Bipartisan proposal for new small business provisions in Bankruptcy Code [American Bankruptcy Institute Journal; May 2019]

Latest memo from Oaktree’s Howard Marks on why this time market cycle isn’t different [OakTree; June 12, 2019]

Is the “vast” liquidity in the market a mirage?  Bloomberg chimes in [Bloomberg; June 13, 2019]

Morgan Stanley Business Conditions Index fell by 32 points in June, the largest one-month decline on record [CNBC; June 13, 2019]

Commodity Prices Set 50-Year Lows Relative to U.S. Stocks [Bloomberg Radio’s Dave Wilson Tumblr Post; June 12, 2019]

Without additional explanation, the Supreme Court recently denied NextEra’s request for further review of its $275 million break fee request following the scuttling of its multi-billion dollar transaction to acquire the majority of Energy Future Holdings Corp.’s assets (see item 8 under “Certiorari Denied” list here).

Following the bankruptcy court’s reconsideration (and reversal) of its prior approval of such fee, and the Third Circuit’s opinion affirming that decision, NextEra petitioned the Supreme Court, arguing that the issue deserved further review.  In particular, NextEra noted that different Courts of Appeal were applying different standards to determine when break up fees were justified, with the Fifth Circuit applying the more liberal “business judgment” standard under Bankruptcy Code Section 363 and the Third Circuit applying the more exacting “actual, necessary cost or expense” standard under Bankruptcy Code Section 503.  Absent additional clarity from the Supreme Court, NextEra argued, the “skittishness of some lower courts to approve” break up fees, “or, worse still, the willingness  to employ Section 503 to retroactively rescind” them (as happened in the NextEra case) would “inevitably chill” potential bids in bankruptcy auctions, potentially costing debtors “millions or billions of dollars.”

Because the Supreme Court refused to grant certiorari, courts in the Third Circuit (notably Delaware bankruptcy courts) will continue to apply the more exacting standard, and some doubt will remain regarding the proper standard for break up fee review in other jurisdictions without binding Circuit-level precedent.  It’s an issue worth watching going forward.



Over the past several years in the US, commentators have noted the resurgence of covenant lite deals, including increasingly in the middle market and direct lending space.  When (as?) the credit cycle turns, naysayers worry that these structures may impact lender recoveries, as borrowers lack incentive to start restructuring discussions with their lenders until it may be too late.

Here Stuart Brinkworth, the European head of leveraged finance at Mayer Brown, discusses similar developments in the UK market, where sponsors are picking and choosing from the high yield bond and syndicated loan markets and also borrowing from US-style documentation.  Among other things, Stuart discusses the evolution of “cov-less” transactions, where loan agreements include fewer covenants that, along with generous addbacks result in the “cumulative effect” of “covenants with little teeth.”


Long read from the International Financing Review on the 2017 failure of Banco Popular, one of Spain’s biggest banks  [IFR; June 7, 2019]

At what may be the tail end of what will soon be the longest economic expansion in U.S. history, Matthew Klein from Barron’s explores when we’re actually in a “recession” [Barrons; June 4, 2019]

Perla, Arkansas becomes first U.S. municipality to file for Chapter 9 bankruptcy since 2015 [Bloomberg Law; May 27, 2019]

Yesterday, the Supreme Court held in a 9-0 decision that a creditor cannot be held in contempt of court for violating a bankruptcy discharge order if there is a “fair ground of doubt” as to whether the order barred the creditor’s conduct.

This is primarily an objective standard, which depends on whether the creditor had a reasonable basis for his position. But subjective intent is still relevant; a creditor who acted in bad faith may deserve to be held in contempt, and a creditor who acted in good faith may not deserve a significant contempt sanction

Mayer Brown represented the respondents before the Supreme Court.

Read more here and here.

CNBC yesterday reported on new warnings from Morgan Stanley analysts about the potential for a near-term recession (CNBC: Morgan Stanley says Economy on Recession Watch), including economic indicators that many in the restructuring and bankruptcy industry are closely tracking.

Relevant data points discussed include slowing manufacturing activity, notable dips in the U.S. services sector and the flattening of the yield curve.  Notably, some of the data pre-dates the recent re-escalation of trade tensions between U.S. and China.

More to come no doubt.



Yesterday, in an 8-1 decision, the US Supreme Court held in Mission Product Holdings, Inc. v. Tempnology, LLC1 that under Section 365 of the Bankruptcy Code, a debtor-licensor’s rejection of a trademark license agreement does not terminate the rights of the licensee to continue using the trademark where those rights would otherwise survive the licensor’s breach of the agreement under non-bankruptcy law.2  The Tempnology decision resolves the most significant unanswered question regarding the treatment of trademark licenses in bankruptcy.

Continue Reading Trademark Licensee May Continue Using Trademark Following Debtor’s Rejection of License Agreement, Supreme Court Rules

On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company, ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year (which we addressed in a previous post).  The district court held Tribune’s post-bankruptcy litigation trustee was barred from asserting certain constructive fraudulent transfer claims against former Tribune shareholders based on what Judge Denise Cote termed a “straightforward” application of the Section 546(e) settlement payment safe harbor.  See In re Tribune Co. Fraudulent Conveyance Litigation, No. 12 cv 2652 (DLC), 2019 WL 1771786 (S.D.N.Y. Apr. 23, 2019). In addressing the extent to which a party’s status as a customer of a “financial institution” (as defined in the Bankruptcy Code) affects the applicability of Section 546(e), the district court was the first court post­-Merit Management to squarely address that question. Continue Reading Debtor Is a Financial Institution for Purposes of Settlement Payment Safe Harbor, Rules Southern District of New York

In less than 24 hours beginning on May 1, 2019, Sungard Availability Services Capital, Inc., and its affiliates (collectively, “Sungard”) commenced and completed Chapter 11 proceedings in what has been described as the fastest Chapter 11 case ever. Sungard filed its Chapter 11 cases just before 9pm on May 1 in the Bankruptcy Court for the Southern District of New York, White Plains Division, and, before 6pm the next day, Judge Robert Drain entered an order confirming Sungard’s prepackaged Chapter 11 plan.[1] The Sungard debtors were able to obtain this rapid result through extensive pre-filing planning and negotiations, and likely also benefited from assignment of their cases to Judge Drain, who had prior experience in addressing similar, expedited pre-packaged cases.[2] Continue Reading Short-Order Reorganization: Sungard’s 24-hour Bankruptcy Case