Borrower beware: in times of distress, your credit documents may give your secured lenders an opportunity to “flip” control of your board

Distress happens, even at companies that once appeared financially solid. When it does, the company, its board (which may be controlled by a sponsor in a public or private equity scenario), and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.

Introduction

In a recent opinion from the Delaware Bankruptcy Court in the Dura Automotive Systems bankruptcy case,[1] Judge Karen Owens held that executory contracts cannot be impliedly assumed through course of conduct by the parties, under binding Third Circuit precedent, notwithstanding that a minority of courts outside of the Third Circuit have allowed it

In its recent opinion arising out of the Orexigen Therapeutics Inc.

The holidays came early for the United States Trustee (the “U.S. Trustee”) on November, 3, 2020, when a three-judge panel of the United States Circuit Court for the Fifth Circuit, on direct appeal, reversed the bankruptcy court and upheld the constitutionality of a 2017 increase to quarterly fees payable to the U.S. Trustee in Hobbs v. Buffets LLC (In re Buffets LLC), No. 19-50765, 2020 U.S. App. LEXIS 34866 (5th Cir. Nov. 3, 2020). Although the Fifth Circuit’s opinion addresses a variety of constitutional challenges to the recent increase to U.S.

In a new opinion issued in the Chuck E. Cheese bankruptcy cases, In re CEC Entertainment, Inc., Case No. 20-33163 (Bankr. S.D. Tex.),¹ Judge Marvin Isgur of the U.S.

On remand from the Fifth Circuit, in its October 26, 2020, decision in In re Ultra Petroleum Corp.,¹ the US Bankruptcy Court for the Southern District of Texas ruled that (1) make-whole premiums are allowed by the Bankruptcy Code under appropriate circumstances and (2) a solvent debtor must pay pos

In Henry Hobbs Jr. v. Buffets LLC the United States Court of Appeals for the Fifth Circuit upheld the constitutionality of a recent increase in United States Trustees fees that are charged to Chapter 11 debtors.

On May 5, 2020, Judge Mary Walrath of the United States Bankruptcy Court for the District of Delaware delivered a bench ruling that denied a minority shareholder’s motion to dismiss the Chapter 11 cases of Pace Industries and certain of its affiliates on the grounds that the shareholder’s contractual right to block a bankruptcy filing under the debtor’s certificate of incorporation was contrary to public policy.

As courts across the country deal with scaled back operations due to the COVID-19 pandemic, bankruptcy courts in New Jersey and Delaware have issued novel orders to address the impact of the virus on certain debtors. Last month, debtors in the chapter 11 bankruptcy cases of Modell’s Sporting Goods, Inc. and CraftWorks Parent, LLC each sought and obtained court orders suspending certain case activity which, for all intents and purposes “mothballed” the cases for a certain period of time.