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?

Confirmation of a Chapter 11 plan generally requires the consent of each impaired class of creditors. A debtor can “cramdown” a plan over creditor dissent, however, as long as at least one class of impaired claims accepts the plan.

The consequences of an order or judgement being final or interlocutory are enormous. An order from an interlocutory order requires leave since these orders are not appealable as of right. In addition, a failure to obtain leave may result in the issue becoming moot. This is especially so when motions to lift the stay are involved: if the motion is denied and is not immediately appealable, by the time the case is concluded, the issues will most likely be moot.

The Second Circuit Court of Appeals recently held in In re Tribune Company Fraudulent Conveyance Litigation, No. 13-3992-cv (L) (2d Cir., Dec. 19, 2019) that Bankruptcy Code Section 546(e) barred claims seeking to avoid payments made by Tribune to its shareholders as part of a leveraged buyout (LBO).

Yes, says the Third Circuit. The Third Circuit recently held that the Bankruptcy Court has the authority to confirm a chapter 11 plan which contains nonconsensual, third-party releases when such releases are integral to the successful reorganization. The court’s decision in In re Millennium holds that, when the third-party releases are integral to the restructuring of the debtor-creditor relationship, the Bankruptcy Court has the constitutional authority to approve nonconsensual, third-party releases.

Background

In the fifth opinion involving the repo liquidation saga of HomeBanc, the Third Circuit addressed several crucial issues involving the liquidation and valuation of repo collateral in bankruptcy. In re HomeBanc Mortg. Corp., 2019 WL 7161215 (3d Cir. Dec. 24, 2019).

Background

Introduction

On June 26, 2019, the European Parliament and the Council of the European Union published a new EU Restructuring Directive on preventive restructuring frameworks, discharge of debt and disqualifications, and measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt (“Directive”).

This is an extraordinary achievement given the existing differences in restructuring regimes across EU Member States.

Background

Following various disputes as to the scope of the collateral given to secured creditors, the debtors and certain of their noteholders jointly proposed a chapter 11. The plan included a rights offering that the consenting noteholders agreed to backstop. These consenting noteholders were granted the right to purchase significant equity of the reorganized debtors at a discount and receive significant premiums for their agreement to backstop the rights offering and support the plan.