balance sheet liabilities (the ‘Levy’) was published on 21 October 2010, 24 November 2010 and 9 December 2010, shedding more light on the final form which the Levy is likely to take.
The reallocation and transfer of risk is at the core of modern economies. Credit institutions, funds and other investment vehicles, insurance companies and governments all use an ever expanding universe of financial instruments to transfer risk.
In the approximately five years since the Bankruptcy Abuse Prevention and Consumer Protection Act’s amendments to the Bankruptcy Code took effect, one general consensus has emerged: the effects of BAPCPA on distressed retailers have been profound.
The proposed UK bank levy represents but one of a burgeoning category of worldwide initiatives introduced following the financial crisis. Adam Blakemore, Oliver Iliffe and Kieran Clancy explore this challenging new landscape.
The United States Bankruptcy Court for the District of Delaware recently denied the appointment of an examiner in U.S. Bank Nat’l Assoc. v. Wilmington Trust Co. (In re Spansion, Inc.), notwithstanding the fact that the statutory threshold which arguably mandates the appointment of an examiner upon the request of a party in interest had been satisfied.
The EU Commission recently proposed major changes to Regulation (EC) No 1060/2009 of September 16 2009 on credit rating agencies (Cra Regulation).
On July 27, 2010, the Government published a discussion document on reforming the taxation of profits of overseas branches of UK tax-resident companies with a view to introducing an exemption in relation to those profits (and a corresponding restriction of loss relief).
In re General Growth Properties Inc. and In re Extended Stay Inc. both challenged how effectively the single purpose entity (SPE) prevents real estate Chapter 11 filings. The findings of these reorganizations indicated that SPE structure alone will not preclude a bankruptcy filing.
As early as the 1930s, the U.S. Supreme Court recognized that there must be some severe consequence where a patent applicant deliberately violated its duty of candor and good faith to the U. S. Patent and Trademark Office (PTO) in submitting information to gain allowance of a patent.
On April 20, 2010, an explosion on the Deepwater Horizon oil drilling rig located off the coast of Louisiana killed 11 crewmen and set off what is now considered the largest offshore oil spill in U.S. history.
The advisers to a corporate undergoing a solvent restructuring need to consider the terms of any outstanding derivative transactions in order to avoid triggering the termination provisions which may result in the corporate being liable for significant mark-to-market termination payments, and may lead to cross-defaults under other financing arrangements.
Catastrophe bonds have become an increasingly significant aspect of the risk management strategies of insurers and reinsurers, even at a time where the reinsurance market for catastrophe risk has available capacity and pricing seems to be soft.
I am a derivatives partner in the law firm Cadwalader, Wickersham & Taft. Last week I had the dubious distinction of being featured in an article on the ISDA Conference in San Francisco.
The Federal Deposit Insurance Corporation recently published a Notice Of Proposed Rulemaking regarding the proposed amendments to its securitization “safe harbor rule.”
Chapter 15 of the US Bankruptcy Code was enacted in 2005 to harmonise US bankruptcy law with the insolvency laws of foreign jurisdictions.
In a follow-up article to their October 2009 analysis of the draft code of practice on taxation for the banking sector, Adam Blakemore and Oliver Iliffe weigh up the implications of recent changes to the scope and content of the code.
On May 5, 2009, Judge James Peck, the bankruptcy judge in the Lehman Brothers bankruptcy cases, held that the safe harbor provisions of the Bankruptcy Code do not override the mutuality requirements for setoff under section 553(a) of the Bankruptcy Code.
In July 2009, the High Court in England confirmed the validity under English law of contractual provisions common in structured finance transactions which subordinate payments to a swap counterparty in circumstances where the swap counterparty has defaulted on its obligations under the terms of the relevant swap agreement.
From time to time, conditions come together to create the ‘Perfect Storm’. Meteorologists use this term rarely and as a benchmark to compare all subsequent weather events.
The U.S. Securities and Exchange Commission's Division of Corporation Finance recently revised its Compliance and Disclosure Interpretations relating to the use of non-GAAP financial measures in filings with the SEC and other public disclosures made by reporting companies.
The advent of the securitization of commercial mortgage loans in the early 1990’s has had a profound effect on commercial real estate finance.
Mortgage fraud takes many guises but can be succinctly classified as either fraud for profit or fraud for housing.
Honest services fraud, also known as the “intangible rights” theory of mail and wire fraud, has been the subject of controversy both before and after the Supreme Court’s decision in McNally v. United States, 483 U.S. 350 (1987).
A recent decision in the U.S. Lehman Brothers bankruptcy case held that investors in a collateralized debt obligation called Dante did not have the right to jump ahead of Lehman to get repaid, contradicting an English court decision and raising questions about how similar deals will be treated.
The unveiling in the recent pre-Budget report of a bank payroll tax is already proving to be one of the most politically charged pieces of taxation legislation of recent years.
The wait is over. The EU Regulation (the “Regulation”) on credit rating agencies (“CRAs”) was published in the Official Journal of the European Union on November 17, 2009 and became effective, subject to certain exceptions, on December 7, 2009.
Despite the prevalence of first lien-second lien structures in the loan market over the course of the recently ended leveraged transaction cycle, a fully-litigated case interpreting the provisions of a first lien-second lien intercreditor agreement remains something of a rarity.
The turbulence in the financial markets has led to a reassessment of the risks of derivatives and related financial products and structures.
For nearly four decades, the “plain view” doctrine, permitting a police officer to seize incriminating evidence without a warrant when discovered in plain view during a lawful entry, has been a fundamental precept of criminal procedure.
While most entrepreneurs have dozens of “great” ideas for starting companies, in actual practice most companies are started by picking a single good idea that can be grown into a successful product.
The recent proposals for a Code of Practice on taxation for banks transacting business in the UK is either a restatement of existing statutory interpretation or a blurring of the boundaries between the executive and the judiciary.
Few doubt that the loss of investor confidence in ratings is linked to the recent mistakes made by credit rating agencies (“CRAs”) when rating structured finance investments.
This article explains a recent decision by England’s High Court which highlights some of the uncertainties concerning transactions that were not structured with the insolvency of swap providers in mind.
HM Revenue & Customs on June 29 published a 24-page consultation document setting out proposals for a Code of Practice on Taxation for Banks.
On June 17, 2009, the Obama Administration released its recommendations for reform of the U.S. financial regulatory system (“Proposal”).
After months of debate, the European Parliament's comprehensive regulation on credit rating agencies (CRAs) and their rating activities is about to come into force.
In the past nine years, the CDS market has grown into a multi-trillion dollar notional market with participants from nearly every sector of the financial world.
For the past several years, lenders have structured subordinate loans on real estate in the form of mezzanine loans, secured by pledges of equity interests in the owners of the real property.
The Corporation Tax Act 2009 (CTA) received Royal Assent on 26 March this year, came into force on 1 April and has effect for accounting periods ending on or after 1 April for corporation tax (and for the tax year 2009/2010 for income tax and capital gains tax).
Climate change has been defined as statistically identifiable changes in the state of the climate that persists for an extended period, typically decades or longer.
Voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code (the “Code”) were filed on September 15, 2008 by Lehman Brothers Holdings Inc. (“Holdings”), on October 3, 2008 by Lehman Brothers Special Financing Inc. (“LBSF”), and on October 5, 2008 by Lehman Brothers Financial Products Inc. (“LBFP”) and Lehman Brothers Derivative Products Inc. (“LBDP”).
Several bills have been recently introduced in Congress (collectively, the “Bankruptcy Legislation”) that would amend the U.S. Bankruptcy Code to, among other things, give bankruptcy judges in Chapter 13 cases the power to modify terms of certain mortgages secured by principal residences, including forcing principal reductions.
During the recent cycle of real estate financings, a popular structure emerged to segregate the real estate assets from the operating assets of a company.
Covered bonds are a form of long-term secured financing that has been used in Europe for centuries but have not previously gained popularity in the U.S. credit markets.
In In re Entringer Bakeries, Inc., the United States Court of Appeals for the Fifth Circuit affirmed the viability of the “earmarking doctrine” as a judicially-created defense to a preference action under section 547(b) of the Bankruptcy Code.
The author discusses how the revised draft legislation and the approach of HMRC to principles-based legislation as proposed in the consultation document could also create uncertainty and a lack of predictability in the taxation of commercial transactions and arrangements.
The authors explain that, based on recent decisions, no damage claim arises from court-approved rejection of a collective bargaining agreement pursuant to Section 1113.