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
Introduction
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
Pension issues in the American Airlines (AMR) bankruptcy1 have resulted in the Internal Revenue Service (IRS) issuing new final regulations, effective November 8, 2012 (Final Regulations), which broadly impact all debtors facing underfunded pension plan obligations. The Final Regulations provide chapter 11 bankruptcy debtors facing distress terminations of their tax-qualified defined benefit pension plans with the additional option of amending the plans to eliminate accelerated payment options.
The US Supreme Court has ruled in Stern v. Marshall (June 23, 2011) that a bankruptcy court lacks jurisdiction to render final judgment on a bankruptcy estate’s compulsory counterclaim against a creditor arising under common law, despite a statutory grant of jurisdiction.
In what appears to be a matter of first impression, Bankruptcy Judge Robert D. Drain, United States Bankruptcy Court for the Southern District of New York, has held that a statutory safe harbor against constructive fraudulent conveyance actions under the Bankruptcy Code involving securities transfers does not apply to the private sale of securities, even when there are no allegations of illegal conduct or fraud involved in the underlying transaction.
On December 16, 2021, United States District Judge Colleen McMahon of the Southern District of New York overturned the confirmation of Purdue Pharma’s chapter 11 plan of reorganization, “put[ting] to rest” the non-consensual third-party releases debate that has “hovered over bankruptcy law for thirty five years.” Judge McMahon concluded in her 142-page opinion that “the Bankruptcy Code does not authorize such non-consensual
The nearly $350 billion loan program made available to small businesses by the Coronavirus Aid, Relief, and Economic Security (CARES) Act was tapped out in less than two weeks. In response to this overwhelming demand, on Friday, April 24, 2020, an additional $320 billion was funded into the loan program, and the second round of applications for small businesses requesting these loans will open on Monday, April 27, 2020.
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?