The past year has been extraordinary for distressed M&A. Although 2009 will be remembered as the year of mega-363 sales in Chrysler and General Motors, 2009 also saw a unique twist in Lehman, and multiple cases, including Delphi and Metaldyne, giving rise to the “collective action” doctrine. Lyondell set the record for compensating prepetition lenders extending new credit as rollover debtor-in-possession financing, Charter broke new ground on reinstatement of prepetition debt, and Tousa voided the “savings” provision used in many complex enterprise financings to insulate upstream guaranties from fraudulent conveyance attack. Finally, responsibilities of the board of a troubled company as established in North American Catholic provided the key support for a critical decision in General Growth Properties and will likely be revisited in the Capmark chapter 11 case.
In September of 2008, Lehman Brothers filed the biggest bankruptcy in U.S. history and, within one week, obtained approval for the sale of substantially all of its assets to Barclays.1 One year later Lehman Brothers through its special counsel, Jones Day, filed a motion seeking to modify the sale order pursuant to Rule 60(b) of the Federal Rules of Civil Procedure, asserting that the sale order was entered on an inaccurate record due to mistake, inadvertence or misrepresentations to the court. Key components of the real agreement between Lehman and Barclays were allegedly not disclosed to the court, resulting in a multibillion dollar windfall for Barclays. The question will not be decided until 2010, but in light of the protections afforded a sale by section 363(m), it bears watching.
