Reporting from Bloomberg shows that during the first eight months of the COVID-19 pandemic, approximately $52 billion of rent under retail leases went unpaid.  The reporting further indicates that in many instances, these rent obligations have been deferred through out-of-court agreements between landlords and tenants and that there may be an appetite for further relief in light of recent news concerning a COVID-19 vaccine. [Bloomberg; Nov. 19, 2020]

Reuters reports that Norwegian Air has filed an examinership proceeding (the equivalent of a US Chapter 11 reorganization) in Ireland, where Norwegian Air’s primary aircraft assets are registered. The filing comes after Norway’s government elected not to advance additional financial support last week, after having already guaranteed approximately $135 million worth of the company’s debt earlier this year. [Reuters; Nov. 18, 2020]

Reporting from Yahoo Finance indicates that “zombie companies” in the United States have added roughly $1 trillion in debt to their balance sheets since the pandemic began. Zombie companies are those that do not earn enough to cover their interest expenses. The reporting indicates some of the “nation’s most iconic companies” like Boeing, Delta Air Lines, Exxon and Macy’s could be classified as zombie companies given their current financial positions. [Yahoo Finance; Nov. 17, 2020]

The Wall Street Journal reports that nearly 300 companies that collectively received up to half a billion dollars in government aid from the federal Paycheck Protection Program have filed for bankruptcy since receiving such funds. According to the Small Business Administration’s inspector general, the agency has seen growing evidence of fraud and abuse among borrowers, which he attributes to the administrative ease with which borrowers were able to obtain such funds. [WSJ; Nov. 17, 2020]

Mayer Brown partners Sean Scott and Aaron Gavant and associates Tyler Ferguson and Alexander Berk discussed the United States Bankruptcy Court for the Southern District of Texas’ most recent decision arising out of the Ultra Petroleum Corp. bankruptcy case and its rulings that (1) make-whole premiums are allowed by the Bankruptcy Code under appropriate circumstances and (2) a solvent debtor must pay post-petition interest at the contractual default rate under the Bankruptcy Code in an article available here.

CEC Entertainment, the parent company of kid-friendly and iconic “dinnertainment” restaurant and arcade chain—Chuck E. Cheese—sought and received Bankruptcy Court approval for three very unique settlement agreements, earlier this year, under which it will pay $2.3 million to three vendors to destroy roughly seven BILLION prize tickets –  i.e.,  enough tickets to fill approximately 65 forty-foot cargo shipping containers.1 The backlog was caused by Chuck E. Cheese placing orders for tickets at pre-COVID utilization rates, the resulting pandemic and rapid fallout in sales, and, most generally, Chuck E. Cheese’s efforts to transition from physical tickets to contactless transactions, like “e-Tickets.”2

Continue Reading The Costs of Destruction: Bankruptcy Court Authorizes Chuck E. Cheese to Spend Millions on Destruction of Prize Tickets

Bloomberg reports that Revlon Inc. was able to exchange approximately $236.5 million of its $343 million in outstanding bonds that were scheduled to mature in 2021 in a deal that the company said should eliminate the need for a chapter 11 bankruptcy filing in the near future. [Bloomberg; Nov. 11, 2020]

The Washington Post reports that banks in the United States, which hold approximately $2 trillion in commercial real estate debt, are preparing for a substantial number of bankruptcy filings and defaults by borrowers caused by extended coronavirus-related economic restrictions. The reporting indicates that Signature Bank set aside $53 million last month to cover loan losses related to pandemic’s negative impact on the U.S. commercial real estate market. [WaPo; Nov. 11, 2020]

The Financial Times reports that Peabody Energy, the world’s largest private sector coal producer, could file bankruptcy for the second time in five years if it is unable to implement certain strategic alternatives that it is currently pursuing. Despite reducing its debt by approximately $5.2 billion as a result of its confirmed plan of reorganization in 2017, Peabody Energy is again facing financial difficulties, reporting a net loss of $67.2M for Q3 2020. [Financial Times; Nov. 9, 2020]

Reporting from the Wall Street Journal shows that the news about Pfizer’s possible COVID-19 vaccine breakthrough lifted stock prices for several companies that have experienced acute financial difficulties as a result of the COVID-19 pandemic. AMC Entertainment Holdings, Inc., Carnival Corp., Dave & Buster’s Entertainment Inc., Hertz Global Holdings, Inc., and Royal Caribbean International are among those who saw a lift following the positive vaccine news. [WSJ; Nov. 9, 2020]

 

In Henry Hobbs Jr. v. Buffets LLC the United States Court of Appeals for the Fifth Circuit upheld the constitutionality of a recent increase in United States Trustees fees that are charged to Chapter 11 debtors. The decision overruled a decision by the bankruptcy court, which held that the fee increase resulted in the application of non-uniform laws to debtors in different jurisdictions because debtors in the six jurisdictions not covered by the United States Trustee program were not required to pay such fees. [5th Cir.; Nov. 3, 2020]

In the November 2020 statement issued by its Federal Open Market Committee, the Federal Reserve committed to use the full range of tools available to it to alleviate the economic hardship caused by the COVID-19 pandemic. To that end, the Federal Reserve indicated that it intends to keep the target range for the federal reserve rate between 0 and 0.25% to help achieve maximum employment in the labor market. [Federal Reserve; Nov. 5, 2020]

The Wall Street Journal reports that Furniture Factory Outlet LLC,  a private-equity owned retailer of discounted home furnishings, filed for Chapter 11 bankruptcy relief in the United States Bankruptcy Court for the District of Delaware on November 5, 2020. The retailer and certain affiliates will reportedly sell substantially all of their assets to competitor American Freight. [WSJ; Nov. 5, 2020]

CNN Business reports that CBL Properties and Pennsylvania Real Estate Investment Trust, two major U.S. REIT mall owners, each filed for chapter 11 bankruptcy protection on Sunday, November 1, 2020.  Some of their respective largest tenants include JC Penney, Tailored Brands, and Ascena Retail Group, all of which also filed for bankruptcy earlier this year. [CNN; Nov. 2, 2020]

Analysis by Bloomberg applying the Z-score method to commercial information available on various airlines addressed which airlines that have not yet restructured following the COVID-19 pandemic were likely to need to restructure as pandemic-related restrictions continue to impact air travel.  Bloomberg found that air carriers in Africa, Latin America, and Asia were the most likely to restructure in the near term. [Bloomberg; Nov. 1, 2020]

Mayer Brown partners Sean Scott, Matt Wargin, and Aaron Gavant, counsel Craig Reimer, and associate Sam Rabuck discussed the recent decision in CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc. from New York’s highest appellate court, the Court of Appeals, and its potential impact on minority noteholder rights in connection with a strict foreclosure and purported cancellation of notes in an article available here.

BJ Services, a Texas-based provider of hydraulic fracturing (i.e., “fracking”) and cementing services for upstream oil and gas companies, filed for chapter 11 protection on July 20, 2020, in the US Bankruptcy Court for the Southern District of Texas, along with three of its affiliates.  Their chapter 11 filings were prompted by unsuccessful restructuring negotiations with one of their equity sponsors—CSL Capital Management—which would have provided a $75 million new money investment, including $30 million in the form of DIP financing, in exchange for the majority of the reorganized equity.  Citing commodity price volatility and an unmanageable capital structure, the debtors have been pursuing an orderly wind-down and confirmation of a chapter 11 liquidation plan, the cornerstone of which was a sale process for six asset packages:  (a) cementing business; (b) fracking business; (c) certain equipment related to the cementing business; (d) certain equipment related to the fracking business; (e) shared lab equipment; and (f) other miscellaneous equipment (e.g., tractors).

Continue Reading BJ Services, LLC, et al.: Not-So-Smooth Sailing for Credit Bidders

Reporting from Law360 shows that bankruptcy filings in fiscal year 2020 are down by approximately 21% as compared to fiscal year 2019. The reporting attributes this drop primarily to non-business filings, which have dropped by approximately 21.7% since 2019. [Law360; Oct. 30, 2020]

The Financial Post reports that Boeing has issued $4.9 billion in unsecured notes in an effort to, among other things, repay approximately $2.8 billion in debt in the form of commercial paper and term bonds, which mature in 2021. In March 2019, regulators grounded Boeing’s best-selling plane model after two fatal accidents. [Financial Post; Oct. 29, 2020]

Reporting for the Wall Street Journal based on data from credit rating agency Moody’s shows that there could be a nationwide state budget deficit of $434 billion between 2020 and 2022.  This estimate assumes no additional stimulus from the federal government, continued restrictions on business and travel, and other costs related to high levels of unemployment. [WSJ; Oct. 28, 2020]

Reporting from Bloomberg based on the findings of the Airports Council International Europe indicates that 193 out of 740 European airports evaluated will soon struggle to keep current with their bills.  Europe has lost 1.29 billion travelers since January 2020, a 73% decline, according to year-over-year comparisons. [Bloomberg; Oct. 27, 2020]

In a post for the Calculated Risk Blog, seven high frequency economic indicators (such as airline travel, restaurant reservations, and hotel occupancy) are compared on a year-over-year basis to show the effects of the COVID-19 pandemic. [Calculated Risk Blog; Oct. 19, 2020]

The Wall Street Journal reports that the trailing 12-month default rate for U.S. corporate issuers of speculative-grade bonds and loans was 8.5% in September of 2020, which is below the 11.2% forecasted by credit rating agency Moody’s in April 2020. [WSJ; Oct. 26, 2020]

Reporting from Business Insider details how subscription streaming service Quibi is shutting down nearly six months after it raised $1.75 billion in pre-launch investments. Quibi will reportedly pursue an assignment for the benefit of its creditors in lieu of filing for bankruptcy. [Business Insider; October 23, 2020]

On October 22, 2020, the New York Court of Appeals issued a split decision in CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc., finding that the holders of a minority in principal amount of senior secured debt retained the right to sue for payment on the notes after a majority holder-directed strict foreclosure that purported to cancel the notes.  Justice Garcia authored the court’s opinion, which held the purported cancellation violated the indenture agreement (which incorporated language from the Trust Indenture Act) because the minority holders did not consent to the cancellation. [N.Y. Ct. App.; Oct. 22, 2020]

The Wall Street Journal reports that Purdue Pharma L.P., which filed for bankruptcy in September 2019, has agreed to settle the United States Department of Justice’s claims against it for approximately $8.34 billion, subject to bankruptcy court approval. Purdue Pharma L.P. will also plead guilty to three felonies as part of the settlement. The reporting further indicates that the company’s assets are far less than the $8.34 billion settlement amount, and that the Sackler family, who owns Purdue Pharma L.P., remains the subject of an additional criminal investigation. [Oct. 21, 2020]

In reporting for Bloomberg, Apollo Global Management’s head of credit investments Jim Zelter predicted a spike in commercial loan defaults starting in 2021 as companies struggle to service the debt they took on to respond to the COVID-19 pandemic. Zelter further predicted that an uneven economic recovery will keep companies in the travel, lodging, and entertainment sectors under financial pressure through late 2021 and beyond. [Bloomberg; Oct. 16, 2020]