The FDIC has statutory obligations to maximize the net present value return from the sale or disposition of the assets entrusted to it as receiver, and to minimize the amount of any loss realized.[1] Today we examine the FDIC’s efforts to fulfill its mandate through the transfer of assets to bridge-banks, Silicon Valley Bank, N.A. (“SVB”) and Signature Bank, N.A. (“SB”).

Key Points

Key Points

Hong Kong Airlines (HKA) has announced that it is seeking to implement a restructuring of its aircraft lease obligations and other liabilities by court action in the UK and Hong Kong.

The plan proposes to give aircraft lessors a right to an upfront cash recovery — of about 5 percent of their claims (or in the case of lessors of aircraft being retained, the right to elect equity in the restructured HKA) — and potential future payouts starting in 2028 tied to the future earnings of the airline.

Key Point

• The UK government's proposals to only partially implement a new UNCITRAL Model Law means that creditors of English law debts who do not consent to a foreign restructuring proceeding will still have recourse to enforcing their rights against the debtor's UK-based assets.

English Law Is Still a Special Situation

Elon Musk recently said he has a "super bad feeling" about the economy, pithily declaring what most financial commentators have been predicting in more technical terms.

Key Points

• The use by Malaysia Airlines' subsidiary, MAB Leasing Ltd. (incorporated in Malaysia) ("MABL"), in 2021, of an English Scheme of Arrangement (a "Scheme") to compromise its aircraft lease obligations proved that US Chapter 11 is not the only route to a globally recognised compromise of airline leases.
• Airline lessors should now prepare themselves for Schemes (and possibly also other English restructuring processes) as an alternative to Chapter 11.

Background

After reporting its lowest annual recovery from False Claim Act (“FCA”) cases in Fiscal Year (FY) 2020, the Department of Justice (“DOJ”) has reportedly bounced back. On February 1, 2021, DOJ released detailed statistics regarding FCA recoveries during FY 2021, during which DOJ reportedly obtained more than $5.6 billion in civil FCA settlements and judgments, of which $5 billion related to matters involving the health care industry.

KEY POINTS The risk that prepetition lease payments made by a lessee that is a debtor in a US bankruptcy will be clawed back from an aircraft lessor can be reduced if: • the lease is a true lease rather than a disguised secured loan or finance lease • one or both of basic rent and maintenance reserves are payable in advance (i.e., at the beginning of a rent period rather than at the end) • basic rent and maintenance reserves are payable monthly rather than quarterly or semiannually • the lessor enforces the lease’s payment obligations consistently • any payment made by a third party on beha

Overview

On December 14, 2020, Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas, issued an important decision in the CEC Entertainment, Inc. (Chuck E. Cheese) bankruptcy case, Case No. 20-33163, denying the Debtors’ motion to abate their obligations to pay post-petition rent due to government shutdown orders issued as a result of the COVID-19 pandemic. Memorandum Opinion [Dkt. No. 1492].