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True Lease or Secured Financing: Recovering Meaningful Residual Value
Equipment lessors bargain for a very different set of legal rights than secured creditors. These bargained-for rights are often subject to attack, particularly in the Chapter 11 context where it is common for interested parties to challenge the characterization of a Chapter 11 debtor's obligations under an agreement styled as a lease. See In re APB Online, Inc., 259 B.R. 812, 815 (Bankr. S.D.N.Y. 2001). As the recent decision by the Third Circuit in Duke Energy Royal, LLC v. Pillowtex Corp. (In re Pillowtex, Inc.), 349 F.3d 711 (3d Cir. 2003) illustrates, when faced with the question of whether a transaction constitutes a “true” lease or a secured financing, Bankruptcy Courts will look through the cosmetics of the deal to its substance. To avoid the re-characterization of an equipment lease by a Bankruptcy Court, an equipment lessor must structure its transactions to retain an economically meaningful “residual value” in the leased property.
Why Is it Important Under Chapter 11 of the Bankruptcy Code?
In the Chapter 11 context, the recovery a lessor can expect to receive under a lease of personal property may be very different from the recovery it would experience as a secured creditor. This is primarily because, during the pendency of a Chapter 11 case, from and after 60 days from the petition date, lessors of personal property are entitled to receive lease payments from a Chapter 11 debtor-lessee until the debtor either assumes or rejects the lease. See 11 U.S.C. '365(d)(10). If a debtor decides to assume the lease, and the court approves the assumption, the lessor also is entitled to “cure” payments and “adequate assurance” of future performance. See 11 U.S.C. '365(b)(1). Conversely, if the debtor decides to reject the lease, then the lessor is entitled to the return of the leased property from the debtor and may assert a rejection damage claim that is treated as a pre-petition unsecured claim.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?