Equipment Financing Pitfalls in Bankruptcy: Lessons from In re Cool Springs LLC

In Wingspire Equipment Finance LLC v. E-Crane International USA Inc. (In re Cool Springs LLC), No. 23-50395, Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware found that an equipment financier did not have a perfected security interest in cranes that it had financed on behalf of the debtor because the debtor never took title to the cranes from the manufacturer. The court further found that the financier’s equipment installment payments constituted property of the debtor. Based on that ruling, the court found that the financier’s claims against the crane manufacturer, including for unjust enrichment, failed even though the crane manufacturer retained the financier’s cash deposits as well as a completed crane.  

The case emphasizes that financiers must be diligent in confirming title to financed goods to avoid having their interests subordinated or lost entirely in insolvency proceedings.

In this Reuters and WestLaw Today article, Loeb Restructuring & Bankruptcy partners Bethany Simmons and Noah Weingarten discuss the practical lessons for equipment financiers arising from the court’s ruling in In re Cool Springs LLC, including the risks of relying on informal payment arrangements and assumptions about title. They examine how insufficient diligence and imperfect documentation can leave lenders unexpectedly unsecured, and without equitable remedies, once a borrower enters bankruptcy.

To read the full article, please visit Reuters’ website (subscription may be required).