Sec. 4. Liquidation, reorganization, or recapitalization of a covered financial corporation
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Title 11, United States Code, is amended by inserting before chapter 15 the following: Sec. 1401. Inapplicability of other sections. 1402. Definitions for this chapter. 1403. Commencement of a case concerning a covered financial corporation. 1404. Regulators. 1405. Special trustee and bridge company. 1406. Special transfer of property of the estate. 1407. Automatic stay; assumed debt. 1408. Treatment of qualified financial contracts and affiliate contracts. 1409. Licenses, permits, and registrations. 1410.
Exemption from securities laws. 1411. Inapplicability of certain avoiding powers. Sections 321(c) and 322(b) do not apply in a case under this chapter. In this chapter, the following definitions shall apply: The term Board means the Board of Governors of the Federal Reserve System. The term bridge company means a newly formed corporation the equity securities of which are transferred to a special trustee under section 1405(a). The term capital structure debt means debt, other than a qualified financial contract, of the debtor for borrowed money with an original maturity of at least 1 year.
The term contractual right means a contractual right as defined in section 555, 556, 559, or 560. The term qualified financial contract means any contract of a kind specified in paragraph (25), (38A), (47), or
(53B)of section 101, section 741(7), or paragraph (4), (5), (11), or
(13)of section 761. A case under this chapter may be commenced by the filing of a petition with the bankruptcy court— under section 301; or by the Board, only if— the Board certifies in the petition that it has determined that— the covered financial corporation— has incurred losses that will deplete all or substantially all of the capital of the covered financial corporation, and there is no reasonable prospect for the covered financial corporation to avoid such depletion; is insolvent; is not paying or is unable to pay the debts of the covered financial corporation (other than debts subject to a bona fide dispute as to liability or amount) as they become due; or is likely to be in a financial condition specified in subclause (I), (II), or
(III)sufficiently soon such that the immediate commencement of a case under this chapter concerning the covered financial corporation is necessary to prevent imminent substantial harm to financial stability in the United States; and the commencement of a case under this chapter concerning the covered financial corporation and the effect of a transfer under section 1406 is necessary to prevent imminent substantial harm to financial stability in the United States; and the bankruptcy court determines, after a hearing described in subsection (b), that the Board has shown by a preponderance of the evidence that the requirements under subparagraph
(A)have been satisfied. A hearing described in this subsection is a hearing held not later than 12 hours after the Board makes a certification under subsection (a)(2)(A), with notice only to— the covered financial corporation; the Federal Deposit Insurance Corporation; and the Secretary of the Treasury. Only the Board and the entities listed in paragraph
(1)may attend or participate in a hearing described in this subsection. Transcripts of such hearing shall be sealed until the end of the case. The covered financial corporation may file an appeal in the district court of a determination made by the bankruptcy court under subsection (a)(2)(B) not later than 12 hours after the bankruptcy court makes such determination, with notice only to the entities listed in subsection (b)(1) and the Board. The district judge specified under section 298(c)(1) of title 28 for the judicial circuit in which the case is pending shall hear the appeal under paragraph
(1)and review within 12 hours the determination of the bankruptcy court under subsection (a)(2)(B) for abuse of discretion. The commencement of a case under subsection (a)(1) constitutes an order for relief under this chapter. In a case commenced under subsection (a)(2), the bankruptcy court shall immediately order relief under this chapter if— the bankruptcy court makes a determination under subsection (a)(2)(B) that the requirements of subsection (a)(2)(A) have been satisfied; and the period for appeal under subsection (c)(1) has passed without an appeal having been filed; or the district court affirms the determination of the bankruptcy court under subsection (c)(2). Notwithstanding paragraph (2), the bankruptcy court shall order relief in a case commenced under subsection (a)(2) if the debtor consents to the order. The Board may raise and may appear and be heard on any issue in any case or proceeding under this title relevant to the regulation of the debtor by the Board or to financial stability in the United States. The Federal Deposit Insurance Corporation may raise and may appear and be heard on any issue in any case or proceeding under this title in connection with a transfer under section 1406. On request of the trustee or the Board, the court may order the trustee to appoint 1 special trustee and transfer to the special trustee all of the equity securities in a corporation to hold in trust for the sole benefit of the estate, if— the corporation does not have any property, executory contracts, unexpired leases, or debts, other than any property acquired or executory contracts, unexpired leases, or debts assumed when acting as a transferee of a transfer under section 1406; the equity securities of the corporation are property of the estate; and the court approves— the trust agreement governing the special trustee; the governing documents of the corporation; and the identity of— the special trustee; and the directors and senior officers of the corporation. The trust agreement governing the special trustee shall provide— for the payment of the costs and expenses of the special trustee from the assets of the trust and not from the property of the estate; that the special trustee provide— periodic reporting to the estate; and information about the bridge company as reasonably requested by a party in interest to prepare a disclosure statement for a plan providing for distribution of any securities of the bridge company, if such information is necessary to prepare such disclosure statement; that the special trustee provide notice to and consult with parties in interest in the case in connection with— any change in a director or senior officer of the bridge company; any modification to the governing documents of the bridge company; and any major corporate action of the bridge company, including— recapitalization; a liquidity borrowing; termination of an intercompany debt or guarantee; a transfer of a substantial portion of the assets of the bridge company; or the issuance or sale of any securities of the bridge company; that the proceeds of the sale of any equity securities of the bridge company by the special trustee be held in trust for the benefit of or transferred to the estate; and that the property held in trust by the special trustee is subject to distribution in accordance with the plan and subsection (c). The special trustee shall distribute the assets held in trust in accordance with the plan on the effective date of the plan, after which time the office of the special trustee shall terminate, except as may be necessary to wind up and conclude the business and financial affairs of the trust. After a transfer under section 1406, the special trustee shall be subject only to applicable nonbankruptcy law, and the actions and conduct of the special trustee shall no longer be subject to approval by the court in the case under this chapter. On request of the trustee or the Board, and after notice and hearing and not less than 24 hours after the commencement of the case, the court may order a transfer under this section of property of the estate to a bridge company. Except as provided under this section, the provisions of section 363 shall apply to a transfer under this section. Unless the court orders otherwise, notice of a request for an order under subsection
(a)shall consist of electronic or telephonic notice of not less than 24 hours to— the debtor; the trustee; the holders of the 20 largest secured claims against the debtor; the holders of the 20 largest unsecured claims against the debtor; the Board; the Federal Deposit Insurance Corporation; the Secretary of the Treasury; the United States trustee; and each primary financial regulatory agency, as defined in section 2(12) of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5301(12) ), with respect to any affiliate that is proposed to be transferred under this section. The court may not order a transfer under this section unless the court determines, based upon a preponderance of the evidence, that— the transfer under this section is necessary to prevent imminent substantial harm to financial stability in the United States; the proposed transfer does not provide for the assumption of any capital structure debt by the bridge company; the proposed transfer provides for the transfer of any accounts of depositors of the debtor that are insured by the Federal Deposit Insurance Company to the bridge company; and the Board certifies to the court that the Board has determined that the bridge company provides adequate assurance of future performance of any executory contract or unexpired leased assumed and assigned to the bridge company, and of payment of any debt assumed by the bridge company, in the transfer under this section. A petition filed under section 301 or 1403 operates as a stay, applicable to all entities, of the termination or modification of any debt, contract, lease, or agreement described in paragraph (2), or of any right or obligation under any such debt, contract, lease or agreement, solely because of— a default by the debtor under any such debt, contract, lease, or agreement; or a provision in such debt, contract, lease, or agreement or in applicable nonbankruptcy law that is conditioned on— the insolvency or financial condition of the debtor at any time before the closing of the case; the commencement of a case under this title concerning the debtor; the appointment of or taking possession by a trustee in a case under this title concerning the debtor or by a custodian before the commencement of the case; or a credit rating agency rating, or absence or withdrawal of a credit rating agency rating— of the debtor at any time after the commencement of the case; of an affiliate during the 48 hours after the commencement of the case; or while the special trustee is a direct or indirect beneficial holder of more than 50 percent of the equity securities of the bridge company— of the bridge company; or of an affiliate, if all of the direct or indirect interests in the affiliate that are property of the estate are transferred under section 1406. A debt, contract, lease, or agreement described in this paragraph is— any debt (other than capital structure debt), executory contract (other than a qualified financial contract), or unexpired lease of the debtor; any agreement under which the debtor issued or is obligated for debt (other than capital structure debt); any debt, executory contract (other than a qualified financial contract), or unexpired lease of an affiliate; or any agreement under which an affiliate issued or is obligated for debt. The stay under this subsection terminates— as to the debtor, upon the earliest of— 48 hours after the commencement of the case; assumption of the debt, contract, or lease under an order authorizing a transfer under section 1406; or a determination by the court not to order a transfer under section 1406; and as to an affiliate, upon the earliest of— entry of an order authorizing a transfer under section 1406 in which the direct or indirect interests in the affiliate that are property of the estate are not transferred under section 1406; a determination by the court not to order a transfer under section 1406; or 48 hours after the commencement of the case, if the court has not ordered a transfer under section 1406. Sections 362(d), 362(e), 362(f), and 362(g) apply to a stay under this subsection. A debt, executory contract (other than a qualified financial contract), or unexpired lease of the debtor, or an agreement under which the debtor has issued or is obligated for any debt, may be assumed by a bridge company in a transfer under section 1406 notwithstanding any provision in an agreement or in applicable nonbankruptcy law that— prohibits, restricts, or conditions the assignment of the debt, contract, lease, or agreement; or terminates or modifies, or permits a party other than the debtor to terminate or modify, the debt, contract, lease, or agreement on account of— the assignment of the debt, contract, lease, or agreement; or a change in control of any party to the debt, contract, lease, or agreement. A debt, contract, lease, or agreement of the kind described in subsection (a)(2)(A) or (a)(2)(B) may not be terminated or modified, and any right or obligation under such debt, contract, lease, or agreement may not be terminated or modified, as to the bridge company solely because of a provision in the debt, contract, lease, or agreement or in applicable nonbankruptcy law— of the kind described in subsection (a)(1)(B) as applied to the debtor; that prohibits, restricts, or conditions the assignment of the debt, contract, lease, or agreement; or that terminates or modifies, or permits a party other than the debtor to terminate or modify, the debt, contract, lease or agreement, on account of— the assignment of the debt, contract, lease, or agreement; or a change in control of any party to the debt, contract, lease, or agreement. If there has been a default by the debtor of a provision other than the kind described in paragraph
(1)in a debt, contract, lease or agreement of the kind described in subsection (a)(2)(A) or (a)(2)(B), the bridge company may assume such debt, contract, lease, or agreement only if the bridge company— cures, or provides adequate assurance to the court in connection with a transfer under section 1406 that the bridge company will promptly cure, the default; compensates, or provides adequate assurance to the court in connection with a transfer under section 1406 that the bridge company will promptly compensate, a party other than the debtor to the debt, contract, lease, or agreement, for any actual pecuniary loss to the party resulting from the default; and provides adequate assurance to the court in connection with a transfer under section 1406 of future performance under the debt, contract, lease, or agreement. Notwithstanding sections 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, and 561, a petition filed under section 301 or 1403 operates as a stay, during the period specified in section 1407(a)(3)(A), applicable to all entities, of the exercise of a contractual right— to cause the liquidation or termination of a qualified financial contract of the debtor or an affiliate; or to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with a qualified financial contract of the debtor or an affiliate; or under any security agreement or arrangement or other credit enhancement forming a part of or related to a qualified financial contract of the debtor or an affiliate. During the period specified in section 1407(a)(3)(A), the trustee or the affiliate shall perform all payment and delivery obligations under a qualified financial contract of the debtor or the affiliate, respectively, that become due after the commencement of the case. The stay provided under subsection
(a)terminates as to a qualified financial contract of the debtor or an affiliate immediately upon the failure of the trustee or the affiliate, respectively, to perform any such obligation during such period. A counterparty to any qualified financial contract of the debtor that is assumed and assigned in a transfer under section 1406 may perform any unperformed payment or delivery obligation under the qualified financial contract promptly after the assumption and assignment with the same effect as if the counterparty had timely performed such obligations. A qualified financial contract between an entity and the debtor may not be assigned to or assumed by the bridge company in a transfer under section 1406 unless— all qualified financial contracts between the entity and the debtor are assigned to and assumed by the bridge company in the transfer under section 1406; all claims of the entity against the debtor under any qualified financial contract between the entity and the debtor (other than any claim that, under the terms of the qualified financial contract, is subordinated to the claims of general unsecured creditors) are assigned to and assumed by the bridge company; all claims of the debtor against the entity under any qualified financial contract between the entity and the debtor are assigned to and assumed by the bridge company; and all property securing or any other credit enhancement furnished by the debtor for any qualified financial contract described in paragraph
(1)or any claim described in paragraph
(2)or
(3)under any qualified financial contract between the entity and the debtor is assigned to and assumed by the bridge company. Section 365(b)(1) does not apply to a default under a qualified financial contract of the debtor that is assumed and assigned in a transfer under section 1406 if the default— is a breach of a provision of the kind specified in section 1407(a)(1)(B)(iv); and in the case of a breach of a provision of the kind specified in section 1407(a)(1)(B)(iv)(III), occurs while the bridge company is a direct or indirect beneficial holder of more than 50 percent of the equity securities of the affiliate. Notwithstanding any provision in a qualified financial contract or in applicable nonbankruptcy law, a qualified financial contract of the debtor that is assumed or assigned in a transfer under section 1406 may not be terminated or modified, and any right or obligation under the qualified financial contract may not be terminated or modified, for a breach of a provision of the kind specified in section 1407(b) at any time after the entry of an order under section 1406 until such time as the special trustee is no longer the direct or indirect beneficial holder of more than 50 percent of the equity securities of the bridge company. Notwithstanding any provision in any agreement or in applicable nonbankruptcy law, an agreement of an affiliate (including an executory contract, unexpired lease, or agreement under which the affiliate issued or is obligated for debt), and any right or obligation under such agreement, may not be terminated or modified at any time after the commencement of the case solely because of a condition described in section 1407(b) if— all direct or indirect interests in the affiliate that are property of the estate are transferred under section 1406 to the bridge company within the period specified in subsection (a); the bridge company assumes— any guarantee or other credit enhancement issued by the debtor relating to the agreement of the affiliate; and any right of setoff, netting arrangement, or debt of the debtor that directly arises out of or directly relates to the guarantee or credit enhancement; and any property of the estate that directly serves as collateral for the guarantee or credit enhancement is transferred to the bridge company. Notwithstanding any otherwise applicable nonbankruptcy law, if a request is made under section 1406 for a transfer of property of the estate, any Federal, State, or local license, permit, or registration that the debtor or an affiliate had immediately before the commencement of the case and that is proposed to be transferred under section 1406 may not be terminated or modified at any time after the request solely on account of— the insolvency or financial condition of the debtor at any time before the closing of the case; the commencement of a case under this title concerning the debtor; the appointment of or taking possession by a trustee in a case under this title concerning the debtor or by a custodian before the commencement of the case; or a transfer under section 1406. Notwithstanding any otherwise applicable nonbankruptcy law, any Federal, State, or local license, permit, or registration that the debtor had immediately before the commencement of the case that is included in a transfer under section 1406 shall vest in the bridge company. For purposes of section 1145, a security of the bridge company shall be deemed to be a security of a successor to the debtor under a plan if the court approves the disclosure statement for the plan as providing adequate information (as defined in section 1125(a)) about the bridge company and the security. Except with respect to a capital structure debt, a transfer made or an obligation incurred by the debtor, including any obligation released by the debtor or the estate, to or for the benefit of an affiliate in a transfer under section 1406, is not avoidable under section 544, 547, 548(a)(1)(B), or 549, or under any similar nonbankruptcy law. . The table of chapters for title 11, United States Code, is amended by inserting after the item relating to chapter 13 the following: 14. Liquidation, reorganization, or recapitalization of a covered financial corporation 1401 .
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Sec. 4
Liquidation, reorganization, or recapitalization of a covered financial corporation
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