With Hertz emerging from a bankruptcy with a positive result for shareholders, we are reminded of the interplay between the equity markets and the bankruptcy alternative.

Some firms facing financial challenges during the pandemic were able to avoid a bankruptcy filing altogether because of their ability to raise the necessary funds through an equity offering. Hertz provides an example of a situation where the bankruptcy filing instead of wiping out the equity enhanced value.

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

Companies should anticipate the possibility that they will find themselves in a situation where a vendor, customer, or other contract counterparty commences a bankruptcy case pursuant to Title 11 of the U.S. Code (the Bankruptcy Code). The ongoing COVID-19 pandemic has caused economic stress to a wide variety of business sectors, and it has underscored the risk that a contract counterparty may file for bankruptcy.

Bankruptcy effect on vendor and supply contracts

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

Companies should anticipate the possibility that they will find themselves in a situation where a vendor, customer, or other contract counterparty commences a bankruptcy case pursuant to Title 11 of the U.S. Code (the Bankruptcy Code). The ongoing COVID-19 pandemic has caused economic stress to a wide variety of business sectors, and it has underscored the risk that a contract counterparty may file for bankruptcy.

Bankruptcy effect on vendor and supply contracts