As witnessed repeatedly from countless national news sources, bankruptcy bulletins and scholarly articles, bankruptcies within the retail and restaurant industries have been booming. Within Fredrikson & Byron’s national practice alone, landlord and lessor clients found themselves wrapped up in many of these national bankruptcy cases, including those for CEC Entertainment, Inc. (better known as Chuck E. Cheese), Pier 1 Imports, Inc., and Vitamin OldCo Holdings, Inc., (f/k/a GNC Holdings, Inc.), amongst many others.

Numerous changes have been made to the Paycheck Protection Program (PPP) in recent months, primarily stemming from the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) signed into law in December 2020 as part of the overall Consolidated Appropriations Act, 2021, and related administrative rules and guidance issued by the Small Business Administration (SBA). In this article, we address frequently asked questions and guidance regarding the initial PPP loans taken out by Borrowers (First Draw Loans).

According to the U.S. Bureau of Labor Statistics, approximately 20 percent of new businesses fail during the first two years of being open, 45 percent during the first five years and 65 percent during the first 10 years. The unprecedented financial challenges of COVID-19 have increased the number of business failures and economists project that the number of failures will accelerate in the quarters ahead.

Prior to the COVID-19 pandemic, the Bankruptcy Code generally has been interpreted to require debtors to pay rent obligations on time under unassumed real property leases as those obligations arose post-filing and pre-rejection. This result was driven by 11 U.S.C. § 365(d)(3), which requires the debtor to “timely perform” all obligations until the lease is assumed or rejected, with one narrow exception. That exception permits the court to allow the debtor to extend the time of performance of any obligation within the first 60 days of the case but not beyond the 60-day period.

Insurance covering the representations and warranties of a seller in a purchase agreement (RWI) has become relatively commonplace in non-distressed M&A transactions. Insurance covering other specific contingent risks associated with a transaction, such as environment liability or tax liability or benefits, is also available. Less commonly, but with increasing frequency, these transaction insurance policies are being marketed and sold in transactions arising in bankruptcy and insolvency transactions.

Through the CARES Act and subsequent legislation, Congress provided up to $659 billion in potentially forgivable loans to businesses impacted by the COVID-19 pandemic.

Amid the throes of the COVID-19 pandemic, industries across the U.S. economy have been impacted in unprecedented ways. Small businesses in the service industry, including restaurants, continue to experience significant disruption in their operations and correspondingly their ability to generate cash flow and profits. Since the outbreak of the virus, restaurants have experienced the forced closure of their dining rooms due to government orders, leaving only those that could operate at reduced capacity through take-out or delivery services. Consequently, U.S.

Due to COVID-19 and its impact on the economy and markets, businesses are experiencing unprecedented disruption. This disruption ripples through supply-chains and affects businesses large and small. These financial challenges impair the ability of many businesses to meet their obligations, in particular to suppliers or trade vendors. Many of these businesses will be forced to restructure obligations to suppliers, with some having to seek bankruptcy protection.

Faced with the unprecedented challenge of responding to the COVID-19 crisis and its impact on the nation’s economy, Congress passed the Coronavirus Aid, Relief and Economic Security Act, commonly referred to as the CARES Act. The CARES Act includes several provisions designed to assist individuals and businesses dealing with this emerging economic catastrophe.