On October 17, 2022, Justice Andrea Masley of the NY Supreme Court issued a decision and order denying all but one of the motion to dismiss claims filed by Boardriders, Oaktree Capital (an equity holder, term lender, and “Sponsor” under the credit agreement), and an ad hoc group of lenders (the “Participating Lenders”) that participated in an “uptiering” transaction that included new money investments and roll-ups of existing term loan debt into new priming debt that would sit at the top of the company’s capital structure.

On October 14, 2022, the Fifth Circuit issued its decision in Ultra Petroleum, granting favorable outcomes to “unimpaired” creditors that challenged the company’s plan of reorganization and argued for payment (i) of a ~$200 million make-whole and (ii) post-petition interest at the contractual rate, not the Federal Judgment Rate. At issue on appeal was the Chapter 11 plan proposed by the “massively solvent” debtors—Ultra Petroleum Corp. (HoldCo) and its affiliates, including subsidiary Ultra Resources, Inc.

On July 6, Delaware Bankruptcy Court Judge Craig T. Goldblatt issued a memorandum opinion in the bankruptcy cases of TPC Group, Inc., growing the corpus of recent court decisions tackling “uptiering” and other similar transactions that have been dubbed by some practitioners and investors as “creditor-on-creditor violence.” This topic has been a hot button issue for a few years, playing out in a number of high profile scenarios, from J.Crew and Travelport to Serta Simmons and TriMark, among others.

1. State of the Restructuring Market

1.1 Market Trends and Changes

State of the Restructuring and Insolvency Market

There were 27,359 insolvencies in France as of the end of September 2021, down 25.1% from the same period in 2020, and down 47.9% from September 2019. Such reduction is relatively stable across all sectors, including those most severely affected by the health-related restrictions, such as accommodation and food services (down 44.2% year-on-year) and trade (down 28.1% year on year).

Fewer Insolvencies for More Opportunities

At the end of 2021, corporate bankruptcies (for most company sizes and in most sectors) were at their lowest level compared to the pre-COVID-19 figures from 2019, with a 50% drop in insolvency proceedings and a 10% decrease in pre-insolvency situations. This was largely due to the temporary impact of government emergency measures and support, including:

On August 26, 2020, the Court of Appeals for the Third Circuit held that the Bankruptcy Code does not require subordination agreements to be strictly enforced in order for a court to confirm a cramdown plan, so long as the plan does not discriminate unfairly.

The new Corporate Insolvency and Governance Bill will introduce new provisions to protect a company from suppliers wishing to terminate supply contracts or invoking more draconian terms when the company is entering into certain insolvency procedures, a CVA, or a new restructuring plan or moratorium (as introduced by the Bill), (each an “Insolvency Procedure”).

The purpose behind the new provisions is to maximise the possibility of a company being rescued or being able to sell its business as a going concern by helping it to trade through an Insolvency Procedure.

Last week the UK government introduced the Corporate Insolvency and Governance Bill in Parliament.

The main objective of the Bill is to provide businesses with the flexibility and space needed to continue to trade during this difficult time caused by the COVID-19 pandemic. That said, the provisions around the new moratorium and the new restructuring plan proposal have been under consideration for a few years.

The Bill’s measures can be split into three categories:

Wrongful Trading

On 14 May 2020, the UK Government extended the temporary suspension of wrongful trading liability until 30 June 2020.

On December 19, 2019, the Second Circuit held that appellants’ state law constructive fraudulent transfer claims were preempted by virtue of the Bankruptcy Code’s safe harbors that exempt transfers made in connection with a contract for the purchase, sale or loan of a security from being clawed back into the bankruptcy estate for