Plans of Reorganization

Recapping 2021, Bloomberg reported that last year saw the fewest annual bankruptcy filings in nearly four decades, falling 24% from 2020. A total of 3,596 chapter 11 cases were filed in 2021, about 3,000 fewer than the year before. The stimulus funds and easy access to liquidity combined with debt forbearance were pointed as the

Fox Business reports that Boy Scouts of America’s insurer Chubb Ltd. has pledged to contribute $800 million to the Boy Scouts of America’s bankruptcy settlement deal. Boy Scouts of America, which filed for bankruptcy in February 2020, is currently on track to settle with approximately 82,500 tort claimants who claim they were sexually abused as children by troop leaders. The latest contribution by Chubb raises the total amount of available funds to resolve the claims to more than $2.7 billion. The fund is also backed by Boy Scouts of America’s primary insurer, the Hartford Financial Group, as well as the Church of Jesus Christ of Latter-day Saints. Ultimately, Boy Scouts of America’s emergence from Chapter 11 hinges on a settlement with tort claimants, and, while several victims have voiced support for the settlement deal, a separate committee of claimants voiced concerns that the deal compromises too much in exchange for a quick exit. The abuse claimants have until December 28th to vote on the reorganization. [Fox Business; Dec. 13, 2021]

Continue Reading What We’re Reading This Week [December 16, 2021]

Los Angeles Business Journal reports on the anticipated increase in bankruptcy filings by hotels in light of the uneven economic recovery and reduction of government support, as lender patience is expected to wear thin.

The Wall Street Journal writes that businesses are taking a wait-and-see approach to the new Omicron variant of Covid-19 that emerged

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