Bankruptcy is a formal process geared toward preserving stakeholder value. Often, the proceedings include negotiations between stakeholders that are arduous, time-consuming and expensive. Positioning the company for healthy and sustainable growth is often viewed as a postemergence priority, as companies naturally prioritize the near-term financial realities threatening their very survival.
Following are this week’s summaries of the Court of Appeal for Ontario for the week of November 14, 2022.
The farming and agricultural industry has been dealing with financial challenges even before the pandemic. Those who were in financial jeopardy before the shutdown are forced to rely on taking on even more debt now just to survive. Currently, the sum of debt across the farming sector amounts to a staggering $496 billion according to the USDA.
Crypto investors were dealt another blow on November 11 when FTX, the world’s second-largest cryptocurrency exchange, filed for chapter 11 bankruptcy relief in the District of Delaware, along with more than 130 related companies and affiliates. The bankruptcy was spawned by liquidity issues brought on by the sudden collapse in value of FTX’s crypto assets. Starting on November 6, customers simultaneously attempted to withdraw their funds and assets from the exchange, causing a situation akin to a classic bank run that led to an estimated $32 billion in value quickly evaporating.
Layoffs often accompany corporate bankruptcy, and employers should be aware of the legal obligations that impact mass layoffs and plant closures. Most notably, the federal WARN Act requires employers to notify the workforce of a mass layoff, a temporary shutdown, or a closure of all or part of a business.
Employers that fail to provide adequate notice could be on the hook for damages of back pay and benefits-related compensation per employee for each day the company violated the WARN Act (up to 60 days).
How did we get here?
The crypto markets were rocked again last week by the collapse and bankruptcy of FTX and Alameda Research. Within a few short days, Sam Bankman-Fried (SBF) and his companies went from a stabilizing force for markets and acting as an industry leader to causing one of the greatest disruptions in digital asset market history.
Bankruptcy is a formal process geared toward preserving stakeholder value. Often, the proceedings include negotiations between stakeholders that are arduous, time-consuming and expensive. Positioning the company for healthy and sustainable growth is often viewed as a post- emergence priority, as companies naturally prioritize the near-term financial realities threatening their very survival.
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).