Absolute Priority Rule: How Absolute is Absolute?

Navigating the New Value Exception, Competitive Bidding and Gifting Strategies in Business Bankruptcies

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, August 13, 2013

Recorded event now available

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Program Materials

This CLE webinar will provide bankruptcy counsel with a review of the absolute priority rule and case law developments since 203 North LaSalle, particularly a recent Seventh Circuit ruling in Castleton Plaza. The panel will also discuss the impact of these rulings on other related issues of competitive bidding and gifting strategies.

Description

In In re Castleton Plaza, the 7th Circuit held that an equity investor could not skirt the absolute priority rule by directing new value be contributed by a non-equity holder insider.  This is a key development for secured lenders and creditors and owners in SARE cases where new-value plans are common.

Castleton Plaza also clarifies a question left open by the U.S. Supreme Court’s decision in Bank of America v. 203 North LaSalle Street Partnership: whether LaSalle's directive that a new-value plan be market-tested requires an auction.  Castleton makes clear that competitive bidding is required, at least in those instances where the new investment is offered by an insider of the old equity investor.

Castleton follows the trend in the 2nd and 3rd Circuits, which have reaffirmed the absolute-priority rule in the context of so-called “gifting plans.” These cases indicate courts will enforce the substance of the rule over attempts to evade it through insider equity purchases or “gifts” from secured lenders.

Listen as our authoritative panel of bankruptcy practitioners discusses the scope of the absolute priority rule and case law developments since 203 North LaSalle, with particular focus on the recent 7th Circuit Castleton Plaza ruling.  The panel will also discuss the impact of the ruling on other issues related to the absolute priority rule, including competitive bidding and gifting strategies.

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Outline

  1. 203 North LaSalle and Circuit Court interpretations of the absolute priority and the new value exception to the rule
  2. Analysis of Castleton Plaza and the scope of new value exception to the rule
  3. Impact of Castleton on other absolute priority issues, such as competitive bidding and gifting strategies
  4. Application of the absolute priority rule and new value to individual Chapter 11 plans

Benefits

The panel will review these and other key questions:

  • What guidance does Castleton Plaza provide to the U.S. Supreme Court’s directives in 203 North LaSalle?
  • How does Castleton fit in with other recent decisions affirming the absolute priority rule in so-called gifting plans
  • Does Castleton Plaza have broader implications for reorganization cases?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Marc Skapof
Marc Skapof

Counsel
BakerHostetler

Mr. Skapof is experienced in all aspects of insolvency and reorganization matters. He regularly represents receivers,...  |  Read More

Ferve E. Ozturk
Ferve E. Ozturk

BakerHostetler

Ms. Ozturk focuses her practice in the areas of bankruptcy, creditors’ rights, financial restructuring and...  |  Read More

Durc A. Savini
Durc A. Savini

Managing Director and Head of Restructuring
Peter J. Solomon Company

A veteran banker in the restructuring advisory business, he joined PJSC in 2010.  During the course of his...  |  Read More

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