A Committee Member’s Guide to Financing and Cash-collateral Stipulations
by Bernard D. Bollinger Jr.
One of the first issues addressed in most chapter 11 bankruptcy cases is the negotiation of an interim financing or cash-collateral stipulation. Often, the terms of the interim stipulation are “negotiated” between the debtor and its secured creditor before a committee is officially formed. Due to the typically weak negotiating position of an often cash-starved debtor that may not wish to “bite the hand that feeds,” interim stipulations typically fail to include a number of provisions that are necessary to insure that a committee can play a meaningful role in protecting the interests of unsecured creditors during the course of a debtor’s reorganization.
Preference Relief Is on the Way
by David B. Wheeler
Not usually the source of good news, it appears that Congress has provided some very good news for prospective preference defendants wishing to assert the ordinary-course-of-business defense.
Under the current law, §547(c)(2), a preference defendant may escape liability to the extent it can establish:
…that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee; made in the ordinary course of business or financial affairs of the debtor and the transferee; and made according to ordinary business terms (emphasis provided).
To a great extent, the courts have construed this provision to require the defendant to establish not only that the payment was typical or in the ordinary course of business between the parties but was ordinary or typical in the related industry at large.
UTCC Listserv
Keep an eye out for the UTCC listserv—it’s how committee members will be able to keep up with the many new changes to the Bankruptcy Code and Rules.