Mayer Brown partners Sean Scott and Aaron Gavant and associates Tyler Ferguson and Alexander Berk discussed the United States Bankruptcy Court for the Southern District of Texas’ most recent decision arising out of the Ultra Petroleum Corp. bankruptcy case and its rulings that (1) make-whole premiums are allowed by the Bankruptcy Code under appropriate circumstances

CEC Entertainment, the parent company of kid-friendly and iconic “dinnertainment” restaurant and arcade chain—Chuck E. Cheese—sought and received Bankruptcy Court approval for three very unique settlement agreements, earlier this year, under which it will pay $2.3 million to three vendors to destroy roughly seven BILLION prize tickets –  i.e.,  enough tickets to fill approximately 65 forty-foot cargo shipping containers.1 The backlog was caused by Chuck E. Cheese placing orders for tickets at pre-COVID utilization rates, the resulting pandemic and rapid fallout in sales, and, most generally, Chuck E. Cheese’s efforts to transition from physical tickets to contactless transactions, like “e-Tickets.”2

Continue Reading The Costs of Destruction: Bankruptcy Court Authorizes Chuck E. Cheese to Spend Millions on Destruction of Prize Tickets

CNN reports that fast-casual dining chain Ruby Tuesday, Inc. filed for chapter 11 bankruptcy relief in the United States Bankruptcy Court for the District of Delaware on October 7, 2020. Ruby Tuesday reportedly plans to close approximately 45% of its locations as part of its restructuring efforts. [CNN; Oct. 7, 2020]

Bloomberg reports that the

Houston, TX-based oil services provider SAExploration Holdings Inc. has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas, reports the Wall Street Journal. SAExploration reportedly owes $6.8 million on a unsecured loan it received through the Paycheck Protection Program of the CARES Act. [WSJ; Aug.

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

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

The American Bankruptcy Institute reports that California Pizza Kitchen Inc. is seeking an out-of-court debt restructuring in an effort to avoid a chapter 11 bankruptcy. The company is reportedly seeking a $30 million bridge loan to allow it to work towards a debt restructuring over the next six months. Prior to the COVID-19 pandemic, California

As courts across the country deal with scaled back operations due to the COVID-19 pandemic, bankruptcy courts in New Jersey and Delaware have issued novel orders to address the impact of the virus on certain debtors.  Last month, debtors in the chapter 11 bankruptcy cases of Modell’s Sporting Goods, Inc. and CraftWorks Parent, LLC each sought and obtained court orders suspending certain case activity which, for all intents and purposes “mothballed” the cases for a certain period of time.

Continue Reading Bankruptcy Courts Address Impact of COVID-19 Coronavirus With Unique Orders

According to Bloomberg, Norwegian Air Shuttle ASA has asked its creditors to convert a portion of the approximately $4 billion they are owed into equity to allow the company to access approximately $290 million worth of loan guarantees offered by the Norwegian government. [Bloomberg; Apr. 9, 2020]

Law360 reports that recent, historic oil and

Two recent decisions from Delaware illustrate somewhat divergent views from the bankruptcy bench on the proper procedures for obtaining non-debtor releases in confirmed plans of reorganization. In both In re Emerge Energy Services LP, et al.1 and In re Cloud Peak Energy Inc., et al.2 the debtors’ initial, and then certain subsequent, efforts at plan confirmation were stymied by proposed opt-out procedures. Ultimately, both debtors were able to confirm their plans after adjusting the applicable release provisions, as described below. Collectively, these decisions demonstrate how closely many courts will scrutinize non-debtor releases and the importance of designing procedures for obtaining consent to such releases that demonstrate that they are procedurally fair.

Continue Reading Recent Delaware Decisions Show Divergent Views on Third-Party Release Procedures