Puerto Rico’s financial woes have recently been front and center in financial news. Although a recent decision by the U.S. Supreme Court curtailed Puerto Rico’s ability to enact its own legislation to address its debt situation, late last month President Obama signed into law legislation designed to allow Puerto Rico to restructure its vast public debt, giving new hope to the Commonwealth’s financially strapped public utilities.

A group of creditors learned the hard way that there may be no excuse for a late claim. U.S. Bankruptcy Judge James Peck of the Southern District of New York recently disallowed seven proofs of claim that had been filed late in the Lehman bankruptcies. Judge Peck held that the reasons cited by the parties for the late filing did not rise to the level of “excusable neglect” and he was thus disallowing their claims. This is of particular interest as it comes out of the Southern District of New York, which has one of the largest bankruptcy dockets in the country.

As the American economy continues to slog through the ongoing Great Recession, even financially sound companies face challenges due to the continued economic malaise. In particular, a company that works with suppliers, customers and other business partners facing financial troubles needs to be prepared to handle the consequences of others' fiscal problems. Being attuned to signs of distress and taking defensive actions early can help strong companies avoid problems and be better positioned in the case of a significant event, such as a business partner filing for bankruptcy.

Bankruptcy cases can be expensive affairs not only for the debtor, but also for creditors trying to obtain payment on their claims. A Bankruptcy Court in the Middle District of Florida recently approved a provision in a chapter 11 plan allowing for certain unsecured creditors to be reimbursed for their legal fees if their participation in the case helped maximize recoveries for other creditors, even though the Bankruptcy Code does not explicitly allow for this kind of reimbursement.

Chrysler's bankruptcy filing, which occurred on April 30, has generated considerable activity already. Baker Hostetler has been monitoring closely the Chrysler activity for our supplier clients. We attended the hearing on the first day filings, which were generally ministerial in nature. The court approved joint administration, maintenance of cash management/business forms, enforcement of automatic stay, payment of wages, and honoring of all warranties.

We sent to you earlier this week an Alert on "Chrysler Bankruptcy Filing and Preliminary Impact on Suppliers." As we promised, below is an update based upon our review of the case and observations at the hearings.

Essential Supplier Motion

The Court approved treatment of essential suppliers on a temporary basis. Here is a summary of the Interim Order:

While 90 percent of life may be just showing up, showing up late may be just as bad as never showing up at all. Just ask two creditors who were told for the second time they cannot file claims in the Lehman Brothers bankruptcy case because they filed their claims too late.