The financing of commercial litigation has grown enormously since it first appeared on the scene in the US, about 15 years ago. While still small relative to the overall US financial market, it is estimated that more than $11 billion has been invested in litigation finance in the US last year alone. In essence, lenders (often referred to as “funders”) provide commercial claimants and contingency law firms with the capital needed to prosecute legal claims which the funders believe have a strong likelihood of success.

Backstop commitments have become commonplace in large corporate bankruptcy cases – they provide certainty to the debtor that it will have the funds needed to satisfy its obligations to creditors under its plan of reorganization and that it will have liquidity to operate post-bankruptcy as the reorganized entity. Backstop commitments are also a way for certain creditors to generate some additional return in the form of commitment fees and expense reimbursements in exchange for their agreement to backstop all or a material portion of a proposed rights offering or other financing arrangement.

Considerations of “environmental, social and governance” (or ESG) criteria with respect to a company’s management and operations continue to take on greater importance in lenders’ and investors’ credit and investment decisions. How a borrower or a target company measures up to these ever-developing ESG standards will impact its cost of capital and value to potential investors and acquirors.

Foreign companies seeking to protect their overseas assets from their creditors have often turned to the United States for immediate relief under Chapter 11 of the Bankruptcy Code. Establishing jurisdiction in the US for purposes of a bankruptcy filing has proved easy – the establishment of a nominal professional fees retainer with a local law firm on the eve of a bankruptcy filing will suffice.

Earlier this year, Mexican airline, Grupo Aeromexico, S.A.B. de C.V. (together with its affiliates, the “Debtors”) announced that their creditor body had overwhelmingly voted to approve their proposed Chapter 11 restructuring plan (the “Plan”) save for one class of unsecured creditor claims that voted to reject the Plan. Those claims were held by Invictus Global Management, LLC (“Invictus”), a distressed investment fund that recently purchased the claims subject to a “plan support provision” which purportedly compelled the claimholder to support the Debtors’ Plan.

The merchant cash advance (“MCA”) industry recently provided two different bankruptcy courts with an opportunity to consider the characterization of MCA funding transactions as either “true sales” of receivables or “disguised loans”.

The practice of granting third party releases in bankruptcy was recently dealt another blow by the District Court for the Eastern District of Virginia. In Patterson et. al. v. Mahwah Bergen Retail Group, Inc., Civil No. 3:21cv167 (DJN), the District Court found that the lower bankruptcy court lacked the constitutional authority to both rule on certain of the claims covered by the third-party releases at issue and, it follows, to confirm the debtors’ plan of reorganization.

The Bankruptcy Court for the District of Delaware recently expressed its view regarding the reach of the “solvent debtor exception” in In re The Hertz Corp., et al. The solvent debtor exception is an equitable doctrine which supports the proposition that creditors are entitled to the full suite of their contractual rights if the debtor in bankruptcy is solvent.

In its much-discussed decision, City of Chicago v. Fulton, 141 S. Ct. 585 (2020), the Supreme Court ruled that the City of Chicago (“City”) was not in violation of Section 362(a)(3) of the Bankruptcy Code for failing to release an impounded car to a debtor in bankruptcy.

Periodically courts remind corporate directors that their decisions to act or to refrain from acting during the course of managing the affairs of a corporation are not without limitations. It is well established that corporate directors owe fiduciary duties, and more specifically, a duty of care and a duty of loyalty to corporate shareholders. Those duties should always be at the front of mind of every director when any action or inaction is contemplated, but in particular, when addressing challenging issues facing the corporation.