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
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
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
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
In a March 2021 decision in the jointly administered bankruptcy cases of Fencepost Productions, Inc. and certain of its affiliates, Judge Dale L. Somers of the Bankruptcy Court for the District of Kansas declined to enforce a voting restriction in subordination agreements between two of the debtors’ creditors, but nonetheless found that the deeply subordinated creditors were barred from voting on the debtors’ plan because they lacked prudential standing.[1] In declining to enforce the contractual voting restriction, the decision defies a trend toward enforcing subordination and intercreditor agreement terms – so long as they are specific and express – even if such terms may limit a party’s statutory rights as a creditor in bankruptcy. Instead, Judge Somers applied a federal court jurisdictional doctrine, the relevance of which can only be determined on a case-by-case basis.
Continue Reading In re Fencepost Productions: Prudential Standing Doctrine Blocks a Subordinated Creditor from Voting
The Wall Street Journal reported that the wave of cash raised by special-purpose acquisition companies (SPACs) is fueling activity in the junk debt market at levels not seen since the dot.com-boom from two decades ago. So far this year, SPACs have issued roughly $100 billion of stock to purchase private companies and take them public,
Bloomberg and CNN reported on the potential impact the pause in the use of Johnson & Johnson’s Covid-19 shot could have. In the wake of the announcement, stay-at-home company stocks bounced, while travel company stocks fell as investors worried about the potential long-term impact. [Bloomberg; April 13, 2021 & CNN; April 14, 2021]
In its recent opinion arising out of the Orexigen Therapeutics Inc. bankruptcy case, the US Court of Appeals for the Third Circuit affirmed that while a creditor retains its direct setoff rights against a debtor under Section 553 of the Bankruptcy Code when both it and the debtor owe debts to one another, so called “triangular” setoffs – setoffs relating to affiliated third party debts – are not similarly protected, even if provided for contractually.1 In so holding, the Third Circuit became the first US circuit court of appeals to reach the issue and affirmed a substantial body of law on the topic developed by numerous lower courts.
Continue Reading Opinion of Interest – In re Orexigen Therapeutics Inc.: “Mutual” Means Mutual Third Circuit Confirms that Triangular Setoffs not Entitled to Protection under Section 553 of the Bankruptcy Code