The Wall Street Journal reports on Purdue Pharma’s continuing confirmation hearing covering the company’s proposed reorganization plan centered around a $4.5 billion settlement with its founders, the Sackler family.  Currently, the Sackler family is named in civil litigation which alleges that the family knowingly fueled opioid addiction through the marketing of OxyContin, an opioid painkiller. A restructuring specialist who had joined the Purdue board before its chapter 11 filing testified on the first day of the confirmation hearing that the Sackler family required releases so as “to be able to put all of the litigation behind them.” The settlement, and related third-party releases of the Sackler family, are being challenged by state and federal authorities as well as some members of Congress. If the plan is approved, the Sacklers would make an immediate payment of $300 million as well as yearly installments until 2030. [WSJ; Aug. 12, 2021]

The Associated Press reports on an ongoing hearing in the Boy Scouts of America bankruptcy regarding a proposed settlement that would be the centerpiece of a proposed reorganization.   The settlement would consist of an $850 million distribution to sex abuse victims, $250 million of which would be paid by Boy Scouts of America itself with remaining $600 million to be contributed by local councils.  On the first day of the hearing, to Judge Silverstein’s surprise, the Boy Scouts noted that their national board had never adopted a resolution approving the settlement.  However, the debtor claims the agreement is nonetheless a valid exercise of its business judgment and should be accepted as the cornerstone of its final bankruptcy plan. [AP; Aug. 12, 2021]

Forbes reports on a recent trend of major financial institutions (in this case Bank of America) losing their status as their millennial consumers “primary” account banks to digital banks.  Top platforms, in this regard, include PayPal, Current, Dave, and Square Cash. Forbes chalks up the continuing shift to the more personalized nature of digital banks and the changing nature of what consumers consider to be their primary “checking account.” [Forbes; Aug. 16, 2021]

The Wall Street Journal reports that the creators of South Park have made a deal to purchase Casa Bonita, a Mexican restaurant and family entertainment center outside Denver which was featured on the pilot of the popular cartoon. The creators announced they would purchase the restaurant, which filed for bankruptcy earlier this year due to the Covid-19 pandemic, pending court approval. Casa Bonita is a Mexican resort-themed restaurant with 30 foot high waterfalls in which cliff divers famously jump to entertain guests. The deal comes after South Park was renewed for another six seasons with Viacom-CBS. The show is expected to earn the creators more than $900 million. [WSJ; Aug. 13, 2021]

Bloomberg reports that the decrease in large U.S. bankruptcy filings may be attributable in part to the use of distressed exchanges in which creditors accept discounts on their debt in exchange for better claims on a borrower’s assets, a later maturity, or both.

The Wall Street Journal reports that Senator Elizabeth Warren plans to introduce legislation prohibiting owners of bankrupt businesses and individuals who have not filed bankruptcy from receiving non-consensual releases of claims that prevent governmental entities and private citizens from suing them. The legislation is prompted by the ongoing Purdue Pharma bankruptcy proceeding, in which the company has proposed a chapter 11 plan that, if approved, would shield the Sackler family from liability stemming from the opioid crisis. The legislation is broader than legislation proposed earlier this year, known as the “SACKLER Act” (discussed in a prior post here), which would only have prohibited non-consensual releases of claims of governmental authorities.

An article in Yahoo Finance describes trends that may drive distress in the commercial real estate market following the COVID-19 pandemic, including the rise of remote work and shorter lease terms as tenants gain negotiating leverage with office landlords.

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 advisory firms recently opened with locations in Massachusetts and New Jersey. [Bloomberg; July 7, 2021]

On July 7, 2021, the U.S. Bankruptcy Court for the Southern District of Texas confirmed Griddy Energy LLC’s plan of reorganization. A key element of the plan is the debtor’s release of certain customer obligations to pay power bills incurred during the unprecedented winter storm Uri. [U.S. Bankruptcy Court S.D. Tex.; July 7, 2021]

Reporting from the Wall Street Journal indicates that Medley LLC, a unit of publicly traded Medley Management Inc., expects to wind down its business operations in connection with its pending chapter 11 bankruptcy case. Although the debtor initially proposed a plan of reorganization centered around a debt-for-equity swap, that plan was withdrawn and replaced with a liquidating plan. [WSJ; July 7, 2021]

Forbes reports that the U.S. Supreme Court will not hear arguments in Conti v. Arrowood Indemnity Co., a case involving a borrower who tried to discharge approximately $76,000 worth of private student loans in bankruptcy. As a result, the existing standard for student loan discharges—which requires that a debtor seeking to discharge their loans show that continued payments would impose an “undue hardship”—will remain in place for the time being. [Forbes; June 28, 2021]

Reuters reports that eleven U.S. airlines collectively issued $12.84 billion in cash refunds to customers in 2020 for flights canceled during the pandemic.  The cash refunds come on top of billions of dollars of travel credits that are now being used at a rapid pace.  [Reuters; May 28, 2021]

The New York Times reports that the New York bankruptcy judge overseeing Purdue Pharma’s Chapter 11 cases provisionally approved the OxyContin manufacturer’s disclosure statement, subject to resolution of a handful of issues, setting up Purdue’s restructuring proposal to be put to a vote of creditors.  While major issues remain for the upcoming confirmation hearing, the most contentious being whether or not the Sackler family who owns Purdue should be released from all opioid-related lawsuits in exchange for its financial contributions to Purdue’s plan, approval of the disclosure statement is a major milestone in the case.  Once the information packets on Purdue’s proposal are mailed out, voting is scheduled to conclude by July 14 and a confirmation hearing is scheduled for August 9.  [The New York Times; May 26, 2021]

Bloomberg reports that Western Community Energy, a local government agency that provides electricity in California, filed for Chapter 9 bankruptcy protection.  In explaining its reasons for filing, the agency blamed the ongoing impacts of Covid-19, its inability to shut off customers with late bills and unexpected energy costs from a 2020 heat wave.  [Bloomberg; May 25, 2021]

The Wall Street Journal discusses the bankruptcy court’s recent decision to reject Sears’ request to increase compensation for three adviser firms that were hired to pursue the retailer’s lawsuits to recover money paid to third parties within three months prior to its bankruptcy filing.  The adviser firms reportedly collected $16 million so far, far short of the initially anticipated $100 million.  [WSJ; May 25, 2021]

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

The American Bankruptcy Institute reported that President Biden signed the “COVID-19 Bankruptcy Relief Extension Act” into law Saturday, March 27, 2021, which extends through March 27, 2022, provisions providing financially distressed consumers and small businesses with greater access to bankruptcy relief.  The provisions were included in the original CARES Act that was passed in the wake of the Covid-19 outbreak and were originally set to expire this month. [ABI; March 29, 2021].

Continue Reading What We’re Reading This Week [March 29, 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

Just after 5:00 p.m. Central Time on February 23, 2021, Belk, Inc. and its affiliates filed chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas, along with a proposed “prepackaged” plan of reorganization.   Before midnight, the US Trustee objected to Belk’s plan, and, by 8:00 a.m. the next day, the parties were in court to decide plan confirmation.  Two hours later, Bankruptcy Judge Marvin Isgur confirmed the plan, and it became effective that afternoon, just 20 hours after the Chapter 11 cases were filed.  Typically, chapter 11 debtors take many months, if not longer, to confirm a plan, and even prepackaged bankruptcy cases like Belk’s often take several weeks from filing to confirmation.   As we discuss in this post, Belk’s swift bankruptcy case is part of a growing trend of bankruptcy courts confirming chapter 11 plans shortly after case filing where there is adequate notice and creditor buy-in prior to the filing.

Continue Reading Belk Chapter 11 Plan Confirmed and Effective Within 24 Hours of Bankruptcy Filing

Bloomberg reports that at least seven new-issue CLOs are currently marketing, with January new-issue volume at nearly $9 billion.  The rise in sales comes as risk premiums for new transactions have tightened to pre-pandemic levels, prompting managers to market new deals at favorable terms and refinance and reset existing bonds at cheaper costs.  [Bloomberg; Feb. 5, 2021]

The International Monetary Fund released a World Economic Outlook Update for January 2021, which reveals that despite the historic recession brought about by the COVID pandemic and related government-ordered lockdowns, 2020 bankruptcies declined over 25% relative to past years due to exceptional policy measures.  Gina Gopinath, Chief Economist of the International Monetary Fund, notes that “[p]olicy makers should prepare for possible ‘pent-up bankruptcies.’”  [World Economic Outlook Update; Jan. 2021]

Forbes reports that China-based coffee chain Luckin Coffee, once considered a major Starbucks competitor, filed for bankruptcy under chapter 15.  Luckin Coffee had been slowly recovering, following a delisting from Nasdaq after it was discovered that the company’s prior management inflated sales figures, before COVID hit.  [Forbes; Feb. 5, 2021]

Reuters discusses disclosure requirements in connection with potentially distressed and bankrupt companies amid social-media-fueled retail trading frenzies, analyzing the dilemma that Hertz and certain similarly-situated companies face.  [Reuters; Feb. 8, 2021]

The National Rifle Association (“NRA”), along with its wholly owned Texas subsidiary, filed for chapter 11 bankruptcy protection on January 15, 2021 in the Bankruptcy Court for the Northern District of Texas.  The case already has presented several threshold issues and challenges that are of interest to both bankruptcy practitioners and the market as a whole.

Continue Reading The NRA Bankruptcy: What You Need to Know About the National Rifle Association’s Recent Chapter 11 Filing