With the beginnings of the coronavirus pandemic, 2020 brought an onslaught of retail bankruptcy cases. Lord & Taylor, Ascena Brands, Neiman Marcus and JC Penny, among many others – not less than 52 in total. As the economy recovered from the initial shock of the pandemic, the number of retail bankruptcy cases subsided in 2021. According to reports, there were 21 retail cases in 2021 as retail traffic began returning to pre-pandemic levels. 2022, however, brings new pressures on the global economy, and certain that may strike the retail industry with force.

Given the recent media coverage and growing concerns among investors over the risks associated with a bankruptcy filing of a cryptocurrency exchange, it feels timely to highlight some issues that arose in the Chapter 11 cases of Cred Inc. and certain of its affiliates (collectively, “Cred”).

The doctrine of equitable mootness is in the news again. The Supreme Court recently denied a cert. petition in a case where the petitioner wanted the doctrine ruled unconstitutional. KK-PB Financial LLC v. 160 Royal Palm LLC, Case No. 21-1197, 2021 WL 7247541 (petition), 2022 WL 1914118, (denying certiorari).

Unitranche financing began as a middle-market product, tracing its origins to the days of recovery from the global credit crisis. The credit markets re-opened with an explosion of available capital from traditional lenders, business development companies and other direct lenders. With an increasing supply of capital, leverage shifted to borrowers and private equity, allowing them to better dictate the terms and conditions of their loan facilities. With the greater prevalence of so-called “covenant-lite” loans, also came the exponential growth of the unitranche market.

In the world of cryptocurrency, exchange platforms act as intermediaries allowing investors to buy and sell assets while making money through commissions and transaction fees. Any assets purchased may be held in either non-custodial or custodial wallets. If a customer chooses a custodial wallet, the platform holds and manages the assets through a private key, which is a string of characters that serves as a password. If a key is lost or forgotten, it may be impossible to recover, resulting in the permanent loss of the asset.

A discharge in bankruptcy usually discharges a debtor from the debtor’s liabilities. Section 523 of the Bankruptcy Code, however, sets forth certain exceptions to this policy, including for “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud. . . .” 11 U.S.C. § 523(a)(2)(A).

Late last week, the District Court for the Southern District of New York provided a reminder of the importance of precise drafting. In Transform Holdco LLC v. Sears Holdings Corp. et. al., CV-05782, Doc. 20, the contractual question at issue related to the purchase of substantially all of the assets (and assumption of certain of the liabilities) of Sears and its domestic and foreign subsidiaries by Transform Holdco LLC (“Transform”) in Sears’ bankruptcy case.

The Fifth Circuit recently dismissed an appeal of a confirmation order as equitably moot. The decision was based on three key factors: the appellant hadn’t obtained a stay pending appeal, the plan had been substantially consummated, and practical relief couldn’t be fashioned if the plan was unwound.Talarico v. Ultra Petro. Corp. (In re Ultra Petro. Corp.), Case No. 21-20049, 2022 U.S. App. LEXIS 8941 (5th Cir. Apr. 1, 2022).

The financing of commercial litigation has grown enormously since it first appeared on the scene in the US, about 15 years ago. While still small relative to the overall US financial market, it is estimated that more than $11 billion has been invested in litigation finance in the US last year alone. In essence, lenders (often referred to as “funders”) provide commercial claimants and contingency law firms with the capital needed to prosecute legal claims which the funders believe have a strong likelihood of success.

Backstop commitments have become commonplace in large corporate bankruptcy cases – they provide certainty to the debtor that it will have the funds needed to satisfy its obligations to creditors under its plan of reorganization and that it will have liquidity to operate post-bankruptcy as the reorganized entity. Backstop commitments are also a way for certain creditors to generate some additional return in the form of commitment fees and expense reimbursements in exchange for their agreement to backstop all or a material portion of a proposed rights offering or other financing arrangement.