Some recent high profile restructuring debtors made multi-million dollar retention bonuses on the eve of bankruptcy filings. The U.S. Government Accountability Office (GAO) took notice of these pre-petition payments and, in September 2021, published a report with data showing that debtors may be “working around the [Bankruptcy] Code’s restrictions” by paying bonuses prior to filing
Rachel Ginzburg is an associate in Herrick’s Restructuring & Finance Litigation Group. Her practice focuses on all areas of bankruptcy and restructuring, including the representation of commercial debtors, secured and unsecured creditors, creditors’ committees, and other significant parties-in-interest in bankruptcy and insolvency proceedings.
Rachel was a law clerk for the Honorable Susan L. Reisner of the Appellate Division of New Jersey, and was also a law clerk for the Honorable Ann G. McCormick of the Chancery Division of New Jersey. While attending law school, Rachel was a SLIP Intern at the Department of Justice’s Commercial Litigation Branch.
Prior to joining Herrick, Rachel was an associate at Porzio, Bromberg & Newman, P.C. She currently serves as the Co-Director of Membership and Sponsorship for the International Women’s Insolvency & Restructuring Confederation’s New Jersey network.
On September 23, 2021, United States Senators Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) introduced the Bankruptcy Venue Reform Act of 2021 (the “Venue Reform Act”), which would tighten the Bankruptcy Code’s venue rules for corporate debtors. A corporate filer would be limited to the district containing its principal place of business or the district where its principal assets have been located for the preceding 180 days. For a public company, the location listed in its SEC filings would be its presumptive principal place of business. The Venue Reform Act is intended to eliminate forum shopping by corporate debtors seeking to file their chapter 11 cases in traditionally debtor-friendly courts.
This blog post describes some of the main changes that would go into effect if the Venue Reform Act were approved. The full text of the proposed Venue Reform Act may be found here: https://www.warren.senate.gov/imo/media/doc/SIL21A87.pdf. …
Continue Reading What the Bankruptcy Venue Reform Act of 2021 Could Mean for Corporate Debtors
On May 11, 2021, Judge Harlin D. Hale dismissed the chapter 11 case filed by the National Rifle Association after finding that it was not filed in good faith. Judge Hale ruled that the case was “filed to gain an unfair litigation advantage” and to “avoid a state regulatory scheme,” which the Court found was “not for a purpose intended or sanctioned by the Bankruptcy Code.”…
Continue Reading Texas Bankruptcy Court Dismisses NRA Bankruptcy Cases, Finding They Were Not Filed in Good Faith
When Congress passed the CARES Act last year, it included changes to the Bankruptcy Code that helped individuals and businesses. Many of these provisions expire on March 27, 2021 even though the economy has not yet returned to normal. The COVID-19 Bankruptcy Relief Extension Act of 2021, which has not passed yet, would extend the…
When Congress passed the Small Business Reorganization Act (“SBRA”) in August 2019, we lived in a different world. The SBRA added a “Subchapter V” to the Bankruptcy Code for small business debtors, responding to longstanding criticism of the Bankruptcy Code’s costs and complexities on small businesses trying to reorganize. The SBRA became effective exactly one year ago, on February 19, 2020, and when many businesses in the United States shut their doors in March 2020, many thought that the timing of the SBRA was just right to serve the needs of the small business community. On the paper anniversary of the SBRA’s effective date (the first wedding anniversary is colloquially referred to as the paper anniversary), we have looked at how the SBRA has helped small business debtors and how Congress modified Subchapter V this year to further help struggling small businesses. We are also highlighting a few issues coming out of Subchapter V so far.
Continue Reading Subchapter V: The Paper Anniversary
On August 11, 2020, the Second Circuit addressed the long-standing question of whether flip clauses are enforceable in bankruptcy. Affirming a Southern District of New York decision, the Court found in Lehman Brothers Special Financing Inc. v. Bank of America N.A. that flip clauses are protected under the safe harbor and therefore enforceable in bankruptcy. Investors should take comfort that this decision puts the final nail in the coffin of the earlier controversial decisions in the Lehman Brothers chapter 11 proceedings that had ruled such provisions unenforceable.
Continue Reading Second Circuit Does Not Flip Flop on Enforceability of Flip Clauses
On January 13, 2020, the Supreme Court denied petitions for writ of certiorari on the question of whether payments on municipal bonds secured by special revenues are required during the issuer’s bankruptcy. Special revenue bonds are paid from pledged revenues generated from a specific activity. The case arose because after the Puerto Rico Highway and Transportation Agency (PRHTA) commenced its municipal reorganization case in 2017, it refused to make a July 2017 payment of $219 million, arguing that the automatic stay of the Bankruptcy Code precluded such payments. That dispute followed actions by Puerto Rico’s governor and legislature in 2015 and 2016, in which they had diverted PRHTA’s special revenues, which consisted of tolls, motor fuels, taxes and other transportation-related revenues, for payment of the Commonwealth’s other obligations.
Continue Reading Bond Market Shaken (Not Stirred) As Supreme Court Declines To Hear Puerto Rico Municipal Bonds Dispute