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S.D.N.Y. Endorses Commonly Used Procedures for Providing Adequate Assurance to Utility Providers

By Joel H. Levitin and Richard A. Stieglitz Jr.
January 30, 2012

When Congress passed the BAPCPA amendments in 2005, it became clear that a debtor's satisfactory prior payment history and the provision of an administrative claim to utility providers for post-petition utility services would no longer be sufficient to satisfy the debtor's requirement to provide “adequate assurance of payment” under Bankruptcy Code ' 366, so as to preclude termination of such services in bankruptcy. What would be sufficient was much less clear.

The general practice since BAPCPA, at least in Delaware and New York, has been to provide two-week deposits based upon annualized averages for utilities held in a segregated utility account and procedures for utilities to object to such adequate assurance and/or to request additional or different adequate assurance. The United States District Court for the Southern District of New York, in In re The Great Atlantic & Pacific Tea Company, Inc., et al., 11-CB-1338 (CS) (S.D.N.Y. Nov. 14, 2011), recently endorsed the use of such procedures, over the objection of multiple utilities.

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