On May 30, 2023, the US Court of Appeals for the Second Circuit released its long-awaited opinion addressing Purdue Pharma’s confirmed chapter 11 bankruptcy plan. Although the appeal challenged more than one aspect of the plan, the Court’s decision was highly anticipated for its discussion of one topic in particular: nonconsensual third-party releases.

In Depth

THIRD-PARTY RELEASES

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:

Intercreditor agreements between multiple lenders are part and parcel of lending to a company with several tranches of debt. Under section 510 of the United States Bankruptcy Code (the “Code”), “[a] subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law.” 11 U.S.C. § 510(a) (West 2017).

Recently secured parties, including some indenture trustees, have found the priority, scope, validity and enforceability of seemingly properly perfected security interests in Federal Communications Commission (“FCC”) licenses, authorizations and permits, and any proceeds or value derived therefrom, challenged by creditors in bankruptcy proceedings.