IB 

Union Calendar No. 470 

113TH CONGRESS 

2D SESSION H. R. 5421 

[Report No. 113–630] 

To amend title 11 of the United States Code in order to facilitate the 

resolution of an insolvent financial institution in bankruptcy. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 9, 2014 

Mr. BACHUS (for himself, Mr. GOODLATTE, and Mr. CONYERS) introduced the 

following bill; which was referred to the Committee on the Judiciary 

DECEMBER 1, 2014 

Committed to the Committee of the Whole House on the State of the Union 

and ordered to be printed 


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A BILL 

To amend title 11 of the United States Code in order to 

facilitate the resolution of an insolvent financial institution in bankruptcy. 


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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Financial Institution 

5 Bankruptcy Act of 2014’’. 

6 SEC. 2. GENERAL PROVISIONS RELATING TO COVERED FI7 NANCIAL CORPORATIONS. 

8 (a) DEFINITION.—Section 101 of title 11, United 

9 States Code, is amended by inserting the following after 

10 paragraph (9): 

11 ‘‘(9A) The term ‘covered financial corporation’ 

12 means any corporation incorporated or organized 

13 under any Federal or State law, other than a stock14 broker, a commodity broker, or an entity of the kind 

15 specified in paragraph (2) or (3) of section 109(b), 

16 that is— 

17 ‘‘(A) a bank holding company, as defined 

18 in section 2(a) of the Bank Holding Company 

19 Act of 1956; or 

20 ‘‘(B) a corporation that exists for the pri21 mary purpose of owning, controlling and financ22 ing its subsidiaries, that has total consolidated 

23 assets of $50,000,000,000 or greater, and for 

24 which, in its most recently completed fiscal 

25 year— 


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1 ‘‘(i) annual gross revenues derived by 

2 the corporation and all of its subsidiaries 

3 from activities that are financial in nature 

4 (as defined in section 4(k) of the Bank 

5 Holding Company Act of 1956) and, if ap6 plicable, from the ownership or control of 

7 one or more insured depository institu8 tions, represents 85 percent or more of the 

9 consolidated annual gross revenues of the 

10 corporation; or 

11 ‘‘(ii) the consolidated assets of the 

12 corporation and all of its subsidiaries re13 lated to activities that are financial in na14 ture (as defined in section 4(k) of the 

15 Bank Holding Company Act of 1956) and, 

16 if applicable, related to the ownership or 

17 control of one or more insured depository 

18 institutions, represents 85 percent or more 

19 of the consolidated assets of the corpora20 tion.’’. 

21 (b) APPLICABILITY OF CHAPTERS.—Section 103 of 

22 title 11, United States Code, is amended by adding at the 

23 end the following: 


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1 ‘‘(l) Subchapter V of chapter 11 of this title applies 

2 only in a case under chapter 11 concerning a covered fi3 nancial corporation.’’. 

4 (c) WHO MAY BE A DEBTOR.—Section 109 of title 

5 11, United States Code, is amended— 

6 (1) in subsection (b)— 

7 (A) in paragraph (2), by striking ‘‘or’’ at 

8 the end; 

9 (B) in paragraph (3)(B), by striking the 

10 period at the end and inserting ‘‘; or’’; and 

11 (C) by adding at the end the following: 

12 ‘‘(4) a covered financial corporation.’’; and 

13 (2) in subsection (d)— 

14 (A) by striking ‘‘and’’ before ‘‘an unin15 sured State member bank’’; 

16 (B) by striking ‘‘or’’ before ‘‘a corpora17 tion’’; and 

18 (C) by inserting ‘‘, or a covered financial 

19 corporation’’ after ‘‘Federal Deposit Insurance 

20 Corporation Improvement Act of 1991’’. 

21 (d) CONVERSION TO CHAPTER 7.—Section 1112 of 

22 title 11, United States Code, is amended by adding at the 

23 end the following: 


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1 ‘‘(g) Notwithstanding section 109(b), the court may 

2 convert a case under subchapter V to a case under chapter 

3 7 if— 

4 ‘‘(1) a transfer approved under section 1185 

5 has been consummated; 

6 ‘‘(2) the court has ordered the appointment of 

7 a special trustee under section 1186; and 

8 ‘‘(3) the court finds, after notice and a hearing, 

9 that conversion is in the best interest of the credi10 tors and the estate.’’. 

11 (e)(1) Section 726(a)(1) of title 11, United States 

12 Code, is amended by inserting after ‘‘first,’’ the following: 

13 ‘‘in payment of any unpaid fees, costs, and expenses of 

14 a special trustee appointed under section 1186, and then’’. 

15 (2) Section 1129(a) of title 11, United States Code, 

16 is amended by inserting after paragraph (16) the fol17 lowing: 

18 ‘‘(17) In a case under subchapter V, all payable 

19 fees, costs, and expenses of the special trustee have 

20 been paid or the plan provides for the payment of 

21 all such fees, costs, and expenses on the effective 

22 date of the plan. 

23 ‘‘(18) In a case under subchapter V, confirma24 tion of the plan is not likely to cause serious adverse 

25 effects on financial stability in the United States.’’. 


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1 (f) Section 322(b)(2) of title 11, United States Code, 

2 is amended by striking ‘‘The’’ and inserting ‘‘In cases 

3 under subchapter V, the United States trustee shall rec4 ommend to the court, and in all other cases, the’’. 

5 SEC. 3. LIQUIDATION, REORGANIZATION, OR RECAPITAL6 IZATION OF A COVERED FINANCIAL COR7 PORATION. 

8 Chapter 11 of title 11, United States Code, is amend9 ed by adding at the end the following: 

10 ‘‘SUBCHAPTER V—LIQUIDATION, REORGANIZA11 TION, OR RECAPITALIZATION OF A COV12 ERED FINANCIAL CORPORATION 

13 ‘‘§ 1181. Inapplicability of other sections 

14 ‘‘Sections 303 and 321(c) do not apply in a case 

15 under this subchapter concerning a covered financial cor16 poration. 

17 ‘‘§ 1182. Definitions for this subchapter 

18 ‘‘In this subchapter, the following definitions shall 

19 apply: 

20 ‘‘(1) The term ‘Board’ means the Board of 

21 Governors of the Federal Reserve System. 

22 ‘‘(2) The term ‘bridge company’ means a newly 

23 formed corporation to which property of the estate 

24 may be transferred under section 1185(a) and the 


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1 equity securities of which may be transferred to a 

2 special trustee under section 1186(a). 

3 ‘‘(3) The term ‘capital structure debt’ means all 

4 unsecured debt of the debtor for borrowed money, 

5 other than a qualified financial contract, for which 

6 the debtor is the primary obligor other than debt se7 cured by a lien on property of the estate that is to 

8 be transferred to a bridge company pursuant to an 

9 order of the court under section 1185(a). 

10 ‘‘(4) The term ‘contractual right’ means a con11 tractual right of a kind defined in section 555, 556, 

12 559, 560, or 561. 

13 ‘‘(5) The term ‘qualified financial contract’ 

14 means any contract of a kind defined in paragraph 

15 (25), (38A), (47), or (53B) of section 101, section 

16 741(7), or paragraph (4), (5), (11), or (13) of sec17 tion 761. 

18 ‘‘(6) The term ‘special trustee’ means the trust19 ee of a trust formed under section 1186(a)(1). 

20 ‘‘§ 1183. Commencement of a case concerning a cov21 ered financial corporation 

22 ‘‘(a) A case under this subchapter concerning a cov23 ered financial corporation may be commenced by the filing 

24 of a petition with the court— 


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1 ‘‘(1) by the debtor under section 301 only if the 

2 debtor states to the best of its knowledge under pen3 alty of perjury in the petition that it is a covered fi4 nancial corporation; or 

5 ‘‘(2) by the Board only if the Board states to 

6 the best of its knowledge under penalty of perjury 

7 in the petition that— 

8 ‘‘(A) the debtor is a covered financial cor9 poration that— 

10 ‘‘(i) has incurred losses that will de11 plete all or substantially all of the capital 

12 of the covered financial corporation, and 

13 there is no reasonable prospect for the cov14 ered financial corporation to avoid such de15 pletion; 

16 ‘‘(ii) is insolvent; 

17 ‘‘(iii) is not paying, or is unable to 

18 pay, the debts of the covered financial cor19 poration (other than debts subject to a 

20 bona fide dispute as to liability or amount) 

21 as they become due; or 

22 ‘‘(iv) is likely to be in a financial con23 dition specified in clause (i), (ii), or (iii) 

24 sufficiently soon such that the immediate 

25 commencement of a case under this subVerDate Sep 11 2014 01:20 Dec 02, 2014 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5421.RH H5421

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1 chapter is necessary to prevent serious ad2 verse effects on financial stability in the 

3 United States; and 

4 ‘‘(B) the commencement of a case under 

5 this title and effecting a transfer under section 

6 1185 is necessary to prevent serious adverse ef7 fects on financial stability in the United States. 

8 ‘‘(b)(1) Unless the debtor consents to an order for 

9 relief, the court shall hold a hearing on the Board’s peti10 tion under subsection (a)(2) as soon as practicable but not 

11 later than 16 hours after the Board files such a petition, 

12 with notice only to— 

13 ‘‘(A) the covered financial corporation; 

14 ‘‘(B) the Federal Deposit Insurance Corpora15 tion; 

16 ‘‘(C) the Office of the Comptroller of the Cur17 rency of the Department of the Treasury; and 

18 ‘‘(D) the Secretary of the Treasury. 

19 ‘‘(2) Only the Board and the entities specified in 

20 paragraph (1) and their counsel may participate in a hear21 ing described in this subsection. The Board or the trustee 

22 may request that pleadings, hearings, transcripts, and or23 ders in connection with a hearing described in this sub24 section be sealed if their disclosure could create financial 

25 instability in the United States. 


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1 ‘‘(3) All pleadings, hearings, transcripts, and orders 

2 sealed under paragraph (2) shall be available to only the 

3 court, the appellate panel, the covered financial corpora4 tion, the Federal Deposit Insurance Corporation, the Of5 fice of the Comptroller of the Currency of the Department 

6 of the Treasury, the Secretary of the Treasury, and the 

7 Board. Notwithstanding paragraph (2), if the case is dis8 missed, all court documents, including pleadings, hearings, 

9 transcripts, and orders, shall be permanently sealed. 

10 ‘‘(c)(1) The commencement of a case under sub11 section (a)(1) constitutes an order for relief under this 

12 subchapter. 

13 ‘‘(2) In a case commenced under subsection (a)(2), 

14 after notice and hearing required under subsection (b) and 

15 not later than 18 hours after the filing of the Board’s peti16 tion, the court shall enter— 

17 ‘‘(A) an order for relief— 

18 ‘‘(i) if the Board has shown at the hearing 

19 under this subsection that the requirements 

20 under subsection (a)(2) are supported by a pre21 ponderance of the evidence; or 

22 ‘‘(ii) if the debtor consents to the Board’s 

23 petition under subsection (a)(2); or 

24 ‘‘(B) an order dismissing the case. 


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1 ‘‘(d)(1) The covered financial corporation or the 

2 Board may appeal to the court of appeals from an order 

3 entered by the court under subsection (c)(2) not later than 

4 1 hour after the court enters such order, with notice only 

5 to the entities specified in subsection (b)(1) and the 

6 Board. Such order shall be stayed pending such appeal. 

7 ‘‘(2) The appellate panel specified under section 

8 298(c)(1) of title 28 for the judicial circuit in which the 

9 case is pending shall hear the appeal under paragraph (1) 

10 within 12 hours of the filing of the notice of appeal under 

11 this subsection. The standard of review shall be abuse of 

12 discretion. The appellate panel shall enter an order deter13 mining the matter that is the subject of the appeal not 

14 later than 14 hours after the notice of appeal is filed. 

15 ‘‘(3) The court may not, on account of an appeal 

16 from an order for relief under section 1183(d)(1), delay 

17 any proceeding under section 1185, except that the court 

18 shall not authorize a transfer under section 1185 before 

19 the determination of the appeal. 

20 ‘‘(e) The members of the board of directors (or body 

21 performing similar functions) of a covered financial com22 pany shall have no liability to shareholders, creditors or 

23 other parties in interest for a good faith filing or con24 senting in good faith to a petition with respect to a case 

25 under this subchapter, or for any reasonable action taken 


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1 in good faith in contemplation of or in connection with 

2 such a petition or a transfer under section 1185 or section 

3 1186, whether prior to or after commencement of the case. 

4 ‘‘(f) Counsel to the debtor or the Board shall provide, 

5 to the greatest extent practicable, sufficient confidential 

6 notice to the Office of Court Services of the Administrative 

7 Office of the United States Courts regarding the potential 

8 commencement of a subchapter V case without disclosing 

9 the identity of the potential debtor in order to allow such 

10 office to randomly designate and ensure the ready avail11 ability of one of the bankruptcy judges designated under 

12 section 298(b)(1) of title 28 to be available to preside over 

13 such subchapter V case. 

14 ‘‘§ 1184. Regulators 

15 ‘‘The Board, the Securities Exchange Commission, 

16 the Office of the Comptroller of the Currency of the De17 partment of the Treasury, and the Federal Deposit Insur18 ance Corporation may raise and may appear and be heard 

19 on any issue in any case or proceeding under this sub20 chapter. 

21 ‘‘§ 1185. Special transfer of property of the estate 

22 ‘‘(a) On request of the trustee or the Board, and after 

23 notice and a hearing that shall occur not less than 24 

24 hours after the order for relief, the court may order a 

25 transfer under this section of property of the estate, and 


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1 the assignment of executory contracts, unexpired leases, 

2 and qualified financial contracts of the debtor, to a bridge 

3 company. Upon the entry of an order approving such 

4 transfer, any property transferred, and any executory con5 tracts, unexpired leases, and qualified financial contracts 

6 assigned under such order shall no longer be property of 

7 the estate. Except as provided under this section, the pro8 visions of sections 363 and 365 shall apply to a transfer 

9 and assignment under this section. 

10 ‘‘(b) Unless the court orders otherwise, notice of a 

11 request for an order under subsection (a) shall consist of 

12 electronic or telephonic notice of not less than 24 hours 

13 to— 

14 ‘‘(1) the debtor; 

15 ‘‘(2) the holders of the 20 largest secured 

16 claims against the debtor; 

17 ‘‘(3) the holders of the 20 largest unsecured 

18 claims against the debtor; 

19 ‘‘(4) counterparties to any debt, executory con20 tract, unexpired lease, and qualified financial con21 tract requested to be transferred under this section; 

22 ‘‘(5) the Board; 

23 ‘‘(6) the Federal Deposit Insurance Corpora24 tion; 


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1 ‘‘(7) the Secretary of the Treasury and the Of2 fice of the Comptroller of the Currency of the Treas3 ury; 

4 ‘‘(8) the Securities and Exchange Commission; 

5 ‘‘(9) the United States trustee or bankruptcy 

6 administrator; and 

7 ‘‘(10) each primary financial regulatory agency, 

8 as defined in section 2(12) of the Dodd-Frank Wall 

9 Street Reform and Consumer Protection Act, with 

10 respect to any affiliate the equity securities of which 

11 are proposed to be transferred under this section. 

12 ‘‘(c) The court may not order a transfer under this 

13 section unless the court determines, based upon a prepon14 derance of the evidence, that— 

15 ‘‘(1) the transfer under this section is necessary 

16 to prevent serious adverse effects on financial sta17 bility in the United States; 

18 ‘‘(2) the transfer does not provide for the as19 sumption of any capital structure debt by the bridge 

20 company; 

21 ‘‘(3) the transfer does not provide for the trans22 fer to the bridge company of any property of the es23 tate that is subject to a lien securing a debt, execu24 tory contract, unexpired lease or agreement of the 

25 debtor unless— 


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1 ‘‘(A)(i) the bridge company assumes such 

2 debt, executory contract, unexpired lease or 

3 agreement, including any claims arising in re4 spect thereof that would not be allowed secured 

5 claims under section 506(a)(1) and after giving 

6 effect to such transfer, such property remains 

7 subject to the lien securing such debt, executory 

8 contract, unexpired lease or agreement; and 

9 ‘‘(ii) the court has determined that as10 sumption of such debt, executory contract, un11 expired lease or agreement by the bridge com12 pany is in the best interests of the estate; or 

13 ‘‘(B) such property is being transferred to 

14 the bridge company in accordance with the pro15 visions of section 363; 

16 ‘‘(4) the transfer does not provide for the as17 sumption by the bridge company of any debt, execu18 tory contract, unexpired lease or agreement of the 

19 debtor secured by a lien on property in which the es20 tate has an interest unless the transfer provides for 

21 such property to be transferred to the bridge com22 pany in accordance with paragraph (3)(A) of this 

23 subsection; 

24 ‘‘(5) the transfer does not provide for the trans25 fer of the equity of the debtor; 


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1 ‘‘(6) the party requesting the transfer under 

2 this subsection has demonstrated that the bridge 

3 company is not likely to fail to meet the obligations 

4 of any debt, executory contract, qualified financial 

5 contract, or unexpired lease assumed and assigned 

6 to the bridge company; 

7 ‘‘(7) the transfer provides for the transfer to a 

8 special trustee all of the equity securities in the 

9 bridge company and appointment of a special trustee 

10 in accordance with section 1186; 

11 ‘‘(8) after giving effect to the transfer, ade12 quate provision has been made for the fees, costs, 

13 and expenses of the estate and special trustee; and 

14 ‘‘(9) the bridge company will have governing 

15 documents, and initial directors and senior officers, 

16 that are in the best interest of creditors and the es17 tate. 

18 ‘‘(d) Immediately before a transfer under the section, 

19 the bridge company that is the recipient of the transfer 

20 shall— 

21 ‘‘(1) not have any property, executory con22 tracts, unexpired leases, or debts, other than any 

23 property acquired or executory contracts, unexpired 

24 leases, or debts assumed when acting as a transferee 

25 of a transfer under this section; and 


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1 ‘‘(2) have equity securities that are property of 

2 the estate, which may be sold or distributed in ac3 cordance with this title. 

4 ‘‘§ 1186. Special trustee 

5 ‘‘(a)(1) An order approving a transfer under section 

6 1185 shall require the trustee to transfer to a qualified 

7 and independent special trustee all of the equity securities 

8 in the bridge company that is the recipient of a transfer 

9 under section 1185 to hold in trust for the sole benefit 

10 of the estate, subject to satisfaction of the special trustee’s 

11 fees, costs, and expenses. The trust of which the special 

12 trustee is the trustee shall be a newly formed trust gov13 erned by a trust agreement approved by the court as in 

14 the best interests of the estate, and shall exist for the sole 

15 purpose of holding and administering, and shall be per16 mitted to dispose of, the equity securities of the bridge 

17 company in accordance with the trust agreement. 

18 ‘‘(2) In connection with the hearing to approve a 

19 transfer under section 1185, the trustee shall confirm to 

20 the court that the Board has been consulted regarding the 

21 identity of the proposed special trustee and advise the 

22 court of the results of such consultation. 

23 ‘‘(b) The trust agreement governing the trust shall 

24 provide— 


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1 ‘‘(1) for the payment of the fees, costs, ex2 penses, and indemnities of the special trustee from 

3 the assets of the debtor’s estate; 

4 ‘‘(2) that the special trustee provide— 

5 ‘‘(A) quarterly reporting to the estate, 

6 which shall be filed with the court; and 

7 ‘‘(B) information about the bridge com8 pany reasonably requested by a party in inter9 est to prepare a disclosure statement for a plan 

10 providing for distribution of any securities of 

11 the bridge company if such information is nec12 essary to prepare such disclosure statement; 

13 ‘‘(3) that for as long as the equity securities of 

14 the bridge company are held by the trust, the special 

15 trustee shall file a notice with the court in connec16 tion with— 

17 ‘‘(A) any change in a director or senior of18 ficer of the bridge company; 

19 ‘‘(B) any modification to the governing 

20 documents of the bridge company; and 

21 ‘‘(C) any material corporate action of the 

22 bridge company, including— 

23 ‘‘(i) recapitalization; 

24 ‘‘(ii) a material borrowing; 


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1 ‘‘(iii) termination of an intercompany 

2 debt or guarantee; 

3 ‘‘(iv) a transfer of a substantial por4 tion of the assets of the bridge company; 

5 or 

6 ‘‘(v) the issuance or sale of any secu7 rities of the bridge company; 

8 ‘‘(4) that any sale of any equity securities of 

9 the bridge company shall not be consummated until 

10 the special trustee consults with the Federal Deposit 

11 Insurance Corporation and the Board regarding 

12 such sale and discloses the results of such consulta13 tion with the court; 

14 ‘‘(5) that, subject to reserves for payments per15 mitted under paragraph (1) provided for in the trust 

16 agreement, the proceeds of the sale of any equity se17 curities of the bridge company by the special trustee 

18 be held in trust for the benefit of or transferred to 

19 the estate; 

20 ‘‘(6) the process and guidelines for the replace21 ment of the special trustee; and 

22 ‘‘(7) that the property held in trust by the spe23 cial trustee is subject to distribution in accordance 

24 with subsection (c). 


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1 ‘‘(c)(1) The special trustee shall distribute the assets 

2 held in trust— 

3 ‘‘(A) if the court confirms a plan in the case, 

4 in accordance with the plan on the effective date of 

5 the plan; or 

6 ‘‘(B) if the case is converted to a case under 

7 chapter 7, as ordered by the court. 

8 ‘‘(2) As soon as practicable after a final distribution 

9 under paragraph (1), the office of the special trustee shall 

10 terminate, except as may be necessary to wind up and con11 clude the business and financial affairs of the trust. 

12 ‘‘(d) After a transfer to the special trustee under this 

13 section, the special trustee shall be subject only to applica14 ble nonbankruptcy law, and the actions and conduct of 

15 the special trustee shall no longer be subject to approval 

16 by the court in the case under this subchapter. 

17 ‘‘§ 1187. Temporary and supplemental automatic stay; 

18 assumed debt 

19 ‘‘(a)(1) A petition filed under section 1183 operates 

20 as a stay, applicable to all entities, of the termination, ac21 celeration, or modification of any debt, contract, lease, or 

22 agreement of the kind described in paragraph (2), or of 

23 any right or obligation under any such debt, contract, 

24 lease, or agreement, solely because of— 


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1 ‘‘(A) a default by the debtor under any such 

2 debt, contract, lease, or agreement; or 

3 ‘‘(B) a provision in such debt, contract, lease, 

4 or agreement, or in applicable nonbankruptcy law, 

5 that is conditioned on— 

6 ‘‘(i) the insolvency or financial condition of 

7 the debtor at any time before the closing of the 

8 case; 

9 ‘‘(ii) the commencement of a case under 

10 this title concerning the debtor; 

11 ‘‘(iii) the appointment of or taking posses12 sion by a trustee in a case under this title con13 cerning the debtor or by a custodian before the 

14 commencement of the case; or 

15 ‘‘(iv) a credit rating agency rating, or ab16 sence or withdrawal of a credit rating agency 

17 rating— 

18 ‘‘(I) of the debtor at any time after 

19 the commencement of the case; 

20 ‘‘(II) of an affiliate during the period 

21 from the commencement of the case until 

22 48 hours after such order is entered; 

23 ‘‘(III) of the bridge company while the 

24 trustee or the special trustee is a direct or 


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1 indirect beneficial holder of more than 50 

2 percent of the equity securities of— 

3 ‘‘(aa) the bridge company; or 

4 ‘‘(bb) the affiliate, if all of the di5 rect or indirect interests in the affil6 iate that are property of the estate 

7 are transferred under section 1185; or 

8 ‘‘(IV) of an affiliate while the trustee 

9 or the special trustee is a direct or indirect 

10 beneficial holder of more than 50 percent 

11 of the equity securities of— 

12 ‘‘(aa) the bridge company; or 

13 ‘‘(bb) the affiliate, if all of the di14 rect or indirect interests in the affil15 iate that are property of the estate 

16 are transferred under section 1185. 

17 ‘‘(2) A debt, contract, lease, or agreement described 

18 in this paragraph is— 

19 ‘‘(A) any debt (other than capital structure 

20 debt), executory contract, or unexpired lease of the 

21 debtor (other than a qualified financial contract); 

22 ‘‘(B) any agreement under which the debtor 

23 issued or is obligated for debt (other than capital 

24 structure debt); 


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1 ‘‘(C) any debt, executory contract, or unexpired 

2 lease of an affiliate (other than a qualified financial 

3 contract); or 

4 ‘‘(D) any agreement under which an affiliate 

5 issued or is obligated for debt. 

6 ‘‘(3) The stay under this subsection terminates— 

7 ‘‘(A) for the benefit of the debtor, upon the ear8 liest of— 

9 ‘‘(i) 48 hours after the commencement of 

10 the case; 

11 ‘‘(ii) assumption of the debt, contract, 

12 lease, or agreement by the bridge company 

13 under an order authorizing a transfer under 

14 section 1185; or 

15 ‘‘(iii) a final order of the court denying the 

16 request for a transfer under section 1185; and 

17 ‘‘(B) for the benefit of an affiliate, upon the 

18 earliest of— 

19 ‘‘(i) the entry of an order authorizing a 

20 transfer under section 1185 in which the direct 

21 or indirect interests in the affiliate that are 

22 property of the estate are not transferred under 

23 section 1185; 

24 ‘‘(ii) a final order by the court denying the 

25 request for a transfer under section 1185; or 


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1 ‘‘(iii) 48 hours after the commencement of 

2 the case if the court has not ordered a transfer 

3 under section 1185. 

4 ‘‘(4) Subsections (d), (e), (f), and (g) of section 362 

5 apply to a stay under this subsection. 

6 ‘‘(b) A debt, executory contract (other than a quali7 fied financial contract), or unexpired lease of the debtor, 

8 or an agreement under which the debtor has issued or is 

9 obligated for any debt, may be assumed by a bridge com10 pany in a transfer under section 1185 notwithstanding 

11 any provision in an agreement or in applicable nonbank12 ruptcy law that— 

13 ‘‘(1) prohibits, restricts, or conditions the as14 signment of the debt, contract, lease, or agreement; 

15 or 

16 ‘‘(2) terminates or modifies, or permits a party 

17 other than the debtor to terminate or modify, the 

18 debt, contract, lease, or agreement on account of— 

19 ‘‘(A) the assignment of the debt, contract, 

20 lease, or agreement; or 

21 ‘‘(B) a change in control of any party to 

22 the debt, contract, lease, or agreement. 

23 ‘‘(c)(1) A debt, contract, lease, or agreement of the 

24 kind described in subparagraph (A) or (B) of subsection 

25 (a)(2) may not be terminated or modified, and any right 


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1 or obligation under such debt, contract, lease, or agree2 ment may not be terminated or modified, as to the bridge 

3 company solely because of a provision in the debt, con4 tract, lease, or agreement or in applicable nonbankruptcy 

5 law— 

6 ‘‘(A) of the kind described in subsection 

7 (a)(1)(B) as applied to the debtor; 

8 ‘‘(B) that prohibits, restricts, or conditions the 

9 assignment of the debt, contract, lease, or agree10 ment; or 

11 ‘‘(C) that terminates or modifies, or permits a 

12 party other than the debtor to terminate or modify, 

13 the debt, contract, lease or agreement on account 

14 of— 

15 ‘‘(i) the assignment of the debt, contract, 

16 lease, or agreement; or 

17 ‘‘(ii) a change in control of any party to 

18 the debt, contract, lease, or agreement. 

19 ‘‘(2) If there is a default by the debtor under a provi20 sion other than the kind described in paragraph (1) in 

21 a debt, contract, lease or agreement of the kind described 

22 in subparagraph (A) or (B) of subsection (a)(2), the 

23 bridge company may assume such debt, contract, lease, 

24 or agreement only if the bridge company— 

25 ‘‘(A) shall cure the default; 


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1 ‘‘(B) compensates, or provides adequate assur2 ance in connection with a transfer under section 

3 1185 that the bridge company will promptly com4 pensate, a party other than the debtor to the debt, 

5 contract, lease, or agreement, for any actual pecu6 niary loss to the party resulting from the default; 

7 and 

8 ‘‘(C) provides adequate assurance in connection 

9 with a transfer under section 1185 of future per10 formance under the debt, contract, lease, or agree11 ment, as determined by the court under section 

12 1185(c)(4). 

13 ‘‘§ 1188. Treatment of qualified financial contracts 

14 and affiliate contracts 

15 ‘‘(a) Notwithstanding sections 362(b)(6), 362(b)(7), 

16 362(b)(17), 362(b)(27), 362(o), 555, 556, 559, 560, and 

17 561, a petition filed under section 1183 operates as a stay, 

18 during the period specified in section 1187(a)(3)(A), ap19 plicable to all entities, of the exercise of a contractual 

20 right— 

21 ‘‘(1) to cause the modification, liquidation, ter22 mination, or acceleration of a qualified financial con23 tract of the debtor or an affiliate; 

24 ‘‘(2) to offset or net out any termination value, 

25 payment amount, or other transfer obligation arising 


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1 under or in connection with a qualified financial con2 tract of the debtor or an affiliate; or 

3 ‘‘(3) under any security agreement or arrange4 ment or other credit enhancement forming a part of 

5 or related to a qualified financial contract of the 

6 debtor or an affiliate. 

7 ‘‘(b)(1) During the period specified in section 

8 1187(a)(3)(A), the trustee or the affiliate shall perform 

9 all payment and delivery obligations under such qualified 

10 financial contract of the debtor or the affiliate, as the case 

11 may be, that become due after the commencement of the 

12 case. The stay provided under subsection (a) terminates 

13 as to a qualified financial contract of the debtor or an 

14 affiliate immediately upon the failure of the trustee or the 

15 affiliate, as the case may be, to perform any such obliga16 tion during such period. 

17 ‘‘(2) Any failure by a counterparty to any qualified 

18 financial contract of the debtor or any affiliate to perform 

19 any payment or delivery obligation under such qualified 

20 financial contract, including during the pendency of the 

21 stay provided under subsection (a), shall constitute a 

22 breach of such qualified financial contract by the 

23 counterparty. 


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1 ‘‘(c) A qualified financial contract between an entity 

2 and the debtor may not be assigned to or assumed by the 

3 bridge company in a transfer under section 1185 unless— 

4 ‘‘(1) all qualified financial contracts between 

5 the entity and the debtor are assigned to and as6 sumed by the bridge company in the transfer under 

7 section 1185; 

8 ‘‘(2) all claims of the entity against the debtor 

9 under any qualified financial contract between the 

10 entity and the debtor (other than any claim that, 

11 under the terms of the qualified financial contract, 

12 is subordinated to the claims of general unsecured 

13 creditors) are assigned to and assumed by the bridge 

14 company; 

15 ‘‘(3) all claims of the debtor against the entity 

16 under any qualified financial contract between the 

17 entity and the debtor are assigned to and assumed 

18 by the bridge company; and 

19 ‘‘(4) all property securing or any other credit 

20 enhancement furnished by the debtor for any quali21 fied financial contract described in paragraph (1) or 

22 any claim described in paragraph (2) or (3) under 

23 any qualified financial contract between the entity 

24 and the debtor is assigned to and assumed by the 

25 bridge company. 


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1 ‘‘(d) Notwithstanding any provision of a qualified fi2 nancial contract or of applicable nonbankruptcy law, a 

3 qualified financial contract of the debtor that is assumed 

4 or assigned in a transfer under section 1185 may not be 

5 accelerated, terminated, or modified, after the entry of the 

6 order approving a transfer under section 1185, and any 

7 right or obligation under the qualified financial contract 

8 may not be accelerated, terminated, or modified, after the 

9 entry of the order approving a transfer under section 1185 

10 solely because of a condition described in section 

11 1187(c)(1), other than a condition of the kind specified 

12 in section 1187(a)(1)(B)(iv)(III) or section 1187(b) that 

13 occurs after property of the estate no longer includes a 

14 direct beneficial interest or an indirect beneficial interest 

15 through the special trustee, in more than 50 percent of 

16 the equity securities of the bridge company. 

17 ‘‘(e) Notwithstanding any provision of any agreement 

18 or in applicable nonbankruptcy law, an agreement of an 

19 affiliate (including an executory contract, an unexpired 

20 lease, qualified financial contract, or an agreement under 

21 which the affiliate issued or is obligated for debt) and any 

22 right or obligation under such agreement may not be ter23 minated or modified, solely because of a condition de24 scribed in section 1187(c)(1), other than a condition of 

25 the kind specified in section 1187(a)(1)(B)(iv)(III) or secVerDate Sep 11 2014 01:20 Dec 02, 2014 Jkt 049200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\H5421.RH H5421

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1 tion 1187(b) that occurs after the bridge company is no 

2 longer a direct or indirect beneficial holder of more than 

3 50 percent of the equity securities of the affiliate, at any 

4 time after the commencement of the case if— 

5 ‘‘(1) all direct or indirect interests in the affil6 iate that are property of the estate are transferred 

7 under section 1185 to the bridge company within the 

8 period specified in subsection (a); 

9 ‘‘(2) the bridge company assumes— 

10 ‘‘(A) any guarantee or other credit en11 hancement issued by the debtor relating to the 

12 agreement of the affiliate; and 

13 ‘‘(B) any right of setoff, netting arrange14 ment, or debt of the debtor that directly arises 

15 out of or directly relates to the guarantee or 

16 credit enhancement; and 

17 ‘‘(3) any property of the estate that directly 

18 serves as collateral for the guarantee or credit en19 hancement is transferred to the bridge company. 

20 ‘‘§ 1189. Licenses, permits, and registrations 

21 ‘‘(a) Notwithstanding any otherwise applicable non22 bankruptcy law, if a request is made under section 1185 

23 for a transfer of property of the estate, any Federal, State, 

24 or local license, permit, or registration that the debtor or 

25 an affiliate had immediately before the commencement of 


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1 the case and that is proposed to be transferred under sec2 tion 1185 may not be terminated or modified at any time 

3 after the request solely on account of— 

4 ‘‘(1) the insolvency or financial condition of the 

5 debtor at any time before the closing of the case; 

6 ‘‘(2) the commencement of a case under this 

7 title concerning the debtor; 

8 ‘‘(3) the appointment of or taking possession by 

9 a trustee in a case under this title concerning the 

10 debtor or by a custodian before the commencement 

11 of the case; or 

12 ‘‘(4) a transfer under section 1185. 

13 ‘‘(b) Notwithstanding any otherwise applicable non14 bankruptcy law, any Federal, State, or local license, per15 mit, or registration that the debtor had immediately before 

16 the commencement of the case that is included in a trans17 fer under section 1185 shall be valid and all rights and 

18 obligations thereunder shall vest in the bridge company. 

19 ‘‘§ 1190. Exemption from securities laws 

20 ‘‘For purposes of section 1145, a security of the 

21 bridge company shall be deemed to be a security of a suc22 cessor to the debtor under a plan if the court approves 

23 the disclosure statement for the plan as providing ade24 quate information (as defined in section 1125(a)) about 

25 the bridge company and the security. 


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1 ‘‘§ 1191. Inapplicability of certain avoiding powers 

2 ‘‘A transfer made or an obligation incurred by the 

3 debtor to an affiliate prior to or after the commencement 

4 of the case, including any obligation released by the debtor 

5 or the estate to or for the benefit of an affiliate, in con6 templation of or in connection with a transfer under sec7 tion 1185 is not avoidable under section 544, 547, 

8 548(a)(1)(B), or 549, or under any similar nonbankruptcy 

9 law. 

10 ‘‘§ 1192. Consideration of financial stability 

11 ‘‘The court may consider the effect that any decision 

12 in connection with this subchapter may have on financial 

13 stability in the United States.’’. 

14 SEC. 4. AMENDMENTS TO TITLE 28, UNITED STATES CODE. 

15 (a) AMENDMENT TO CHAPTER 13.—Chapter 13 of 

16 title 28, United States Code, is amended by adding at the 

17 end the following: 

18 ‘‘§ 298. Judge for a case under subchapter V of chap19 ter 11 of title 11 

20 ‘‘(a) Notwithstanding section 295, the Chief Justice 

21 of the United States shall designate not fewer than 3 

22 judges of the courts of appeals in not fewer than 4 circuits 

23 to serve on an appellate panel to be available to hear an 

24 appeal under section 1183 of title 11 in a case under such 

25 title concerning a covered financial corporation. Appellate 


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1 judges may request to be considered by the Chief Justice 

2 of the United States for such designation. 

3 ‘‘(b)(1) Notwithstanding section 295, the Chief Jus4 tice of the United States shall designate not fewer than 

5 10 bankruptcy judges to be available to hear a case under 

6 subchapter V of chapter 11 of title 11. Bankruptcy judges 

7 may request to be considered by the Chief Justice of the 

8 United States for such designation. 

9 ‘‘(2) Notwithstanding section 155, a case under sub10 chapter V of chapter 11 of title 11 shall be heard under 

11 section 157 by a bankruptcy judge designated under para12 graph (1), who shall be assigned to hear such case by the 

13 chief judge of the court of appeals for the circuit embrac14 ing the district in which the case is pending. To the great15 est extent practicable, the approvals required under sec16 tion 155 should be obtained. 

17 ‘‘(3) If the bankruptcy judge assigned to hear a case 

18 under paragraph (2) is not assigned to the district in 

19 which the case is pending, the bankruptcy judge shall be 

20 temporarily assigned to the district. 

21 ‘‘(c)(1) The court of appeals shall have jurisdiction 

22 of appeals from all orders for relief and orders of dismissal 

23 under section 1183 of title 11. 


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1 ‘‘(2) Notwithstanding section 295, in an appeal under 

2 paragraph (1) in a case under title 11 concerning a cov3 ered financial corporation shall be heard by— 

4 ‘‘(A) 3 judges selected from the appellate panel 

5 designated under subsection (a); or 

6 ‘‘(B) if the 3 judges of such panel are not im7 mediately available to hear the case, 3 judges des8 ignated under subsection (a) from another circuit 

9 and assigned by the Chief Justice of the United 

10 States to hear the case. 

11 ‘‘(3) If any of the judges of the appellate panel speci12 fied in paragraph (2) is not assigned to the circuit in 

13 which the appeal is pending, the judges shall be tempo14 rarily assigned to the circuit. 

15 ‘‘(4) A case under subchapter V of chapter 11 of title 

16 11, and all proceedings in the case, shall take place in 

17 the district in which the case is pending. 

18 ‘‘(d) In this section, the term ‘covered financial cor19 poration’ has the meaning given that term in section 

20 101(9A) of title 11.’’. 

21 (b) AMENDMENT TO SECTION 1334.—Section 1334 

22 of title 28, United States Code, is amended by adding at 

23 the end the following: 

24 ‘‘(f) This section does not grant jurisdiction to the 

25 district court after a transfer pursuant to an order under 


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1 section 1185 of title 11 of any proceeding related to a spe2 cial trustee appointed, or to a bridge company formed, in 

3 connection with a case under subchapter V of chapter 11 

4 of title 11.’’. 

5 (c) TECHNICAL AND CONFORMING AMENDMENT.— 

6 The table of sections for chapter 13 of title 28, United 

7 States Code, is amended by adding at the end the fol8 lowing: 

‘‘298. Judge for a case under subchapter V of chapter 11 of title 11.’’. 


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Union Calendar No. 470 

113TH CONGRESS 

2D SESSION H. R. 5421 

[Report No. 113–630] 

A BILL 

To amend title 11 of the United States Code in 

financial institution in bankruptcy. order to facilitate the resolution of an insolvent 

DECEMBER 1, 2014 

Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 


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