May 2013

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On May 21, 2013, Treasury Secretary Jack Lew in his role as Chairman of the Financial Stability Oversight Council (“FSOC”) testified before the House Financial Services Committee. In its annual report, the FSOC stated that “the commercial real estate sector has improved, with prices rising slightly and CMBS issuance gaining strength in 2012. The past year witnessed the strongest post-crisis credit flows for commercial real estate (CRE), with almost $100 billion in CMBS issuance”. (more…)

The Bankruptcy Code is a balancing act with each section promoting one or more of three competing principles: the protection of a secured creditor’s property rights, equitable and equal distribution to unsecured creditors or the debtor’s fresh start. Section 506(c) is a counter weight designed to balance the need for an equitable distribution to unsecured creditors with the secured lender’s right to realize the value of its collateral. Ordinarily, in order to protect the secured lenders’ interest in its collateral, unsecured creditors, including the administrative creditors, must look only to the unencumbered assets of the bankruptcy estate to seek payment. However, Section 506 (c) is the exception to that rule and offers a “surcharge” on the collateral of a secured lender when efforts by or on behalf of the bankruptcy estate clearly benefit the secured lender rather than the estate generally. Thus, the section provides that the trustee (or the debtor in possession) may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, the secured property to the extent of any benefit to the holder of such claim. (more…)