The Wall Street Journal discusses the  $11.2 trillion in outstanding corporate debt, and considers whether companies that took advantage of “cheap money” this past year merely delayed a reckoning coming in the next economic downturn.   [WSJ; June 14, 2021]

CNN Business covers the bankruptcy filing of Washington Prime Group, an owner of more than 100 malls across the United States.  The company cited temporary closures and relaxation of rent payments from some tenants as the primary causes of its bankruptcy filing.  Washington Prime Group is using chapter 11 to “implement a comprehensive and consensual financial restructuring” to deleverage nearly $1 billion in debt.  [CNN Business; June 14, 2021]

Bloomberg analyzes retail investors’ continued interest in financially-distressed companies and the increased popularity of “meme stocks” (e.g., AMC Entertainment Holdings Inc., GameStop Corp.).  AMC, once on the brink of bankruptcy, now has a “path to a sustainable capital structure,” in part because of the increased demand from retail investors allowed it to sell new shares.  Investors also continue to purchase shares of companies already in bankruptcy, a risky bet that has paid off for some investors so far.  [Bloomberg; June 11, 2021]

Barron’s analyzes why Hertz’s stock continues to rise when the company is still in bankruptcy, noting the recently-confirmed plan that provides a payout to shareholders.  [Barron’s; June 16, 2021]

Business Insider reports that the U.S. economy added 559,000 new jobs in May, a rate of job creation that, if maintained, will take another 15 months for U.S. jobs to surpass the pre-pandemic peak.  While labor shortages have emerged as an issue, economists predict that such shortages are likely to fade away as new school year starts, unemployment benefits expire, and vaccination efforts continue.  [Business Insider; June 4, 2021]

CNBC reports that the National Rifle Association intends to defend itself against New York Attorney General Letitia James’ attempts to shut the organization down in a state court, dropping its own federal lawsuit seeking to block her efforts.  The move comes after the NRA’s bankruptcy case was dismissed for being based on improper effort to avoid regulatory oversight and gain an unfair litigation advantage.  [CNBC; June 4, 2021]

Bloomberg reports that eight municipal borrowers entered distressed territory last week, lifting Bloomberg’s total tally for such borrowers in 2021 to 76.  While the numbers indicate that the wave of U.S. municipal-bond distress set off by the pandemic is still spreading, analysts have indicated that municipal credit health has strengthened compared to last year.  [Bloomberg; June 3, 2021]

The Wall Street Journal reports that Avadim Health, a seller of topical products, filed for Chapter 11 bankruptcy protection in Delaware, with the aim of selling itself to its secured lenders led by Hayfin Capital Management LLP in exchange for roughly $70 million in debt forgiveness.  [WSJ; June 1, 2021]

Reuters reports that eleven U.S. airlines collectively issued $12.84 billion in cash refunds to customers in 2020 for flights canceled during the pandemic.  The cash refunds come on top of billions of dollars of travel credits that are now being used at a rapid pace.  [Reuters; May 28, 2021]

The New York Times reports that the New York bankruptcy judge overseeing Purdue Pharma’s Chapter 11 cases provisionally approved the OxyContin manufacturer’s disclosure statement, subject to resolution of a handful of issues, setting up Purdue’s restructuring proposal to be put to a vote of creditors.  While major issues remain for the upcoming confirmation hearing, the most contentious being whether or not the Sackler family who owns Purdue should be released from all opioid-related lawsuits in exchange for its financial contributions to Purdue’s plan, approval of the disclosure statement is a major milestone in the case.  Once the information packets on Purdue’s proposal are mailed out, voting is scheduled to conclude by July 14 and a confirmation hearing is scheduled for August 9.  [The New York Times; May 26, 2021]

Bloomberg reports that Western Community Energy, a local government agency that provides electricity in California, filed for Chapter 9 bankruptcy protection.  In explaining its reasons for filing, the agency blamed the ongoing impacts of Covid-19, its inability to shut off customers with late bills and unexpected energy costs from a 2020 heat wave.  [Bloomberg; May 25, 2021]

The Wall Street Journal discusses the bankruptcy court’s recent decision to reject Sears’ request to increase compensation for three adviser firms that were hired to pursue the retailer’s lawsuits to recover money paid to third parties within three months prior to its bankruptcy filing.  The adviser firms reportedly collected $16 million so far, far short of the initially anticipated $100 million.  [WSJ; May 25, 2021]

Bloomberg reports that shareholders in Latam Airlines Group SA’s chapter 11 case have organized into an ad hoc committee and hired the same counsel that represented equity holders in Hertz. Shareholders see the potential for the Latam bankruptcy to produce a recovery to common equity; similar to Hertz, Latam is a travel company, was in good financial health before the COVID pandemic, and is arguably in position for a fast recovery after the pandemic. [Bloomberg; May 20, 2021]

The Wall Street Journal and Reuters report that TAL Apparel Ltd., a former minority owner of Brooks Brothers, has sued the Del Vecchio family for not accepting deals for the company that could have prevented its 2020 chapter 11 filing. Brooks Brothers was sold out of bankruptcy last year to Authentic Brands Group LLC and mall operator Simon Property Group Inc. for $325 million. The suit alleges that the Del Vecchio family rejected the pre-bankruptcy offers because the valuation was not high enough to prevent the Del Vecchios from paying under a make-whole provision in their agreement with TAL. [Wall Street Journal; May 18, 2021] [Reuters; May 18, 2021]

Various experts opine on what is driving the current labor shortages in the New York Time’s DealBook newsletter, including what roles unemployment benefits, wages, childcare, and health concerns may be playing. [New York Times; May 22, 2021]

The Wall Street Journal reports on the winning bid in the 36-hour auction for control of Hertz in anticipation of its emergence from bankruptcy later this summer.  The winning bidders, a group of co-investors led by Knighthead Capital Management and Certares Management, will buy the bulk of Hertz’s equity upon emergence for $2.8 billion.  Assuming Hertz’s reorganization plan is confirmed next month as expected, that plan will return more than $7 per share in value to shareholders, a rare result in corporate chapter 11 bankruptcy cases. The winning bid was approved last Friday (May 14, 2021). [WSJ; May 12, 2021] [WSJ; May 14, 2021]

The fallout from Winter Storm Uri in Texas continues, with Bloomberg reporting that Goldman Sachs is having difficulty collecting on a $400 million natural gas trade with a state-owned Mexican power utility. Given that the investment bank has been expanding in the Mexican market and that the costs of the trade might ultimately be passed on to Mexican households, commentators suggest that it is uncertain whether and on what terms the trade will be settled. [Bloomberg; May 17, 2021]

Bloomberg reports that supply chains are at risk of seizing up as global corporate demand for materials has skyrocketed. Businesses are building up their inventory over fears that materials may not be available in the future, which has also stoked further concerns over inflation. [Bloomberg; May 16, 2021]

The Boy Scouts case is generating high legal fees as the parties work towards a resolution of sexual abuse claims; the New York Times reports that Judge Silverstein and other parties are taking a hard look at fee applications. [NYT; May 11, 2021]

The Bankruptcy Court for the Northern District of Texas dismissed the National Rifle Association’s (“NRA”) bankruptcy case on May 11, finding that the case was not filed in good faith.  In his opinion, Judge Harlin Hale found that there was cause for dismissal because the case was filed “to gain unfair litigation advantage and … to avoid a state regulatory scheme,” neither of which he considered to be a purpose intended or sanctioned by the Bankruptcy Code.

Continue Reading NRA Bankruptcy Dismissed for Lack of Good Faith in Filing

The Wall Street Journal reports that hedge-fund founder, Dan Kamensky, was sentenced to six months in prison for bankruptcy fraud in connection with his attempt to quash a competing bid for shares of Neiman Marcus subsidiary MyTheresa during Neiman’s bankruptcy case.  As a member of the official unsecured creditors’ committee, Kamensky had a fiduciary obligation to serve the interests of all creditors, not just his own firm’s financial interests.  Kamensky, who founded Marble Ridge Capital LP, pleaded guilty to the charge of bankruptcy fraud back in February 2021. [WSJ; May 7, 2021]

The New York Times reports that a Northern District of Texas bankruptcy judge dismissed the National Rifle Association’s bankruptcy case, writing that the NRA  did not file in good faith since its filing was being primarily used to gain an unfair advantage in litigation brought by the New York Attorney General and to avoid the New York state regulatory scheme.  The NYT had previously reported that in addition to vehement opposition to the filing from the New York Attorney General, the United States Trustee’s Office also joined the call for the case to be dismissed, which bankruptcy experts said underscored the unusual character of the NRA’s bankruptcy case.  [NYT; May 11, 2021; NYT; May 3, 2021]

The Wall Street Journal reports that as much as $4 billion in Paycheck Protection Program (PPP) loans went to thousands of venture-backed startups, many of whom ended up raising hundreds of millions of dollars by going public just a year later.  More than 30 such startups, each valued at more than $150 million, went public via special-purpose acquisition companies (SPAC) reverse mergers, and another 15, each valued at over $200 million, had initial public offerings within a year of taking the taxpayer-funded forgivable loans.  [WSJ; May 9, 2021]

Bloomberg reported that USA Gymnastics asked the Southern District of Indiana Bankruptcy Court to enforce the automatic stay and enjoin litigation filed by four plaintiffs seeking to hold the US Olympic & Paralympic Committee (USOPC) liable for sexual abuse committed by convicted child sexual predator Larry Nassar.  USA Gymnastics said allowing the litigation to proceed would be disruptive to its chapter 11 proceedings and its settlement talks with survivors.  In its motion to enforce the automatic stay, USA Gymnastics argued that the claims against the USOPC are property of its estate because they are general and common among its creditors, which include over 500 survivors of Nassar’s abuse.  The plaintiffs objected to enforcement of the stay with respect to their lawsuit against the USOPC, arguing that their claims are not general and common, but rather personal and particularized such that they are not estate property and should be allowed to proceed.  A hearing was held on April 28, and a ruling is pending.  [Bloomberg; April 27, 2021]

After facing opposition from California state regulators, Law360 reported that Lambda School agreed to strike language suggesting that students might not be able to wipe out their income-tied tuition repayment agreements in bankruptcy.  Lambda School, a San Francisco-based online coding school that offers many tech and web-based courses, allows students to pay no tuition until after they start earning money post-graduation.  According to the California Department of Financial Protection and Innovation, the repayment agreements falsely stated they were qualified education loans subject to the dischargeability limits of the Bankruptcy Code.  [Law 360; April 26, 2021]

Bloomberg reported that more than 700,000 small businesses in the United Kingdom are facing serious cash flow shortages.  The number of small- and medium-sized companies facing financial distress is up 15 percent from the end of last year, putting an estimated 3.2 million jobs at risk.  [Bloomberg; April 28, 2021]

After more than one year since the Paycheck Protection Program, or PPP, was established pursuant to the US Cares Act in March 2020, the Small Business Administration (“SBA”) has recently reversed its policy that prohibited companies in bankruptcy from applying for PPP funding due to their status as debtors in bankruptcy.  Specifically, on April 6, 2021, SBA released new guidance as part of its eighth version of Frequently Asked Questions for Borrowers and Lenders Participating in the Paycheck Protection Program,[1] which clarifies what it means to be “presently involved in any bankruptcy.”  As set forth in greater detail below, this newly-issued guidance removes bankruptcy as a roadblock to PPP funding and now permits companies on the road out of bankruptcy to apply for PPP loans before the program’s May 31, 2021 deadline. Continue Reading Too Little Too Late? After Much Debate, SBA Allows Debtors to Access PPP Loans – But Only on a Limited Basis

In a March 30, 2021 announcement, the Biden administration announced that it would be extending relief to approximately 1.14 million student loan borrowers who previously were not covered under the CARES Act relief enacted last year. These are borrowers who have defaulted on loans issued pursuant to the Federal Family Education Loan Program (“FFELP”). Specifically, under the measure, borrowers who have defaulted on FFELP loans will not face further penalties (and will see penalties already assessed unwound) and will also see their current interest rates reset to 0%.[1] The Biden administration’s action will be retroactive to March 13, 2020—the day the governmental formally declared a state of emergency due to the COVID-19 pandemic—and will return FFELP loans that defaulted during this period to good standing, with credit bureaus asked to remove any related negative credit reporting, allowing the applicable borrowers to rehabilitate their credit scores.[2] Continue Reading Approaching Student Loan Relief Piecemeal: The Biden Administration Extends CARES Relief to Defaulted FFELP Student Loan Borrowers; Weighs Options for Further Measures