Bankruptcy and The Letter of Credit Dilemma: Overcoming Challenges to Keeping LOC Proceeds
Recording of a 90-minute CLE video webinar with Q&A
This CLE webinar will discuss the effect on the beneficiary and issuer of a letter of credit (LOC) if the account party (a/k/a the applicant) files for bankruptcy. The panel will identify key provisions in LOCs, post-petition draw demands, possible preference liability and related defenses, how proceeds of the LOC are applied to an outstanding claim, and drafting strategies to minimize risks. The panel will also discuss issues that arise for the other parties if the issuer or the beneficiary files for bankruptcy.
Outline
- Overview of LOCs
- Pre-petition draw on the LOC
- Post-petition draw on the LOC
- Preference risks and defenses
- Indirect transferees
- Strategies for beneficiaries before and after bankruptcy
Benefits
The panel will review these and other key issues:
- How are LOC proceeds applied to the cap on lease damages in Section 502?
- When might the issuer be an indirect transferee of a preference?
- What happens if the account party is not the debtor but a guarantor of the debtor?
- Does it matter if the LOC is secured when the security interest arose?
- When would drawing on an LOC violate the automatic stay?
Faculty
Patrick E. Fitzmaurice
Partner
Pillsbury Winthrop Shaw Pittman
Mr. Fitzmaurice's practice focuses on representing lenders and other creditors in workouts, restructurings,... | Read More
Mr. Fitzmaurice's practice focuses on representing lenders and other creditors in workouts, restructurings, litigation and bankruptcy matters. He regularly represents clients in fraudulent transfer and other types of avoidance litigation. Mr. Fitzmaurice is also frequently involved in advising creditors in foreclosure and other types of enforcement actions involving real estate and UCC collateral.
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William D. Gardner
Shareholder
von Briesen & Roper
Mr. Gardner is a Shareholder and Chair of the firm’s Restructuring & Insolvency Section. Clients value his... | Read More
Mr. Gardner is a Shareholder and Chair of the firm’s Restructuring & Insolvency Section. Clients value his extensive experience representing banks, non-bank lenders, and borrowers in loan originations, workouts, financial restructurings, and insolvency proceedings. Mr. Gardner partners with clients to define their business objectives and develop legal strategies. Clients regularly consult with him on issues arising under UCC Article 8 and UCC Article 9 and in connection with Chapter 128 Wisconsin receiverships and bankruptcies. Mr. Gardner is committed to continually improving client relationships and finding innovative ways to be a better business partner. He tracks legislative, regulatory and other developments that impact the financial services industry, including adoption of the new proposed UCC Article 12 that will govern certain rights in digital assets such as virtual currencies and non-fungible tokens (NFTs).
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