The COVID-19 pandemic has wreaked havoc on the global economy. The equity markets, the travel and tourism industry, and retail establishments of all stripes have been hit hard. In addition to manufacturing, shipping, and other operational and supply chain disruptions, companies will need to address their borrowing requirements. Likewise, lenders, bondholders and alternative capital providers will need to consider what their rights and obligations are under their financing documents.

All too often the task of procuring and renewing D&O insurance at a portfolio company is assigned to the portfolio company’s CFO or Controller, who employs an insurance broker to find the best price for the amount of coverage deemed appropriate by the broker. When such insurance is procured and thereafter renewed, the CFO/Controller simply reports to the board the fact of the procurement/renewal and few questions about the terms of coverage are discussed at the board level. This can be a big mistake.

Court holds that distributions made pursuant to priority payment provisions contained in CDO transactions are protected by Section 560 of the Bankruptcy Code