In the March 2025 edition of the Restructuring Department Bulletin, we highlight recent decisions and developments impacting the restructuring arena and share the latest news on the Paul, Weiss Restructuring Department.

• In one of the most high-profile and hotly-watched cases in the London restructuring market, on 18 February 2025, the English High Court approved the restructuring plan proposed by Thames Water.
• The Court gave permission to appeal the Court’s order to a group of challenging junior creditors, a subordinated creditor and Liberal Democrat MP Charlie Maynard, with the Court of Appeal due to sit from 11 to 13 March 2025.

Bankruptcy-remote LLC Agreement Did Not Impermissibly Restrict

LLC’s Right to File Bankruptcy

In re 301 W. North Ave., LLC, Case No. 24-02741 (Bankr. N.D. Ill.

Jan. 6, 2025), the Bankruptcy Court dismissed the chapter 11 case

of a Delaware limited liability company for “cause” under section

1112(b) of the Bankruptcy Code because the company had not been

properly authorized to file for chapter 11 relief. The court found that

the underlying LLC agreement prohibited the company from filing a

Paul, Weiss Named Chapter 11 Firm of the Year in Global Restructuring Review Awards

Global Restructuring Review (GRR) recognized Paul, Weiss as the “Chapter 11 Firm of the Year” in its 2024 GRR Awards, which honor the most impressive restructuring practices and individuals of the past year. The firm was recognized for its role advising in several major chapter 11 matters, including the restructurings of Hornblower, Lumileds, Revlon and Rite Aid, among others

Brian Hermann Discusses Chapter 11 Trends at Bankruptcy Conference

Situations Partner Kai Zeng in London Kai Zeng, who advises on cross-border restructurings and special situations matters, has joined the firm in London as a partner in the Restructuring Department and Finance and Hybrid Capital & Special Situations groups.

Kai advises sponsors, debtors, creditors and strategic investors on restructurings of stressed and distressed businesses, as well as hedge and credit funds, investments banks and private equity firms on their review and diligence of European investment opportunities in par, stressed and distressed transactions.

In most bankruptcies, the company decides to file for relief. In involuntary bankruptcies, creditors force the company into bankruptcy. Involuntary petitions are an extreme remedy, and therefore the requirements and standards to meet for filing such petitions are strictly construed and applied. If creditors meet the requirements under the Bankruptcy Code for filing an involuntary petition, it can serve as a powerful tool to use against a debtor.

Key Issues

Unlike traditional Chapter 11 bankruptcy cases, sometimes called "free fall" cases, where a debtor files for bankruptcy and determines its path out of bankruptcy over the course of the following months, some debtors enter into bankruptcy with a plan entirely (or mostly) drafted, with an emergence strategy already completed. In these cases, debtors enter bankruptcy with pre-packaged plans or pre-negotiated plans (sometimes called pre-arranged plans) ready to file on or just after their petition date.

In a bankruptcy case, a preference action1 is often asserted pursuant to Section 547 of the Bankruptcy Code against a creditor to claw back funds paid to the creditor in the 90 days prior to the bankruptcy. While the most common defenses to a preference action are the ordinary course of business defense2, the new value defense3, and the contemporaneous exchange for new value defense4, there are other defenses that a savvy creditor should consider to reduce or even eliminate preference liability.

Key Issues

Sales pursuant to Section 363 of the Bankruptcy Code have become commonplace in bankruptcy cases as a mechanism to liquidate a debtor's assets and maximize value for creditors. Selling the debtor's assets to a third party provides a new go-forward business partner for the debtor's vendors and customers, and likely provides continuity of jobs for the debtor's former employees. Due to the benefits associated with a sale of the debtor's assets, creditors or parties-in-interest may be under the misconception that they need not pay attention to the sale process.

Pursuant to Section 341 of Title 11 of the U.S. Code (the Bankruptcy Code), the U.S. Trustee is required to convene and preside over a meeting of the creditors of a debtor (the 341 Meeting). The purpose of the 341 Meeting is to examine the debtor's financial position and to confirm facts stated by the debtor in the bankruptcy filing. While creditors are not required to attend the 341 Meeting, creditors have an opportunity to examine the debtor and ask questions related to the debtor's financials and the bankruptcy case.