The Paycheck Protection Program (PPP) is one of two business loan programs created under the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist companies by extending potentially forgivable credit to small business employers. The PPP is designed to help cover employee-related expenses and help employers avoid layoffs. The prospect of forgivable debt, coupled with relatively favorable terms, have put PPP loans in high demand and many businesses, including some which had already sought chapter 11 bankruptcy protection, have sought PPP loans.

Buried in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which is expected to be passed by Congress and signed by the President today, are revisions to the Bankruptcy Code that are relevant to creditors dealing with distressed debtors. Most notably, the bill will impact the recently-enacted Small Business Reorganization Act of 2019 (the “SBRA”) by increasing the potential pool of qualified debtors.

Before ingesting too much holiday cheer, we encourage you to consider a recent opinion from the United States Court of Appeals for the Second Circuit.

Weil Bankruptcy Blog connoisseurs will recall that, in May 2019, we wrote on the Southern District of New York’s decision in In re Tribune Co. Fraudulent Conveyance Litigation, Case No. 12-2652, 2019 WL 1771786 (S.D.N.Y. April 23, 2019) (Cote, J.) (“Tribune I”).

A recent chapter 15 decision by Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) suggests that third-party releases susceptible to challenge or rejection in chapter 11 proceedings may be recognized and enforced under chapter 15. This decision provides companies with cross-border connections a path to achieve approval of non-consensual third-party guarantor releases in the U.S.

Background

A recent chapter 15 decision by Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) suggests that third-party releases susceptible to challenge or rejection in chapter 11 proceedings may be recognized and enforced under chapter 15. This decision provides companies with cross-border connections a path to achieve approval of non-consensual third-party guarantor releases in the U.S.

Background