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

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]

Forbes reports that car rental company The Hertz Corporation filed for bankruptcy on Friday, May 22, 2020. Forbes indicates that Hertz’s financial condition was harmed by the substantial reduction in air travel resulting from the COVID-19 pandemic. Financial distress in the car rental industry is expected to negatively impact the already struggling automotive industry more broadly as car rental companies reduce their number of annual new cars purchased or otherwise shrink the size of their existing fleets. [Forbes; May 23, 2020]

Credit rating agency Fitch released a special report, which shows that leveraged loan defaults in the United States are at a six year high as a result of the fallout from the COVID-19 pandemic. [Fitch; May 22, 2020]

Reporting from Reuters indicates that members of the German cabin crew union are demanding that any bailout package to the Lufthansa include guaranteed job protection for cabin crew union members. Lufthansa, like many airlines, has endured significant financial distress as a result of the COVID-19 pandemic. We discussed Lufthansa’s financial distress and ongoing bailout efforts in an earlier post. [Reuters; May 22, 2020]

Reporting from the Washington Post shows a surge in claims on business interruption insurance policies from restaurants in the fallout from the COVID-19 pandemic. While payment on the business interruption insurance claims could help many restaurants survive the substantial drop in revenue that many have experienced since March of 2020, insurers argue that the majority of policies do not cover business interruption caused by viruses and that payment on such claims could deplete their existing surpluses and threaten their existence. [WaPo; May 19, 2020]


In an article for Mayer Brown’s COVID-19 Response Blog, Mayer Brown partners Sean Scott and Aaron Gavant and associate Kyle Tum Suden discuss recent bankruptcy court decisions concerning whether companies in bankruptcy are eligible for paycheck protection program loans under the US CARES Act.

J.C. Penney Company, Inc. is the latest retailer to file for chapter 11 bankruptcy, reports CNN. Although the COVID-19 pandemic played a role in the 118-year old retailer’s decision to file for bankruptcy protection, the company has struggled for nearly a decade to overcome slumping sales and profits. The company has reportedly obtained agreement from a majority of its lenders on a turnaround plan. [CNN; May 15, 2020]

The New York Times discusses the impact leveraged buyouts may have had on the recent bankruptcies of retailers J. Crew and Neiman Marcus. [N.Y. Times; May 15]

The Financial Times reports that the United States’ economic recovery from the COVID-19 pandemic could be threatened in the event that bankruptcy courts see a substantial uptick in filings and recommends that the Trump Administration take action to avoid the bankruptcy courts becoming overwhelmed. [FT; May 14, 2020]

In its response to Forever 21’s motion to extend its plan exclusivity period, the United States Trustee for Region 3 observed that the Debtors will be unlikely to propose a confirmable plan because the Debtors’ wind down fund currently consists of approximately $5.5 million while the Debtors currently have approximately $100 million in post-petition trade debt that the UST believes would need to be paid in full to confirm a plan. Although the UST did not object to extension of the plan exclusivity period, it indicated that, given the difficulty it anticipates the Debtors will have in proposing a confirmable plan, dismissal or conversion to chapter 7 may be appropriate in the future. [In re Forever 21, Inc.; May 8, 2020]

Brookfield Asset Management is aiming to invest approximately $5 billion in a retail revitalization investment fund to assist retailers impacted by the COVID-19 pandemic, reports the Wall Street Journal. Brookfield will reportedly focus on obtaining noncontrolling interests in retail businesses with greater than $250 million in pre-pandemic revenue. [WSJ; May 7, 2020]

Bloomberg reports that United Airlines was forced to increase the yield offered on a $2.25 billion bond issuance from approximately 9% to 11% after investors expressed concerns with the aging fleet being offered as collateral. [Bloomberg; May 7, 2020]

The Eighth Circuit Court of Appeals affirmed decisions by the United States Bankruptcy Court for the Eastern District of Missouri and the United State District Court for the Eastern District of Missouri that barred various California municipalities from continuing post-bankruptcy lawsuits against the reorganized debtors for strict liability, negligence, trespass, and nuisance in connection with the debtor’s pre-petition role in “climate change science denial.” The Eighth Circuit agreed with the lower courts that the municipalities’ claims were barred by a plan injunction and did not qualify as claims arising from federal, state, and local statutes for “pollution or protection of the environment, or environmental impacts on human health and safety,” which were excepted from the plan injunction. [8th Cir.; May 6, 2020]

The Federal Reserve Bank of New York released guidance for its Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility, which are intended to provide a funding backstop to eligible issuers and support market liquidity for corporate debt. [Federal Reserve Bank of New York; May 4, 2020]

The Wall Street Journal reports that clothing retailer J. Crew Group Inc. has filed for chapter 11 bankruptcy in the United State Bankruptcy Court for the Eastern District of Virginia. The company has reportedly reached a deal with lenders owed approximately $1.65 billion to conduct a debt-for-equity swap. [WSJ; May 4, 2020]

German airline Lufthansa will reportedly receive state-backed loans from Switzerland and Austria, as reported by Reuters. Lufthansa is also in negotiations with the German government for an aid package of approximately $9.8 billion. [Reuters; Apr. 29, 2020]

Yahoo Finance reports that bankrupt restaurant chain Cosi Inc. is suing the United States Small Business Administration, alleging that the SBA cannot deny it access to loans available through the Paycheck Protection Program established by the federal Coronavirus Aid, Relief, and Economic Security Act on the grounds that the company is engaged in an ongoing bankruptcy proceeding. [Yahoo Finance; Apr. 28. 2020]

Reporting for Bloomberg indicates that private equity firms are seeking to invest in public companies that are experiencing financial distress as a result of the COVID-19 pandemic. Per the report, approximately $8 billion worth of such investment  has occurred since the beginning of March. [Bloomberg; Apr. 27, 2020]