Category: In the News

A recent case before bankruptcy judge Karen B. Owens of the United States Bankruptcy Court for the District of Delaware, In re Dura Auto. Sys., LLC, No. 19-12378 (KBO), 2021 WL 2456944 (Bankr. D. Del. June 16, 2021), provides a cautionary reminder that the Third Circuit does not recognize the doctrine of implied assumption (i.e., assumptions implied through a course of conduct as opposed to those that are assumed pursuant to a motion and court order).

On Wednesday, February 23, just after 5:00 p.m., Belk, Inc. – a North Carolina-based department store chain – and its affiliates filed voluntary petitions under Chapter 11 of the Bankruptcy Code.  Less than 24 hours later, Bankruptcy Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas entered an order confirming Belk’s Chapter 11 plan.  As a result, Belk “has received $225 million of new capital, significantly reduced its debt by approximately $450 million and extended maturities on all term loans to July 2025.”  Critically, the plan leaves all unsecured creditors unimpaired. 

On Wednesday, November 18, two customers of Cred Inc., a cryptocurrency investment platform currently in Chapter 11, asked Delaware Bankruptcy Judge John T. Dorsey to convert the Chapter 11 case to a Chapter 7 liquidation (or, in the alternative, to appoint a Chapter 11 Trustee “with expertise in hunting down . . . stolen cryptocurrency”). Prior to its Chapter 11 filing, Cred received investor-cryptocurrency, typically in the form of loans, and then purportedly used those funds across a variety of investments to generate favorable returns.

Changes in culture and technology have been reshaping the way Americans acquire and consume goods and services for a generation.  Indeed, long before the coronavirus, insolvency professionals and industry experts understood that the retail landscape was experiencing a dramatic transformation.  Reduced foot traffic, online competition from Amazon and others, and changing shopping patterns all combined to place enormous strain on traditional retailers.  To keep up, and to match the tastes of consumers in the age of social media, retailers and shopping centers have placed a renewed focus on strategies that will create a more valuable and enriching in-store experience for consumers.  It has to be modern, it has to be fun, and – above all – it has to look cool on Instagram: no one takes a selfie at Sears. 

COVID-19 is taking an alarming and unfortunate toll on our country’s population. Each day, we collectively face daunting health risks, and the economic cost to individuals and businesses alike has already been, and will continue to be, staggering. Accordingly, more than at any point in the past decade, both debtors and creditors should consider the potential benefits of the bankruptcy process. This post discusses four basic bankruptcy concepts that always merit consideration, especially in these trying times.

There has been considerable progress towards resolution in two of the largest bankruptcy cases pending in the United States:  the Commonwealth of Puerto Rico and the California utility, Pacific Gas & Electric.

On August 23, 2019, President Trump signed H.R. 3311 into law.  The goal of the Small Business Reorganization Act is to facilitate reorganization among small businesses.  One of my fellow bloggers has provided a summary that you can read here.  But in addition to helping small businesses, the SBRA also offered some relief to vendors and other suppliers of goods from the bane of preference lawsuits—not just in small business cases, but in all cases under the Bankruptcy Code.

Here’s an update on recent political, social, and economic developments in Venezuela.  From our perspective as a blog focused on insolvency and restructuring topics, the upshot of what’s been taking place in Venezuela is that the chances of a debt restructuring in the coming months remain slim. 

When we last checked in on the Puerto Rico restructuring case, we reported on the February 15 decision of the First Circuit Court of Appeals that the members of the Financial Oversight and Management Board were appointed in contravention of the Appointments Clause of the U.S. Constitution because they were never confirmed by the U.S. Senate.  But, in recognition of the implications of its decision, the Court delayed the effectiveness of its ruling for 90 days.  That 90-day deadline was set to expire on May 16, causing several commentators to express skepticism that a legislative solution could be achieved in the time allotted. 

On January 14, 2019, facing “billions of dollars in liability claims from two years of deadly wildfires,” PG&E Corporation and its regulated utility subsidiary, Pacific Gas and Electric Company, reported that they expect to file petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California on or about January 29, 2019.   It is rare for a debtor to telegraph its filing so clearly in advance of the petition date, but a recently enacted California law required a 15-day advance notice period before the filing.

The Sears bankruptcy case made headlines this month in the complex world of credit default swaps (CDS).  A credit default swap is a contract pursuant to which the seller receives payment from a buyer in exchange for which the seller must compensate the buyer in the event of a default or other specified credit event.  On November 9, in what it openly admitted was an attempt to take advantage of the abundance of default protection issued in the days leading up to its bankruptcy filing, Sears sought permission to auction certain “medium-term notes” (MTNs) that were issued by Sears Roebuck Acceptance Corp. (“SRAC”) prior to the petition date and held entirely by affiliates of Sears.

Started as a mail-order retailer, evolved to brick-and-mortar stores in urban areas and expanded to a big-box retailer through merger, Sears is now facing the most turbulent time in its history.  On October 15, 2018, Sears Holdings Corp.—the holding company of Sears and Kmart—along with its affiliated entities, filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the Southern District of New York. With assets of approximately $6.94 billion and liabilities of approximately $11.34 billion in total, the fate of “Where America Shops” remains unclear.

The failure of Toys ‘R Us to successfully reorganize in Chapter 11 sent shockwaves throughout the retail world and the restructuring community.  Saddled with unsustainable debt and unable to chart a viable path forward, the company – in bankruptcy since late 2017 – conducted going-out-of-business sales and closed most of its more than 700 stores this summer.  As part of the wind-down process, the debtors scheduled an auction to sell their existing intellectual property, including the name, website, and, of course, their celebrated brand mascot, Geoffrey the Giraffe.

On March 7, 2018, Journal of Corporate Renewal featured an article written by Daniel A. Lowenthal, Chair of Patterson Belknap’s Business Reorganization and Creditors' Rights Practice, entitled “Venezuelan Debt Crisis Intensifies as Its Leaders Ponder Responses.” Mr. Lowenthal discusses Venezuela's current debt crisis and the uncertainty of how it will unfold and how long it will take to resolve.

To read the full article, click here.

Back in the day--say, the last two decades of the twentieth century--we bankruptcy lawyers took it largely on faith that the right structural and contractual provisions purporting to confer bankruptcy-remoteness were enforceable and likely to be successful in preventing an entity from becoming, voluntarily or involuntarily, a debtor under the Bankruptcy Code.  During the latter part of the first decade of the twenty-first century, however, that faith began to erode as bankruptcy court case law began to accumulate which denied motions to dismiss petitions based upon remoteness provisions. 

On Tuesday, two leading credit-rating agencies again downgraded the city of Hartford:  Moody’s Investors Service now rates the struggling city at Caa3, while S&P Global Ratings has lowered its rating to CC.  They attribute the junk classification to the increasing likelihood of a default by Hartford on its debt service obligations to bondholders. 

For over eight years, In re Lehman Bros., No. 08-13555-scc (Bankr. S.D.N.Y.), has been one of the most active, complex bankruptcy dockets in the country.  A large portion of the remaining contested matters in that case are claims by trustees for residential mortgage backed securities (RMBS), who continue to pursue claims against the Lehman estate for losses caused by toxic mortgages.  Recent developments show that Lehman is trying to wrap up many, if not most, of those RMBS claims by the end of this year.