On March 27, the president signed into law Phase 3 of the federal stimulus program, called the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. Title I of the act, titled the Keeping American Workers Paid and Employed Act (KAWPEA), directs, among other amounts, $349 billion to small businesses as part of an expansion of the U.S. Small Business Administration’s (SBA) Section 7(a) loan program under a new paycheck protection loan program (PPP) as well as $10 billion through an expansion to the SBA’s Section 7(b) economic injury disaster loan (EIDL) program.

The outbreak of coronavirus COVID-19 represents one of the most significant global public health crises in recent memory and is causing major disruption and unprecedented volatility in markets, economies and businesses. With such great social and economic uncertainty, it is inevitable that existing financial arrangements will be affected and asset-based lenders (ABLs) are not immune to this. They are, however, uniquely positioned – given the flexibility of the products they offer – to react to the ever-changing economic landscape.

The question is not if but how deeply the global coronavirus (COVID-19) pandemic will disrupt businesses and impact future operations. That answer differs based upon each company’s industry, access to cash and other capital, debt structure, ability to manage expenses, lost revenues, and operational interruption. Certain industries, such as airlines and airline service companies, hotels, restaurants, sports and entertainment, media, and retailers, among others, are suffering immediate adverse effects. Our healthcare resources are being stretched thin.

The Australian Government has passed the "Coronavirus Economic Response Package Omnibus Bill 2020". The new legislation was announced on Sunday 22 March 2020 and was fast tracked through parliament as part of the Australian Government's response to the economic impact of COVID-19.

While the impact of the coronavirus disease (COVID-19) is as of yet uncertain, one thing is clear: the global outbreak of COVID-19 has caused − and will likely continue to cause − a precipitous decrease in demand and supply as a result of quarantine orders, business closures, and social distancing, all aimed at flattening the curve of the pandemic. As a result, a dramatic and pronounced economic downturn is predicted as the pandemic’s impact touches virtually all businesses, regardless of geography or industry.

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:

In its recent decision in Rodriguez v. Federal Deposit Insurance Corp., No. 18–1269 (Sup. Ct. Feb. 25, 2020), the Supreme Court held that federal courts may not apply the federal common law “Bob Richards Rule” to determine who owns a tax refund when a parent holding company files a tax return but a subsidiary generated the losses giving rise to the refund. Instead, the court should look to applicable state law.

General Legal Background

On January 17, 2020, Justice Romaine of the Alberta Court of Queen’s Bench found that the Alberta Securities Commission’s (the “ASC”) administrative penalties against Theodor Hennig (“Hennig”) survived Hennig’s discharge in bankruptcy. This decision marks the first time a Canadian court has considered securities regulatory penalties within the context of subsection 178(1) of the Bankruptcy and Insolvency Act (the “BIA”).

The Bottom Line

In Whirlpool Corp. v. Wells Fargo Bank (In re hhgregg Inc.), Case No. 18-3363 (7th Cir. Feb. 11, 2020), the Seventh Circuit held that a trade creditor’s later-in-time reclamation claim was subordinate to lenders’ pre-petition and debtor-in-possession (“DIP”) financing liens. The Seventh Circuit found that Sction 546(c) of the Bankruptcy Code creates a “federal priority rule,” making clear that a reclamation claim is subordinate to prior rights of a secured creditor.

What Happened?