Herrick Restructuring Review

Belk Inc., a national privately-owned department store chain, just completed a $450 million debt restructuring in less than 24 hours! U.S. Bankruptcy Judge Marvin Isgur confirmed the plan the morning of the First Day Hearing despite the U.S. Trustee’s concerns about adequate notice. The Debtors’ prepackaged plan became effective hours after it was confirmed by the Court. Belk argued that the plan must be confirmed quickly because the company had no cash reserves and no…
Earlier this month, three student loan borrowers filed an involuntary Chapter 11 petition under 11 U.S.C. § 303(b)(1) for Navient Solutions LLC, a student loan servicer. Three or more entities who each hold a claim against an involuntary debtor can file an involuntary bankruptcy petition on that debtor’s behalf if each claim is neither a contingent liability nor the subject of a bona fide dispute as to liability or amount. The borrowers alleged that Navient…
When Congress passed the Small Business Reorganization Act (“SBRA”) in August 2019, we lived in a different world. The SBRA added a “Subchapter V” to the Bankruptcy Code for small business debtors, responding to longstanding criticism of the Bankruptcy Code’s costs and complexities on small businesses trying to reorganize. The SBRA became effective exactly one year ago, on February 19, 2020, and when many businesses in the United States shut their doors in March 2020,…
Greylock Capital Associates, LLC, a New York-based hedge fund founded in 2004, recently filed for chapter 11 protection under subchapter V for small businesses. Assets under management for Greylock have halved since 2017 and the hedge fund has cut its staff from 21 people to just nine now. Greylock filed to reject its $100,000 per month Madison Avenue lease that the hedge fund no longer needs. Greylock leased the 11,400 square foot premises in 2014,…
On January 28, Judge David Jones of the Bankruptcy Court for the Southern District of Texas sanctioned BP after finding that its conduct in an arbitration proceeding involving the Seadrill debtors amounted to a “willful, knowing, and intentional” violation of the Bankruptcy Code’s automatic stay provisions. Judge Jones also sanctioned BP by awarding Seadrill their attorneys’ fees and costs in bringing the motion. Seadrill brought an emergency motion to enforce the automatic stay pursuant to…
The Outlook A recent string of high-visibility hotel chapter 11 filings  has led investors and lenders to wonder what to expect for 2021. Recent filings include: Martinique Hotel, a 165-key property in Brooklyn – September 2020 Tillary Hotel, Brooklyn, a 174-key boutique property in Brooklyn – December 2020 Holiday Inn Resort Orlando Suites, a 777-key property in Orlando, Florida – January 2021 Wardman Park Hotel, a 1,152-key property in Washington, D.C. – January 2021 Eagle…
On January 15, 2021, the Supreme Court unanimously ruled in City of Chicago v. Fulton that a secured party in possession of a debtor’s collateral does not violate the automatic stay by passively retaining possession after a debtor commences a bankruptcy case. When a debtor files a bankruptcy case, the Bankruptcy Code protects the debtor by imposing an automatic stay on efforts to collect prepetition debts or “any act . . . to exercise control…
Herrick congratulates its Restructuring & Finance Litigation Group on the success it has enjoyed over the last two years. The team, which now has 18 members and counting, has grown substantially while taking on a variety of complex litigation matters and Chapter 11 Restructurings. Below is a small sampling of our recent work. We are very grateful to our clients that have entrusted us with such important matters, and we wish everyone a happy and safe holiday…
Introduction In In re VP Williams Trans, LLC,[1] Judge Michael Wiles of the United States Bankruptcy Court for the Southern District of New York confirmed that a secured creditor may make an election under section 1111(b) of the United States Bankruptcy Code (the “Bankruptcy Code”) in a proceeding under subchapter V of the Bankruptcy Code for small business debtors. Judge Wiles’s decision appears to be the first decision on this issue in this Circuit since…
On August 11, 2020, the Second Circuit addressed the long-standing question of whether flip clauses are enforceable in bankruptcy. Affirming a Southern District of New York decision, the Court found in Lehman Brothers Special Financing Inc. v. Bank of America N.A. that flip clauses are protected under the safe harbor and therefore enforceable in bankruptcy.[1] Investors should take comfort that this decision puts the final nail in the coffin of the earlier controversial decisions in the…