What You Need to Know

• Silicon Valley Bank’s 48-hour collapse sent several Big Law firms into action late last week.

• Morgan Lewis, Wilmer, Wilson Sonsini and Ballard Spahr are among the laws firms that launched task forces and webinars over the weekend.

• Despite some reassurance from the FDIC on Sunday, there are lingering issues that are expected to continue to prevent firms’ clients from conducting business in the normal course.

One of the world’s largest cryptocurrency exchanges—FTX Trading Ltd.—and many of its affiliates filed for bankruptcy earlier this month.¹ While the full impact of the FTX bankruptcy is not yet clear, various responses from the executive branch and federal and state regulators indicate that, in the short term, agencies will continue to use their existing authorities to seek information about the practices of crypto market participants and to enforce existing rules to protect customers and avoid further market contagion.² The following statements may indicate what market

Two recent decisions from Judge Laurie Selber Silverstein of the United States Bankruptcy Court for the District of Delaware address common-interest and attorney work-product protection issues that arose in the bankruptcy case of In re Imerys Talc America, Inc., No. 19-10289 (Bankr. D. Del.).¹ Those decisions delineate the interests (and concomitant privilege and work-product protections) of certain parties in Chapter 11 cases, and their reasoning provides instructive guidance on those often misunderstood issues outside of bankruptcy as well.

Valuation is a critical and indispensable element of the Chapter 11 bankruptcy process. It drives many aspects of a Chapter 11 case, from petition to plan confirmation, in all circumstances. But the COVID-19 pandemic has added a layer of complexity—and volatility—to bankruptcy valuation issues. This is likely to affect decisions about whether and when a company should enter Chapter 11, and how creditors and shareholders will be treated as a result of Chapter 11 filings.

TRANSACTIONAL

May 2, 2017

Bankruptcy and Financial Restructuring Alert

Coming to America?--Applying Bankruptcy Code Section 109(a) to Vet Foreign Companies Filing US Bankruptcy Cases Under Chapter 15

By Andrew N. Goldman, Benjamin W. Loveland and Lauren R. Lifland

I. Introduction

Historically, many companies seeking bankruptcy protection have attempted to streamline and shorten their Chapter 11 cases to reduce cost and risk.¹ But the COVID-19 pandemic may be disrupting that trend, especially in industries that rely on in-person shopping or dining or are otherwise disproportionately affected by the economic slowdown. Across the country, many businesses are seeing revenues dry up as consumers stay home, following concerted governmental and social efforts to “flatten the curve” of the novel coronavirus’s transmission.²

When a company faces financial distress and seeks to sell its assets, both the seller and the buyer may prefer to implement the transaction through a Section 363 sale in a Chapter 11 bankruptcy case of the seller. A Chapter 11 sale process provides certain protections to the buyer from fraudulent transfer and other claims of the seller’s creditors, and a seller may be able to maximize the purchase price of its assets through a Section 363 auction process.

Summary: A recent Third Circuit decision has clarified the scope of the third-party injunction, including injunctions in favor of insurers that resolve insurance coverage in asbestos bankruptcy cases, that may be issued under Section 524(g) of the Bankruptcy Code. Liability covered by such an injunction must be “derivative” of the debtor, meaning that under state law, the third party’s liability must depend on the debtor’s liability.

Phil Anker, in this article published by DailyDAC's Commercial Bankruptcy Alternatives, explores the “Absolute Priority Rule” and other “Rules” of “Priority” in bankruptcy, and if they really are “absolute,” if they really are “rules,” and if they always provide “priority” to some claimants over others.

Timing is key to valuation of all types and in all contexts. But in bankruptcy, valuation timing can take on heightened importance because a central element of bankruptcy involves distributing value as of a specific point in time. Higher valuation means larger creditor recoveries in bankruptcy, and lower valuation means smaller creditor recoveries. Valuation can also affect which creditors receive those recoveries and the extent to which various stakeholders retain an interest in the reorganized debtor.