Is it Groundhog Day for private equity backed companies struggling to cope with higher interest rates, or is it different this time? The attempts to curb inflation flowing from the re-opening of the global economy after the Covid pandemic and the war in Ukraine have seen interest rates rise globally. In this article we look back at the response to financial distress in private equity backed companies during the global financial crisis of 2007-2009 and ask if it is different this time?
Celsius’ retail borrowers finally have an answer on who owns the cryptocurrency they deposited into Celsius in exchange for a loan from Celsius – spoiler alert: on November 13, 2023 the bankruptcy court held that Celsius’ terms of service “clearly and unambiguously” gave Celsius ownership of retail borrowers’ cryptocurrency. The bankruptcy court’s decision follows its January 2023 decision which similarly held that the cryptocurrency of Celsius’ “Earn” customers also belonged to Celsius because the terms of service similarly unambiguously granted Celsius title ownership.
The UK High Court has considered and granted permission for a so called “credit bid” in an application by the Special Administrators of Sova Capital Ltd (in special administration) for a substantial portfolio of illiquid Russian securities. The transaction structure, involving the transfer of securities in exchange for the release of a £233m claim against the estate, is unprecedented in the UK where ‘credit bidding’ has no technical recognition.
Although the IMF recently announced at Davos that it would upgrade its global economic forecasts, with an improvement predicted in the later part of 2023 and into 2024, times remain difficult for many companies and their lenders – and are likely to remain so for a while yet.
The UK Government yesterday announced that it will proceed with the phasing out of temporary measures introduced to protect businesses from creditor action during the COVID-19 pandemic, whilst also announcing new measures to protect smaller businesses from winding up petitions. The legislation required to implement these amendments was laid before Parliament yesterday and will come into force on 29 September 2021.
The liquidity-fueled lull in restructuring activity provides both an interesting historical echo of the late 1990s and a useful opportunity for market participants to take note of a deceptively interesting opinion in Giuliano ex rel. Consolidated Bedding, Inc. v. L&P Financial Services Co. (In re Consolidated Bedding, Inc.), Case No. 19-50727, 2021 WL 2638594 (Bankr. D. Del. June 25, 2021) (Shannon, J.).
In Shameeka Ien v. TransCare Corp., et al. (In re TransCareCorp.), Case No. 16-10407, Adv. P. No. 16-01033 (Bankr. S.D.N.Y. May 7, 2020) [D.I. 157], the Bankruptcy Court for the Southern District of New York recently refused to dismiss WARN Act claims against Patriarch Partners, LLC, private equity firm (“PE Firm“), and its owner, Lynn Tilton (“PE Owner“), resulting from the staggered chapter 7 bankruptcies of several portfolio companies, TransCare Corporation and its affiliates (collectively, the “Debtors“).
Joining three other bankruptcy courts, Judge Thuma of the District of New Mexico recently held that the rules issued by the Small Business Administration (“SBA“) that restrict bankrupt entities from participating in the Paycheck Protection Program (“PPP“) violated the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, P.L. 115-136 (the “CARES Act”), as well as section 525(a) of the Bankruptcy Code.
The Southern District of New York recently reminded us in In re Firestar Diamond, Inc., et al., Case No. 18-10509 (Bankr. S.D.N.Y. April 22, 2019) (SHL) [Dkt. No. 1482] that equitable principles in bankruptcy often do not match those outside of bankruptcy. Indeed, bankruptcy decisions often place emphasis on equality of treatment amongst all creditors and are less concerned with inequities to individual creditors.