In HighPoint Resources Corporation, Case No. 21-10565-CSS (Bankr. D. Del. 2021), the U.S. Trustee’s office filed an objection (Dkt. No. 48) to the rapid confirmation of the Debtors’ plan of reorganization, among other things, indicating its concern regarding the recent trend of expedited pre-packaged plans because of their failure to provide interested parties with adequate notice.
In a typical bankruptcy, a debtor files for bankruptcy, notifies its creditors and other interested parties, prepares compressive schedules, proposes a plan of reorganization and solicits votes on such plan with a disclosure statement. This will often take anywhere from 6 to 20 months, and sometimes much longer.
By contrast, as discussed in our prior post entitled “Rocket Confirmations Gain Traction,” an expedited pre-packaged plan (a “Pre-Pack”) occurs when a debtor files its bankruptcy petition having already solicited votes on a confirmable plan, and a court approves the debtor’s plan within the first few weeks and sometimes, as in In re Belk Inc., Case No. 21-3060630 (Bankr. S.D. Tex. 2021), within the first 24 hours of the filing of the debtor’s bankruptcy petition. Continue reading “Expedited Pre-Packs: Balancing Cost-Saving with Adequacy of Notice”
Continue reading “Rocket Confirmations Gain Traction”
Parts I and II in this series discussed certain of the statutory predicates of credit bidding and some considerations for structuring such a bid. Here in Part III, we will address some additional issues that a lender must take into account when deciding to credit bid its debt and some documentary considerations. As its name implies, the predominant form of consideration in a credit bid is often the lender’s debt. Lenders, however, cannot ignore another component of consideration often needed to consummate a transaction, cash. Continue reading “Credit Bidding Part III: Some Additional Considerations”
In Part I of this three part series we noted the likelihood that credit bidding will be more prevalent in today’s unpredictable economic environment and discussed some of the statutory backdrop. Here, in Part II, we will discuss certain mechanics that are associated with making, and later consummating, a credit bid.
Rather than risk holding assets in an entity that was not organized with that in mind (e.g., a bank), lenders will often organize a new “acquisition vehicle” (e.g., a limited liability company) for purposes of consummating, if not making, a credit bid. The form of the entity may depend on the assets to be acquired. For example, lenders in a recent transaction formed a trust, rather than LLC, to acquire their helicopter collateral. Continue reading “Credit Bidding Part II: Important Mechanics”
For many secured lenders, the concept of credit bidding in bankruptcy is generally understood yet infrequently explored in practice. In today’s extremely uncertain economic environment, third-party alternatives may not present themselves as M&A activity and acquisition financing have slowed significantly with the spread of COVID-19. As a result, credit bidding could gain momentum as lenders look for self-help alternatives to maximize their recoveries. In three related posts, we will address (i) the statutory predicates for a credit bid, (ii) certain mechanics involved in structuring and consummating a credit bid, and (iii) the need to raise cash to close a credit bid, as well as items to consider when drafting loan documentation that may facilitate a credit bid in the event of a borrower’s bankruptcy. Continue reading “Credit Bidding Part I: An Important Tool for Lenders”
Landlords are often among the very first to feel the impacts of their tenant’s financial woes. In today’s unpredictable economic environment, many businesses are forced to shut their stores temporarily while the risks of COVID-19 continue to play out. Within the last few days many large and small retailers have unilaterally announced publicly that they would not be paying upcoming rent. In these unprecedented times, landlords must be aware of the risks they face in light of what is certain to be a previously unheard of level of tenant defaults. Noted below are a number of things that landlords should take into consideration and be aware of, both in anticipation of a tenant’s bankruptcy and following such an event. Of course, the discussion below is intended only to highlight certain points and careful consideration must be given to each in the particular circumstances that a landlord may find itself. Continue reading “A Landlord’s Primer For An Uncertain Retail Environment”
In the face of these unprecedented and uncertain days of COVID-19, financially stressed borrowers are expected to take every measure available to them to keep their businesses afloat. For borrowers with revolving credit lines, this has included drawing down unused availability to ensure immediate, and sometimes future, access to needed liquidity. In ordinary circumstances, a revolver provides a borrower flexibility to address changing cash flow needs on a cyclical or seasonal basis. Today, an untapped revolver may be a lifeline for a business struggling with the loss of cash flow. Continue reading “Prepare For Additional Revolver Draws During Current Crisis”
In an effort to broaden his appeal to members of the left-leaning electorate, Joe Biden endorsed Senator Elizabeth Warren’s bankruptcy plan during this past weekend. Ms. Warren’s plan, a material piece of the platform from her former presidential bid, is focused on protecting struggling individual consumers by reducing bankruptcy costs, streamlining the process, and expanding debt forgiveness. Like many of her plans, Ms. Warren’s bankruptcy plan is detailed and generally includes the following proposals: Continue reading “Biden Endorses Senator Warren’s Bankruptcy Plan”
The Small Business Reorganization Act of 2019 (the “Act”) will go into effect on February 19, 2020. Most of the attention given to the new law deservedly addresses the impact of those provisions that are intended to streamline the bankruptcy process for “small business debtors” that might not otherwise have the financial resources to reorganize under Chapter 11. Recognizing that a Chapter 11 proceeding has become very expensive, lawmakers have offered small business owners (generally persons or entities engaged in commercial activities and having aggregate debts not exceeding $2,725,625) an opportunity to reorganize under a new Subchapter V of Chapter 11. These provisions reduce the likelihood that an unsecured creditors’ committee will be appointed, lighten reporting requirements, and provide for guidance of a “small business trustee,” among other things. Although critically important, these changes will not have any effect on middle-market and large corporate bankruptcies. Much less attention has been paid to a provision in the Act that is applicable in bankruptcy cases of all sizes and could prove to be of material benefit to a debtor’s vendors. Continue reading “Small Business Reorganization Act Will Bring Changes to Preference Litigation”