Plans of Reorganization

On October 10, 2021, Judge Colleen McMahon of the U.S. District Court for the Southern District of New York entered a temporary restraining order, delaying implementation of Purdue Pharma’s plan of reorganization, which was confirmed by Bankruptcy Judge Robert Drain on September 17th, pending argument on the U.S. Trustee’s motion for a stay pending appeal

On September 1, 2021, Judge Robert Drain issued a much-anticipated oral ruling approving Purdue Pharma L.P.’s plan of reorganization. The plan, which has garnered significant attention from the media, legislators, academics, and practitioners, releases current and future members of the Sackler family and many of their associates and affiliated companies – none of whom filed for bankruptcy themselves – from liability in connection with any possible harm caused by OxyContin and other opioids that Purdue Pharma manufactured and distributed. In return for the liability releases, the Sacklers will, over a nine-year period, contribute up to $4.325 billion to a settlement fund from which payments will be made primarily to compensate victims and to fund initiatives to abate the opioid epidemic.

Continue Reading SDNY Bankruptcy Court OKs Purdue Pharma’s Plan of Reorganization Featuring Third-Party Releases for Sacklers in Exchange for Contributing $4.325 Billion to Opioid Victim Settlement Fund

Bloomberg reports on shifting dynamics in the retail sector caused by the COVID-19 pandemic, highlighting the transition that certain financial advisory firms have made from advising on liquidating retail assets to sourcing and selling goods at brick-and-mortar retail locations they operate. The article highlights a new off-price department store, Shopper’s Find, that two global financial

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

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 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

Bloomberg Law reports that that the U.S. Trustee’s Office is working to combat the recent rise of “pre-packaged” chapter 11 bankruptcy filings. A pre-packaged bankruptcy or a “pre-pack” refers to the circumstances in which a debtor negotiates its reorganizational agreements with key stakeholders before filing its chapter 11 case and then files and confirm its

On Friday, March 19, 2021, Congressional lawmakers introduced a bill that would amend the U.S. Bankruptcy Code to prohibit bankruptcy judges from permanently enjoining or releasing legal claims of states, tribes, municipalities or the U.S. government against non-debtors.

According to media reports, the bill, which is named the “SACKLER Act,” (i.e., the “Stop Shielding Assets from Corporate Known Liability by Eliminating Non-Debtor Releases Act”) is specifically designed to prevent members of the Sackler family, who own OxyContin-maker Purdue Pharma LP, from using the bankruptcy process to obtain legal releases from government lawsuits.  Purdue Pharma LP filed for bankruptcy in September 2019, but none of the members of the Sackler family have filed for bankruptcy as individuals.  Nevertheless, the Sacklers have offered to contribute roughly $4.28 billion as part of a proposed bankruptcy plan to fund payouts to victims who suffered injuries linked to Purdue Pharma’s opioids over the next decade in exchange for legal releases that would enjoin claims against the Sackler family.  If approved, those legal releases would shield the Sackler family from further liability related to the opioid crisis, something that many state attorneys general have ardently opposed. 
Continue Reading Wither Non-Debtor Releases? Purdue Pharma and the Proposed SACKLER Act

Bloomberg reports that HighPoint Resources Corp. received approval for its chapter 11 reorganization plan, clearing the way for its merger with Bonanza Creek Energy Inc. less than one week after filing for bankruptcy protection.  The fully-consensual plan, which carried the support of more than 99% of impaired claimants, deleverages HighPoint’s balance sheet by approximately $625 million vis-à-vis an unsecured debt-for-equity swap and an issuance of new unsecured notes totaling $100 million.  Existing equityholders are even slated to receive 1.6% of the new equity in the combined company.  [Bloomberg; Mar. 18, 2021].

Continue Reading What We’re Reading This Week [March 22, 2021]

On March 10, 2021, the parent company of sports club and gym-operator Town Sports International, LLC, filed a motion seeking to set aside a purported $250,000 settlement agreement between Town Sports and the New York Attorney General arguing that the agreement (1) was barred by the terms of Town Sports’ confirmed chapter 11 plan and (2) in any case, not authorized by Town Sports but instead only by one of its prior attorneys.

As noted in our prior post on the case, Town Sports has been embroiled in litigation with the New York Attorney General since September 2020, when the attorney general’s office filed a lawsuit against Town Sports arguing that it improperly failed to honor certain of its members’ cancellation requests, and instead continued to assess monthly membership fees, during the disruptions caused by the COVID-19 pandemic and related government shutdown orders.  The parties appeared to have settled their lawsuit on March 4, 2021, when a New York state court
Continue Reading Settled or Not? Town Sports Challenges Settlement it Purportedly Entered into with New York Attorney General