What: This evening, March 19, Senate Majority Leader Mitch McConnell introduced a bill called the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. The proposed bill is intended to provide relief to various sectors of the U.S. economy. Of particular interest is the Coronavirus Economic Stabilization Act of 2020, set forth in Division C, Title I of the proposed bill, which provides assistance to severely distressed sectors of the U.S. economy, including (but not limited to) airline carriers.
Who Does This Impact:
Debt exchanges have long been utilized by distressed companies to address liquidity concerns and to take advantage of beneficial market conditions. A company saddled with burdensome debt obligations, for example, may seek to exchange existing notes for new notes with the same outstanding principal but with borrower-favorable terms, like delayed payment or extended maturation dates (a "Face Value Exchange"). Or the company might seek to exchange existing notes for new notes with a lower face amount, motivated by discounted trading values for the existing notes (a "Fair Value Exchange").
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