Australian satellite-based IoT startup Sky and Space Global Ltd. filed for Voluntary Administration in Australia, the equivalent of a Chapter 11 bankruptcy in the United States. April 13 – OneWeb Global Ltd. (OneWeb), which filed for Chapter 11 bankruptcy protection in the United States last month, announced that it secured a commitment from its largest secured creditor, SoftBank Group Corp., to provide up to $75m in debtor-in-possession (DIP) financing to fund its ongoing operations during the bankruptcy proceeding. The DIP financing proposal was approved
The novel coronavirus COVID-19 pandemic has the potential to impact the U.S. economy at a level which could ultimately rival or surpass the global financial crisis of 2009. Reports from commercial landlords suggest that a majority of retail and restaurant tenants, perhaps as many as 75%, failed to make payments of rent due on April 1st.
Historically, many companies seeking bankruptcy protection have attempted to streamline and shorten their Chapter 11 cases to reduce cost and risk.1 But the COVID-19 pandemic may be disrupting that trend, especially in industries that rely on in-person shopping or dining or are otherwise disproportionately affected by the economic slowdown. Across the country, many businesses are seeing revenues dry up as consumers stay home, following concerted governmental and social efforts to “flatten the curve” of the novel coronavirus’s transmission.2
Supply chain finance products have a well-deserved reputation of being fairly low risk propositions. The majority of facilities are uncommitted, exposures are typically short-term and many counterparties are highly rated and well capitalized.
In In re Tribune Co. Fraudulent Conveyance Litig., 946 F.3d 66 (2d Cir. 2019), the U.S. Court of Appeals for the Second Circuit reaffirmed, notwithstanding the U.S. Supreme Court's ruling in Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883, 200 L. Ed. 2d 183 (2018), its 2016 decision that creditors' state law fraudulent transfer claims arising from the 2007 leveraged buyout ("LBO") of Tribune Co. ("Tribune") were preempted by the safe harbor for certain securities, commodities, or forward contract payments set forth in section 546(e) of the Bankruptcy Code.
Many companies are currently experiencing dramatic reductions in revenues due to the COVID-19 pandemic. Such companies (along with their investors and creditors) are justifiably concerned that they may need to restructure and even potentially seek bankruptcy protection. Below is a list of items that any potentially distressed company should attend to as soon as possible to increase the likelihood of obtaining the most favorable outcome under the circumstances.
I. Focus on Cash
As the impact of COVID-19 is felt across the globe, many airlines have grounded their fleet, ceased operating flights, and are potentially in breach of any financial covenants that they may have in their debt or lease documents, if not already in technical insolvency.
If an airline does go into insolvency, what should banks and lessors do to protect their assets? What issues, practical and legal, should they be aware of?
The Warning Signs
A new trend is brewing in bankruptcy courts: debtors are increasingly able to use the courts’ general equitable powers for assistance in weathering the current economic storm. These pandemic-related equitable arguments may significantly impact the marketplace—positively or negatively depending on your position—specifically as it relates to lease performance and also in general.
In light of the ongoing economic impacts of the COVID-19 pandemic, and although Chapter 11 of the U.S. Bankruptcy Code pertains to many industries, there are certain real estate related provisions of which owners and tenants should remain particularly aware in planning strategies to cope with the fallout from the current health crisis.
To raise awareness in that regard, the following is a general summary of some of the more critical provisions of the Code.
Single Asset Real Estate Entity
The sudden fall of the oil market is already wreaking havoc on companies, and recent bankruptcy filings may be just the beginning.