Probate & Property Magazine, March/April 2011 — Counsel
Scott Miller co-authored the article, “General Growth: Special Purpose Entities (Barely) Survive First Bankruptcy Test,” which discusses the impact of
In re General Growth Properties, Inc. “Lenders have used bankruptcy-remote, special purpose entities (SPEs) since the early 1990s to attempt to isolate their collateral from the claims of affiliates of their borrower, especially in loans secured by commercial mortgage-backed securities,” the authors wrote. The value of this SPE structure was put to the test in the 2009 General Growth Properties (GGP) bankruptcy, which also dealt with independent directors, lenders and separateness issues. “At the end of the day, bankruptcy principles prevailed over most, but not all, of the separateness and bankruptcy remoteness protections intended to protect the lenders’ collateral,” the authors explained. “For bankruptcy lawyers,
General Growth provides new ideas and authority for challenging separateness covenants and bankruptcy remoteness devices. For corporate lawyers who prepare and review the organizational documents of borrowers, it provides a valuable lesson about ‘independent directors.’ For lending lawyers, the result could have been (and almost was) much worse and provides some tough lessons from which to learn.”