Leveraged loans continue to be a topic of interest in the current environment, particularly when they are pooled and securitized as collateralized loan obligations. A recent decision sheds light on whether and when leveraged loans and similar instruments may be classified as securities and, therefore, be subject to securities laws.

As the COVID-19 pandemic continues to disrupt businesses and markets, and companies begin to look to bankruptcy courts for relief from the resulting liquidity and operational distress, the issue of creditor and shareholder “blocking rights” seems likely to become an important topic as parties attempt to protect their investments.

On May 1, 2020, in connection with the bankruptcy sale of Dean Foods Company (“Dean Foods”), the Department of Justice Antitrust Division required divestiture of certain Dean Foods assets by Dairy Farmers of America Inc. (“DFA”). DFA and Prairie Farms Dairy Inc. (“Prairie Farms”) were acquiring fluid milk processing plants from Dean Foods.

The question whether a counter claim filed against a Corporate Debtor is liable to be stayed during moratorium has been considered by the Courts/NCLT/NCLAT time and again. Since its inception, the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as the “Code”) has been a hotbed of discussions and debates amongst the legal experts. Under the Code, the concept of moratorium is envisaged under Section 13 and 14 and provides for a time period within which the following against the Corporate Debtor are prohibited:

With courts and government agencies around the world enacting emergency measures in response to the Covid-19 pandemic – ranging from complete shutdowns to delays and limitations – advancing the ball in dispute resolution is more challenging than ever. Because fraud investigations and complex asset recovery matters are typically managed by litigation counsel and often follow litigated claims, clients have a tendency to see the effort through a litigation lens.

INTRODUCTION:

The Insolvency and Bankruptcy Code, 2016 (‘Code’) was enacted by the Parliament with the aim to provide and revamp the framework for insolvency resolution in India in a time bound manner and for the promotion of entrepreneurship, credit availability and balancing of different interests of each and every stakeholder of a Company.

In a recent decision addressing valuation issues, the First Circuit has issued an important reminder – and warning – to creditors seeking to establish a secured claim in settlement proceeds based on a security interest in the settled claim. In short, the key lesson for would-be secured creditors is this – the value of a claim is not equal to the value of damages!

The global COVID-19 pandemic has created uncertainty around the planned deal-making activities of many middle market private equity funds. However, this environment also creates significant opportunity to provide investment and financing to companies that find themselves in distressed circumstances.

Background

As many traditional private company buyers take a “wait and see” approach to dealmaking, pausing or cancelling their active transactions, many are scanning the horizons for new opportunities outside of their traditional comfort zones. In addition to scoping targets in COVID-19–relevant industries, many are looking for unique value propositions and approaching historically healthy and stable targets that are experiencing distress during the pandemic.

President Trump signed the Small Business Reorganization Act of 2019 (the “SBRA”) into law in August of last year and it became effective on February 20, 2020. The SBRA amended the U.S. Bankruptcy Code and is designed to simplify and shorten the reorganization process for “small businesses” and to make the entire process more cost effective. At the same time that the SBRA was coming online, the U.S. economy experienced a severe downturn as a result of the COVID-19 pandemic.