Many foreign companies experiencing financial distress due to the COVID-19 pandemic have utilized the American bankruptcy system to restructure. In 2020, major airlines in Chile, Colombia and Mexico availed themselves of Chapter 11 protections. The oil and gas sector, already struggling from a multiyear slump in commodity prices that worsened with the pandemic, also saw a surge in Chapter 11 filings by foreign entities.

On January 17, 2017, the U.S. Court of Appeals for the Second Circuit issued an opinion in Marblegate Asset Management v. Education Management Corp., 15-2124-cv(L), 15-2141cv(CON) (2nd Cir. Jan. 17, 2017), overturning a broad interpretation of the Trust Indenture Act (TIA) by the U.S.

Despite lower-than-average Chapter 11 activity in 2014, the legal landscape for distressed investors has continued to evolve, with significant legal developments in credit bidding, make-whole premiums and intercreditor agreements. By staying apprised of the evolving jurisprudence in these areas, distressed investors can mitigate risks that have foiled lenders in recent cases.

Credit Bidding

Corporate Chapter 11 filings remained relatively low in 2014, down slightly from 2013, due to a robust capital market environment, low interest rates and easy access to financing. These and other factors allowed highly leveraged borrowers that might otherwise have been Chapter 11 restructuring candidates to refinance or pursue other nonjudicial restructuring alternatives. Among those companies that filed corporate bankruptcies, the District of Delaware and the Southern District of New York continued to capture the lion's share of cases.