Various creditor constituencies in the Purdue Pharma bankruptcy case have requested access to financial information concerning foreign affiliates controlled by the Sackler family, reports the Wall Street Journal. The creditors contend that this information is critical in determining the creditors’ response to the current multi-billion dollar settlement offer being made by the Sackler family in connection with Purdue Pharma’s bankruptcy case. [WSJ; July 2, 2020]

NPC International, a nationwide franchisee of fast food restaurants Pizza Hut and Wendy’s, filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas, reports CNN. NPC also recently entered into a restructuring support agreement with various first lien debt holders, which is intended to reduce long-term debt and help the company improve its capital structure. [CNN; July 1, 2020]

PG&E Corporation announced its exit from chapter 11 bankruptcy on July 1, 2020 after its plan of reorganization was confirmed on June 20, 2020. Under the confirmed plan, PG&E made payments totaling $5.4 billion to wildfire victims on the plan’s effective date (i.e. July 1, 2020), with an additional $1.35 billion in payments to be made in two installments between 2021 and 2022. [PG&E; July 1, 2020]

Reporting from Market Watch indicates that Tailored Brands Inc., a retail clothing business that counts Men’s Wearhouse, Jos A. Bank, and Joseph Abboud among its brands, failed to make a $6.1 million interest payment on its 2022 senior notes that was due on July 1, 2020. As a result of the missed payment, Tailored Brands entered a 30-day grace period in which it may make its missed interest payment after which, the missed payment becomes an event of default under the 2022 senior notes. [Market Watch; July 1, 2020]

 

 

 

Mayer Brown Partners Matthew O’Meara and Sean Scott discussed the impact of the recent news that a New York state court judge denied a preliminary injunction request filed in the Supreme Court of New York by a group of dissenting first-lien lenders, seeking to prevent a borrower, Serta Simmons, and certain first-lien consenting lenders from entering into a recapitalization transaction in an article available here.

Mayer Brown partners Brian Trust, Sean Scott, and Aaron Gavant and associate Kyle Tum Suden discussed the evolving case law surrounding whether companies in bankruptcy are eligible to pursue funding pursuant to the SBA’s Paycheck Protection Program in an article available here. For a further discussion of this issue, see prior articles for Mayer Brown’s COVID-19 response blog available here and here.

The New York Times reports that natural gas extraction company Chesapeake Energy Corporation has sought chapter 11 bankruptcy relief in the United States Bankruptcy Court for the Southern District of Texas. Chesapeake’s bankruptcy is reportedly the largest bankruptcy of a United States oil and gas company since 2015 (N.Y. Times; June 29, 2020)

German fintech company Wirecard AG sought insolvency protections in Munich after disclosing bookkeeping discrepancies revealed in an annual audit that called into question the existence of approximately $2.1 billion in cash recorded in its 2019 accounts, reports Reuters. Wirecard is the first member of Germany’s DAX Stock Index to seek insolvency protection. [Reuters; June 26, 2020]

Queso Holdings, the parent company of children’s entertainment company Chuck E. Cheese, filed for chapter 11 bankruptcy relief in the United States Bankruptcy Court for the Southern District of Texas, citing an unsustainable capital structure, reports the Washington Post. The company is seeking to confirm a restructuring plan that supports reopening its locations in the near term. [WaPo; June 25, 2020]

The Wall Street Journal reports that the economic disruption caused by the COVID-19 pandemic coincided with an economic environment wherein substantial corporate debt was purchased by funds that subsequently sold purportedly safe collateralized loan obligations to global investors. [WSJ; June 24, 2020]

Reporting from the New York Times suggests that the United States economy may be heading for a “COVID-19 cliff,” in which distressed businesses that have made efforts to amass and conserve cash throughout the COVID-19 pandemic will be forced to spend money at an unsustainable rate as economies reopen and government pandemic relief programs expire over the next 30 to 60 days. This reporting, which includes commentary from leaders of the American College of Bankruptcy and the creator of Z score (a finance-based method of predicting business failure), suggests that hitting the “COVID-19 cliff” will result in an unprecedented number of bankruptcy filings. [N.Y. Times; June 18, 2020]

Bloomberg reports that Irish industrial manufacturing company Trane Technologies has placed two recently created business units, Aldrich Pump LLC and Murray Boiler LLC, into chapter 11 bankruptcy in the United States Bankruptcy Court for the Western District of North Carolina. The reported goal of these bankruptcy filings is to establish a channeling trust for asbestos-related personal injury claims against the debtors. [Bloomberg; June 18, 2020]

Talen Energy Corp. has placed two of its coal-fired power plants into chapter 11 bankruptcy for the third time since 2014, reports the Wall Street Journal. Talen reportedly plans to transfer ownership of the plants to senior creditors that are owed approximately $555 million. [WSJ; June 18, 2020]

The Washington Post reports that lending programs currently being employed by the Federal Reserve in response to the COVID-19 pandemic could lead to an increase in “zombie” firms in the United States. “Zombie” firms are those that do not make enough in profits to cover the cost of debt-service and are required to borrow to stay in business. [WaPo; June 17, 2020]

PG&E Corp. received approval from the United States Bankruptcy Court for the Northern District of California to sell $20 billion worth of new debt and equity, reports the Wall Street Journal. Approximately $10.7 billion worth of both investment grade and high-yield bonds will be issued and the company is seeking to find investors to purchase approximately $9.3 billion worth of new equity. [WSJ; June 11, 2020]

In Blixseth v. Credit Suisse, the Ninth Circuit Court of Appeals ruled that section 524(e) of the Bankruptcy Code does not bar a “narrow exculpation clause” in favor of creditors in a plan of reorganization so long as the exculpation clause is “focused on actions of various participants in the Plan approval process and relating only to that process.” [Blixseth v. Credit Suisse; June 11, 2020]

Reporting from Forbes describes and criticizes the receipt of substantial bonuses, some of which were given on the eve of bankruptcy filings, by corporate executives of five high-profile, financially distressed companies.  [Forbes; June 9, 2020]

The New York Times reports that luxury clothing retailer Brooks Brothers may soon seek bankruptcy protection after being forced to close three domestic clothing factories and layoff approximately 700 employees at such factories in light of the COVID-19 pandemic. [N.Y Times; June 5, 2020]

In transactions reminiscent of the contentious JCrew “trap door” transaction of 2017, performance entertainment company Cirque du Soleil and travel booking company Travelport Worldwide Ltd. each recently obtained more favorable financing terms, in the face of increasing financial distress, by transferring certain valuable intellectual property rights into unrestricted subsidiaries (thus freeing those rights from their existing creditors’ liens) to be pledged as security for new loans.  Each company’s transfer has been disputed by certain existing creditors claiming that such actions violated the companies’ existing credit agreements; Travelport now has commenced a declaratory judgment action in New York state court to validate its transfer.

Continue Reading Cirque Du Soleil and Travelport Transactions Create Controversy

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Mayer Brown partners Michael Fiddy, Amy Jacks, and Devi Shah, counsel Sheena Frazer and Alexandra Wood, senior associate Nicola Collins, and associates Fatema Begum and Amy Halsall recorded a five-episode podcast series focusing on the key reforms proposed by the UK government’s anticipated draft legislation (the Corporate Insolvency and Governance Bill), which aims to provide greater opportunities for company survival and better returns for creditors during and after the COVID-19 emergency. The podcast series can be accessed here.

Reporting from Bloomberg indicates that Ascena Retail Group, the parent company of clothing brand Ann Taylor, has entered discussions with lenders concerning a potential bankruptcy filing. Ascena reportedly wishes to pursue a partial asset sale in bankruptcy, whereby it would sell certain of its brands to reduce its existing debt, while retaining several of its key brands around which it would reorganize. [Bloomberg, June 5, 2020]

Reporting from Reuters show a 48% year-over-year rise in commercial bankruptcy filings, which it attributes in large part to the economic impact of the COVID-19 pandemic. [Reuters; June 4, 2020]

Judge Vincent Papalia of the United States Bankruptcy Court for the District of New Jersey recently extended his “mothball” order in the bankruptcy case of Modell’s Sporting Goods, Inc., which has effectively suspended activity in the Debtors’ bankruptcy cases in response to the COVID-19 pandemic since it was initially entered on March 27, 2020. See our earlier post on the initial “mothball” order for more information. [In re Modell’s Sporting Goods, Inc.; June 4, 2020]

CBL & Associates Properties Inc. reportedly failed to make an $11.8 million interest payment to bondholders, reports the Wall Street Journal. CBL is reportedly the “first major retail landlord during the coronavirus pandemic to take this step toward a bond default.” As a result of the missed bond payments, CBL has now entered a 30-day grace period, which it will reportedly use to negotiate with its lenders. [WSJ; June 2, 2020]

Reporting from Bloomberg indicates that April 2020 consumer spending in the United States dropped 13.6% from March, which is the sharpest month-over-month drop in approximately 60 years’ worth of consumer spending data maintained by the Commerce Department. [Bloomberg; May 29, 2020]

The Wall Street Journal reports that 24 Hour Fitness Worldwide Inc. is seeking a financing package in order to stave off a bankruptcy filing until July of 2020. The Company, which was reportedly struggling prior to the COVID-19 pandemic, plans to close underperforming locations as part of its restructuring efforts. [WSJ; May 28, 2020]

On May 26, 2020, the United States Supreme Court denied a petition for certiorari by creditors in ISL Loan Trust, et al. v. Millennium Lab Holdings, et al., which was decided by the Third Circuit in December of 2019. The Third Circuit’s opinion, which was discussed by members of Mayer Brown’s restructuring group in a January 2020 client alert, held that bankruptcy courts have the constitutional authority, well within the constraints of Stern v. Marshall, to confirm Chapter 11 reorganization plans containing nonconsensual third-party releases. [SCOTUS; May 26, 2020]

Judge Keith L. Phillips of the United States Bankruptcy Court for the Eastern District of Virginia entered an order extending the time in which J. Crew and its affiliated debtors must perform under all of their existing leases by 60-days through July 3, 2020. The order was entered over objections from creditors that such relief was unwarranted as many regions of the United States have started reopen following widespread COVID-19 related closures. [In re Chinos Holdings Inc., et al.; May 26, 2020]