On March 27, 2021, President Biden signed into law the COVID-19 Bankruptcy Relief Extension Act (the Extension Act). The Extension Act temporarily extends certain bankruptcy relief provisions that were enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), as further amended and/or extended as part of the Consolidated Appropriations Act (the CAA) which was signed into law on December 27, 2020. This alert highlights the impact of these changes on banks and other lenders.

Subchapter V Debt Limits

Debtors who ignore instructions from the Bankruptcy Court do so at their own peril, as a recent case from the First Circuit Court of Appeals illustrates.

Over the past year, the Covid-19 pandemic upended many industries. While the construction industry has largely been able to operate throughout the pandemic, albeit with increased and ever-changing restrictions on jobsites, one consequence of these disruptions may be an increase in construction-related bankruptcy filings. Already in 2021, there have been over 70 construction-related bankruptcy filings across the country. For many property owners and real estate developers, these filings create a nightmare scenario where work may slow or even stop entirely.

In a first, the Bankruptcy Court for the Southern District of New York in the Arcapita Bank case had to decide whether Shari’a compliant investment agreements, providing for Murabaha and Wakala transactions, qualify for the safe harbor protections provided in the bankruptcy code for securities contracts, forwards and swaps. The court held that they do not. Since the opinion runs about 100 pages long, we attempt to distill some very basic facts concerning Shari’a compliant transactions and point to important holdings made by the court.

Shari’a Compliant Transactions

Asbestos bankruptcy trusts remain a topic frequently monitored and reported on Asbestos Case Tracker. As the first quarter of 2021 comes to a close, we have seen a number of changes to 11 trusts that will impact the amount of compensation available to individuals claiming asbestos-related injuries.

The debtor violated numerous state court orders in actions to recover amounts he misappropriated. The state court held him in contempt and imposed monetary sanctions and ordered him to stop managing property he did not own and to turnover proceeds from the illegal management. The debtor filed his bankruptcy petition the day before a state court hearing on sentencing the debtor to jail for contempt.

Dear Clients and Friends,

In 2020, domestic and international energy markets were challenged by a worldwide pandemic and its effect on commodity prices, which accelerated disruptions in supply chains and impacted the energy transition in countries around the world.

After more than one year since the Paycheck Protection Program, or PPP, was established pursuant to the US Cares Act in March 2020, the Small Business Administration (“SBA”) has recently reversed its policy that prohibited companies in bankruptcy from applying for PPP funding due to their status as debtors in bankruptcy.

Lenders often require their borrowers to be “special purpose entities” in real estate transactions. This is a way that lenders can mitigate their bankruptcy risk in the event that the borrower or any of its parent entities file for bankruptcy. In addition, since most real estate financing is non-recourse, lenders require that the borrower is a separate, special purpose entity so that no other property or business will impact the property which is the subject of the underlying loan.

On April 19, 2021, the United States Bankruptcy Court for the Eastern District of Virginia granted a motion (the “Seal Motion”) filed by the Intelsat S.A. debtors (the “Debtors”) to seal the hearing on the Debtors’ motion to extend exclusivity and motion to compel plan mediation.