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Articles by Jay Goffman
Insolvency 2019 Second Edition
This second edition of the 2019 Insolvency Global Practice Guide is a guide for legal and non-legal professionals to the differing legal regimes that apply to business restructurings, reorganisations, rehabilitations, insolvencies and liquidations in the 49 countries covered by this publication. The contributing firms and authors are well-versed in the restructuring and insolvency practices and laws of their respective jurisdictions.
US Supreme Court Holds That Bankrupt Companies Cannot Rescind Trademark Licenses | JD Supra
Updated: May 25, 2018: JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.
Downside Distressed Investing: A Lender’s Perspective
Corporate distress is rarely a surprise to participants in the capital structure, and it usually rears its ugly head over a series of unfortunate events. Customer losses, an unfavorable shift in industry dynamics, delayed G&A cuts, covenant breaches, and dwindling liquidity are just a small subset of the many adverse outcomes that can lead a company to a rocky landing at the gates of the zone of insolvency.
Surviving Retail Distress: How Some Retailers Proved ‘Exceptions to the Rule’
In the robust financing environment of 2017, commercial bankruptcies leveled off from credit-crisis highs. Through the first three quarters of 2017, commercial bankruptcies totaled 17,371, a significant decline from the 2009 peak year, when 45,510 commercial bankruptcies were filed in the first three quarters of the year.1 As commodity markets have risen significantly from January 2016 lows, the energy and production cycle has come to a halt. But not all sectors have been so lucky.
Key Valuation Issues in Distressed Investing
The distressed investor considers investing in securities of companies that are either in bankruptcy or are approaching bankruptcy. Typically, these companies have outstanding claims greater than the value of the assets and are experiencing difficulty in servicing their debt. There is a real possibility that the company will be liquidated or will be reorganized as a going concern.
Rights Offerings Prove Popular with Both Debtors, Distressed Investors
The past few years have brought a number of large rights offerings in bankruptcies in the energy, healthcare, and retail sectors. Between January 1, 2015, and December 1, 2017, more than $5.5 billion was raised through rights offerings or private placements in more than two dozen large bankruptcy cases. In 2017 alone, seven companies raised $300 million or more through rights offerings.
State of the Financial Restructuring Market
Continuing low interest rates and generally improved economic conditions in the U.S. and worldwide during 2017 have reduced financial distress and the need for business bankruptcies in most sectors. However, out-of-court financial restructurings and Chapter 11 bankruptcies will continue in 2018 due to significant market changes in the energy, retail and health care industries that have developed over the past several years.
The Examiners: Courts Have the Tools to Keep Claims Trading in Check
Overall, does claims trading help or hinder the chapter 11 process? Should additional disclosures be required? Claims trading became a big business in the early 1980s. At that time, it mainly involved buying trade creditors’ claims in order to make a profit under the plan of reorganization. Since then, claims trading has grown exponentially and now involves all types of debt. Often, claims are purchased for the purpose of taking control of the insolvency process and owning the reorganized debtor.
The Examiners: Rulings Could Prompt More Prepacks
How does bondholders’ use of the Trust Indenture Act affect companies’ ability to complete out-of-court restructurings? When a company needs to restructure its balance sheet, it may look to a variety of legal mechanisms including exchange offers, tender offers, prepackaged plans of reorganization and traditional chapter 11 cases. While each situation is sui generis, it is important that all options be available.
The Examiners: Balance Shoppers’ Privacy With Need to Maximize Value
Do shoppers suffer too much in bankruptcy, or should they be expected to share the pain? As a general rule, shoppers do better than other unsecured creditors in bankruptcy because companies want to take care of their loyal customers. Warranty programs, return policies, gift cards and other similar customer loyalty programs are usually assumed and honored in a restructuring. The one area where shoppers have a realistic concern is in the area of data collection.
The Examiners: There’s No Easy Solution on Student Loans
Should the bankruptcy code be amended to make it easier for borrowers to seek forgiveness of student loan debt through a bankruptcy filing? This is a question that cannot be answered easily. Without a doubt, there is a financing crisis in higher education. College tuition has increased at least 250% in the last 25 years. However, over a comparable period, real wages for college graduates have risen by less than 20%.
The Examiners: Like Others, This Cycle Likely a Double-V
How much stress can we expect to see for oil and gas producers and related companies as a result of the current low prices? And what special issues does this industry face when it’s time to restructure or file for bankruptcy? It depends, not surprisingly, on where the price of oil is headed. Most forecasters don’t seem to agree.
The Examiners: Bankruptcy Has Actually Become Less Expensive
Have Chapter 11 restructurings become so expensive that professionals are essentially pricing themselves out of business? Chapter 11 restructurings aren’t becoming more expensive, and professionals aren’t pricing themselves out of business. In general, in fact, I would argue that the opposite is true. Over the last 30 years, Chapter 11 has become less expensive.
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