Interest rates remain high, and for many markets and asset classes, prices have yet to fall. However, there’s at least one way real estate investors can buy a property at the right price in this cycle: Distressed sales.
“It’s a main mechanism for price correction,” said Matthew Scoville, a New York-based attorney and partner at Hunton Andrews Kurth who has represented both lenders and real estate developers. In many cases, distressed sales allow investors to acquire properties that would otherwise not be available. “Opportunities are the name of the game,” he said.
Several relics of the 2008-2010 financial crisis have returned to the commercial real estate sector as distress in the market picks up and lenders and borrowers look for solutions to loans that are in or near default.
The Second Circuit released a new decision this week in Sears regarding bankruptcy valuation methodologies and the entitlement of second lien debt holders to adequate protection. Among other interesting aspects of the ruling, the Second Circuit affirmed the Bankruptcy Court’s adoption of a "net orderly liquidation value" for the debtors’ inventory as of the petition date (rather than looking to the actual values obtained by the debtors during the case).
For a decade or more, restructuring professionals have predicted the coming of a bankruptcy boom. This may be the year those predictions finally come true. Inflation, interest rates, supply chain issues, global conflict and domestic politics have created a challenging macro environment. At the same time, dry powder abounds, with new distressed debt funds cropping up daily. Will this result in a bankruptcy tidal wave, or an increase in workouts and distressed M&A? Perhaps all of the above.
In Pharmagona Limited v Taheri,(1) the High Court refused to seal and issue a contempt application as the breach, if it had occurred, was only technical, and it was therefore inappropriate for the application to succeed.
Facts
Background to the Restructuring Plan
The UK has introduced the Restructuring Plan; a new, flexible court supervised restructuring tool. The Restructuring Plan draws upon features of the existing Companies Act 2006 scheme of arrangement procedure (which remains available) but includes features which are new to the UK but similar to those under U.S. Chapter 11 bankruptcy proceedings.
HMRC clamping down on furlough fraud by companies in Danger Zone
The latest statistics show that over 11 million workers have been furloughed in the UK as part of the government's job retention scheme (that equates to 16% of the population or one in six people) and 41% of employers had staff furloughed. The scheme has so far cost the government over £40 billion and this figure will continue to rise until the end of September this year when the scheme is set to wind down.
What are the proposed changes to rules on transfer of ownership?
The key takeaway
The Law Commission’s proposed changes are likely to improve consumers’ odds of owning goods bought online in the event of retailer insolvency, even before they have left the retailer’s possession.
The background
In this chapter of our Annual Insurance Review 2021, we look at the main developments in 2020 and expected issues in 2021 for D&O.
Key developments in 2020
For D&O insurers, 2020 was all about the hardening market – with rates doubling in some cases and limits contracting – and the underlying causes of that.