Illinois Governor Rauner presented his turnaround agenda in his “State of the State” address last week and called for, among other things, the state “to extend to municipalities bankruptcy protections.”  Mirroring the proposed legislation introduced by Representative Ron Sandack in January, and reported on in an earlier post, Illinois seems positioned to provide municipalities with clear and direct access to Chapter 9 bankruptcy and

On February 6th, Federal District Judge Francisco Besosa ruled that Puerto Rico’s municipal debt-restructuring law, the “Recovery Act”, was unconstitutional stating that:  “The Recovery Act is pre-empted by the federal Bankruptcy Code and is therefore void.”  The Court also permanently enjoined current and future government officials from enforcing the Act.  Puerto Rico has announced that it will be appealing the ruling.

Illinois’ municipal distress is severe and we have witnessed the political maneuvers  to address Chicago’s ongoing fiscal dilemma.  In 2013, Chicago Mayor Rahm Emmanuel stoked bankruptcy fears citing the city’s ballooning pension obligations that he estimated could exceed $1.6 billion in 2016.  Pew Charitable Trusts has reported that among the nation’s five largest cities, Chicago has put aside the smallest portion of its looming pensions obligations.  While certain changes have been made to counter the pension funding deficit, including Governor Quinn’s hotly contested

Say what you will about Detroit’s bankruptcy case, but when it is all said and done, the value for each of its participants most likely lies in the learning experience.   And, experience is sometimes a painful teacher.   One of the many take-aways is a framework for what constitutes a workable or“feasible” plan of adjustment (“Plan” or “Plan of Adjustment”) while recognizing the significant risk of implementation and post bankruptcy performance.

Detroit Highlights

NASA defines a black hole as a place in space where gravity is relentless and pulls so much that not even light can get out.  And, so it goes with Chicago as it attempts to get out of its pension black hole. The recent Illinois Supreme Court opinion in Jones v. Municipal Employees’ Annuity and Benefit Fund of Chicago, 2016 IL 119618 (Ill. 2016) (“Jones”) may have created a wormhole or way through Chicago’s pension black hole.  That way through is collective bargaining, as discussed below.

This is the first of several posts on gathering agreements in bankruptcy, covenants running with the land and rejection claims that arise when a debtor finds gathering agreements financially burdensome. As our readers know, we waited with much anticipation for theSabine ruling and wait with equal anticipation for the ruling on similar issues in QuickSilver.  Being pragmatic business lawyers we decided to blog on what parties to gathering agreements should be doing now in light of the non-binding, advisory Sabine ruling.

In the past several years, the United States has seen a tidal wave of retail sector chapter 11 cases. The end result for most of those cases has been going out of business and liquidation sales. On March 11, 2020, Modell’s Sporting Goods commenced its chapter 11 cases seeking to follow a similar path taken by other retailers by closing all 153 sporting goods stores in a controlled liquidation. Unfortunately for Modell’s, the COVID-19 crisis hit the United States just as Modell’s commenced its liquidation.

On March 26, 2020, the Senate approved a roughly $2 trillion stimulus package—the biggest economic stimulus in recent U.S. history—in response to the COVID-19 pandemic. This economic relief provides expanded protections for American families, workers, and businesses affected by the public health and economic crisis.

The key measures included in the package are:

In this article, we focus on working capital and consider ways a business can seek to weather the storm and preserve all-important liquidity through this challenging period.

Practical Tips

Given the unprecedented challenges presented by COVID-19 globally, what can senior management do in order to manage and mitigate the risk to the company's financial health?

Municipalities often drive economic development through subsidiaries and affiliated entities. When these “quasi-municipalities” become distressed, however, questions arise as to whether the potential debtor qualifies as a debtor under Chapter 11 or Chapter 9. This uncertainty can lead to litigation over whether the entity may proceed as a Chapter 11 debtor or is a governmental unit that must proceed through a Chapter 9 bankruptcy filing. In states where Chapter 9 is not authorized, Chapter 11 may be the only available option for a supervised restructuring.