The statutory language is clear. As of a bankruptcy petition’s filing date, the automatic stay of section 362 constricts many a creditor and bars many an action. The broad scope of section 362(a)(1) proscribes “the commencement or continuation ...

Turmoil in the tech ecosystem and escalating sentiment that a recession in the U.S. might occur in the near-term, indicate that startups, their lenders, and investors may soon confront extreme financial challenges – and will force all stakeholders in a troubled venture to consider strategic options. Distressed startups raise a unique set of legal issues that should be considered and addressed by their stakeholders in connection with any strategic transaction. Here are a few:

Since 1993, decisions out of the U.S. Bankruptcy Court for the Southern District of New York consistently adopted the aggregate “rent approach” for calculating lease rejection damages in bankruptcy proceedings. But in Bankruptcy Judge Wiles’ recent decision in In re Cortlandt Liquidating LLC, he departed from the “rent approach” in favor of the “time approach,” which is based on the time remaining under the lease rather than factoring in the total or aggregate rent still owed under the lease.

When can a municipality declare bankruptcy under chapter 9 of the Bankruptcy Code? An issue explored the headline-grabbing chapter 9 case of Detroit, that’s the question illuminated by a decision dealing with the travails of Chester, Pennsylvania, issued by the United States Bankruptcy Court for the Eastern District of Pennsylvania (“Bankruptcy Court”) on March 14, 2023.

Chester’s Long Road to Insolvency

Background

On March 22, 2023, the U.S. District Court for the Eastern District of Virginia (Court) granted the Federal Energy Regulatory Commission’s (FERC) Motion for Default Judgment and entered a default judgment against Powhatan Energy Fund, LLC (Powhatan Energy Fund). The Court awarded FERC $3,465,108 in disgorgement and $16,800,000 in civil penalties.

A chapter 11 plan may be modified after votes have been solicited on the plan, but prior to confirmation, without providing creditors and interest holders with an amended disclosure statement and another opportunity to vote on the modified plan, provided, among other things, that the modifications do not adversely affect creditors or interest holders who previously voted to accept the plan.

A handful of recent high-profile court rulings have considered whether a chapter 11 debtor is obligated to pay postpetition, pre-effective date interest ("pendency interest") to unsecured creditors to render their claims "unimpaired" under a chapter 11 plan in accordance with the pre-Bankruptcy Code common law "solvent-debtor" exception requiring a solvent debtor to pay pendency interest to unsecured creditors. The U.S. Court of Appeals for the Second Circuit weighed in on this question in In re LATAM Airlines Grp. S.A., 55 F.4th 377 (2d Cir. 2022).

Like debtors, bankruptcy trustees, official committees, examiners, and estate-compensated professionals, foreign representatives in chapter 15 cases have statutory reporting obligations to the bankruptcy court and other stakeholders as required by the plain language of the Bankruptcy Code. Such duties include the obligation to keep the U.S. bankruptcy court promptly informed of changes in either the status of the debtor's foreign bankruptcy case or the status of the foreign representative's appointment in that case. Furthermore, chapter 15 provides a U.S.

As the economic headwinds indicate that borrowers will continue to face financial pressures in 2023 and beyond, lenders are seeking ways to exercise more leverage as “covenant-lite” facilities prevail. Material adverse change clauses in finance documents UK and US perspective By Olga Galazoula, Jacques McChesney and Charlotte Harvey 4 FUNDS INSIDER FUNDS INSIDER 5 The event relied upon by the lender to enforce this clause was the making of an arbitration award that could potentially result in significant damages being awarded against the borrower.

This entry is part of Nelson Mullins’s ongoing “Bankruptcy Basics” blog series that is intended to address foundational aspects of bankruptcy for new and non-bankruptcy practitioners and professionals. This entry will discuss the general structure of bankruptcy cases and the differences between “adversary proceedings” and “contested matters.”