Shale Boom Brings Challenges to the Banking Industry
Residential mortgage lenders used to pay little attention to oil and gas
leases. Then came the drilling boom in
the Marcellus and Utica shales and a spate of negative publicity about the
potential adverse effects of fracking. Our firm has been engaged in an ongoing
project to review oil and gas leases in connection with loans secured by
mortgages on residential properties. We
advise our lender client regarding whether the lease contains sufficient
protections for the borrower and the bank that the loan can or should be made.
We also review requests from oil company lessees that the bank’s existing mortgage
be subordinated to their leases.
Representation of Community Bank Using Personal Property as Collateral
Not every borrower has real estate to put up as collateral for a loan, but many have personal property that will provide adequate security to a lender. Personal property comprises just about everything other than real property, including goods, inventory, equipment, accounts, documents and instruments. Stock is also personal property, as are interests in partnerships and limited liability companies. Our firm provides ongoing assistance to a local community banking client in documenting secured transactions, including both the promissory note and the relevant security documents, and in perfecting the security interests to establish the bank’s priority vis-à-vis other creditors of the borrower. And we help levy on the collateral if the loan goes bad.
Defense of First Lien Position for a Community Bank
Our firm successfully prosecuted a CF Bank's first lien position by obtaining a state court receiver. We defeated the borrower’s attempt to stop foreclosure by filing personal business bankruptcy and restored operation of property in the bank’s receiver and helped stabilize cash flows. Our lawyers also developed and prosecuted follow-up actions against the borrower’s spouse and a closely held limited liability company (LLC). Additionally, we enhanced our client’s recovery through actions against title insurer for its negligence.
Cognovit Judgment on 100 Residential Properties Across Several States
On behalf of Advantage Bank, we successfully obtained cognovit judgment against a borrower on loans collateralized by nearly 100 residential properties across several states. This involved the appointment of receiver, which stabilized the cash flow from operations. We also successfully defended the borrower’s attack on the validity of our client's mortgages in bankruptcy proceedings and subsequently handled the receiver’s sale of all real property collateral.
The Nicole Energy Services Bankruptcy
On behalf of the debtor, we prosecuted an action for breach of contract
and negligence against a large mid-western pipeline transportation company; the
negotiated settlement valued more than $3.5 million for benefit of the
creditors. Our attorneys overcame the opposition of the debtor’s management and
obtained court approval of compromise. We successfully defended the outcome
through appeals up to the United States Supreme Court.
$6 Million Credit Facility Default Workout
We successfully guided an out-of-court workout of a borrower’s default on a $6 million credit facility secured by real estate and heavy construction equipment. Our attorneys assisted in the asset liquidation and resolved priority disputes with other secured creditors. We also negotiated an asset surrender agreement and secured party sale of collateral.
$1.5 Million Liquidation of Shoe Retailer
Our lawyers represented the bankruptcy trustee in the liquidation of a multi-state fashion shoe retailer with inventory valued at more than $1.5 million. Our work included assisting in the closure of four stores in urban retail malls across three states. We also litigated and resolved contested claims of landlords for unpaid rent and charges due under defaulted leases and secured approval of the court for the Trustee’s bulk sale of inventory to a nationally known liquidator. Ultimately, Kegler Brown lawyers prosecuted the actions to recover preferential transfers.
Liquidation of Mid-Sized Residential Apartment Project
Kegler Brown served as counsel to the liquidating trustee for a mid-sized residential apartment project. Through the course of the representation, we discovered errors in the secured creditor’s mortgage and successfully avoided the lender’s lien on the project. We also worked through local zoning authorities to complete platting of the project and negotiated a contract with the property manager while assisting the trustee in supervising operations. Our lawyers also handled the trustee’s sale of property to a unsecured creditor under an innovative “credit bid” procedure and won court approval of the trustee’s sale proposal.
Settlement of Alleged Automatic Stay Violation
We successfully settled an alleged violation of the automatic stay in debtor's closed bankruptcy case after an initial "show cause" hearing demanded by the debtor against our national telecommunications client.
Defense of Multiple Preferential Demands in Graceway Bankruptcy
Kegler Brown handled the defense of multiple preferential demands from the debtor, filing and defending of proofs of claims, and applications for allowance of administrative expense claims in the Graceway Chapter 11 bankruptcy case for multiple related entities. Our firm provided advice related to the continuation of business with the debtor and guidance regarding how the debtor’s proposed plan would affect such business.
Multi-Million-Dollar Collection Action Against “Closed-Door” Pharmacy
We represented Cardinal Health, a publicly traded Fortune 20 company, in a multi-million-dollar collection action against a “closed-door” pharmacy and four guarantors in three separate lawsuits filed in North Carolina, South Carolina and Oklahoma. Our attorneys assisted in the pre-suit liquidation of the debtor’s assets, including providing client advice on regulatory issues in connection with seizing prescription drug inventory.
Pharmacy Receivership and Related Chapter 11 Bankruptcy in Nebraska
We successfully prosecuted a multi-million-dollar collection action against an operating pharmacy and sought to place the pharmacy in receivership, prompting the debtor to file Chapter 11 bankruptcy in Nebraska. We continued our representation of a public company through those Chapter 11 proceedings, culminating in the sale of the debtor's assets under Section 363, resulting in substantial recovery for our client.
Workout and Friendly Foreclosure of Failing Pipeline Company’s Assets
In this case, the pipeline company failed during completion of a major
project for a mid-stream transporter during the rainy winter season; the
mid-stream transporter alleged faulty construction and the pipeline company
defaulted on its loan. Attorneys at Kegler Brown negotiated a loan workout between
the lender, the mid-stream transporter and the pipeline construction company,
as well as other creditors, to complete construction, release liens, sell
assets and pay debts.