In re: Quebecor World (USA) Inc., Debtor. Official Committee of Unsecured Creditors of Quebecor World (USA) Inc. Appellant,
American United Life Insurance Company, AUSA Life Insurance Company, Barclays Bank PLC, Deutsche Bank Securities Inc., Life Investors Insurance Company of America, Midland National Life Insurance Company Annuity, Modern Woodmen of America, North American Company for Life and Health Insurance/Annuity, North American Company for Life and Health Insurance of New York, Provident Life and Accident Insurance Company, The Northwestern Mutual Life Insurance Company, The Paul Revere Life Insurance Company, Symetra Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Life Insurance Company, Wachovia Capital Markets, LLC, Wilton Reassurance Life Company of New York, John Does, 1-50, Deutsche Bank AG, Appellees.
Argued: May 13, 2013
Appeal from a judgment of the United States District Court for the Southern District of New York (Furman, J.), affirming an order of the United States Bankruptcy Court (Peck, J.) dismissing appellant's adversary complaint. Appellant sought to avoid and recover certain payments made to appellees in exchange for private placement notes that had been issued by one of debtor's affiliates. Both lower courts held that the payments were exempt from avoidance under section 546(e) of the Bankruptcy Code.
John K. Sherwood (Jason E. Halper and Natalie J. Kraner, on the brief), Lowenstein Sandler LLP, Roseland, New Jersey, for Appellant.
Joshua Dorchak (Dina Kaufman and Jonathan B. Alter, on the brief), Bingham McCutchen LLP, New York, New York, for Appellees.
Before: Chin and Lohier, Circuit Judges, and Swain, District Judge. [*]
Chin, Circuit Judge:
In this case, appellant Official Committee of Unsecured Creditors of Quebecor World (USA) Inc. (the "Committee") sought to avoid and recover certain payments made by debtor Quebecor World (USA) Inc. ("QWUSA") to the appellee noteholders in exchange for private placement notes that had been issued by one of QWUSA's affiliates.The bankruptcy court granted appellees' motion for summary judgment, holding that the payments were exempt from avoidance because they were both "settlement payment[s]" and "transfer[s] made . . . in connection with a securities contract, " within the meaning of section 546(e) of the Bankruptcy Code. 11 U.S.C. § 546(e). The district court affirmed both holdings. We need not decide whether the payments fall within the "settlement payments" safe harbor because we conclude that they clearly fall within the safe harbor for "transfers made . . . in connection with a securities contract." Accordingly, we affirm the district court's judgment.
The relevant facts are undisputed and may be summarized as follows:
QWUSA and Quebecor World Capital Corp. ("QWCC") are subsidiaries of Quebecor World, Inc. ("QWI"), a Canadian printing company. In 2000, QWCC raised $371 million for the Quebecor entities by issuing private placement notes (the "Notes") to the appellees pursuant to two nearly identical Note Purchase Agreements (the "NPAs"). QWI and QWUSA guaranteed the Notes and the funds were eventually transferred, at least in part, to QWUSA.
Section 8.2 of the NPAs gave QWCC the option to prepay the Notes so long as QWCC paid the outstanding principal, accrued interest, and a specified "Make-Whole Amount." Section 8.6 prohibited any Quebecor affiliate from purchasing the Notes unless they, inter alia, complied with the prepayment provisions in section 8.2. Once the Notes were paid in full, section 8.5 required that they be surrendered to QWCC for cancellation.
The NPAs also provided for the acceleration of the Notes' maturity if QWI's debt-to-capitalization ratio fell below a certain threshold. Pursuant to the terms of QWI's separate $1 billion revolving credit facility, any default with respect to the Notes would have in turn triggered a default under the credit facility agreement, with calamitous results for Quebecor. When QWI began having financial difficulty in May 2007, it offered to purchase just over half of the Notes in exchange for increasing the debt-to-capitalization ratio, but the appellees rejected this offer. Instead, they entered a Noteholder Cooperation Agreement and Right of First Refusal Agreement (the "Cooperation Agreement"), in which they agreed not to sell their Notes to anyone but an existing noteholder.
In September 2007, QWI approved the prepayment of all the Notes and QWCC issued a notice of its intent to redeem the Notes early. After realizing redemption would have severe tax implications under Canadian law, however, QWI restructured the prepayment so that first QWUSA would purchase the notes from the appellees for cash and then QWCC would redeem the notes from QWUSA in exchange for forgiveness of debt QWUSA owed to QWCC. QWUSA issued a new notice to appellees indicating that it -- not QWCC -- would pay the "Redemption Price" set out in the NPAs, and that the payment would "result in the purchase of the Notes by Quebecor World (USA) Inc."
On October 29, 2007, QWUSA transferred approximately $376 million to the appellees' trustee, CIBC Mellon Trust Co. ("CIBC Mellon"). CIBC Mellon distributed the funds to appellees and the appellees eventually surrendered the Notes directly to QWI in Canada. QWUSA filed for bankruptcy in the Southern District of New York on ...