Business Restructuring Review

Business Restructuring Review | Vol. 21 No. 2 | March–April 2022

Message from the Business Restructuring & Reorganization Practice Leader 

In the 20 years since Jones Day launched the Business Restructuring Review as a platform for keeping clients and friends informed of significant developments in business bankruptcy, restructuring, and related areas, the world has faced a series of challenges that have profoundly changed the way that we look at almost everything. Bankruptcy and restructuring is no exception. 

The bankruptcy and restructuring landscape has shifted during the last two decades in ways that might have been difficult to imagine at the turn of the millennium. The rise of private capital and the market shift to privately held companies has fundamentally changed the tenor of restructurings. Out-of-court restructurings have largely supplanted "free fall" chapter 11 cases, and chapter 11 itself now usually features asset sales and pre-packaged or pre-negotiated bankruptcies by which companies can sometimes obtain confirmation of comprehensive restructuring plans in mere days rather than months or years. Restructuring has more frequently become a global phenomenon, with an explosion of cross-border cases and enactment of laws in many countries designed to harmonize and coordinate cross-border proceedings. 

These developments demand creative solutions, and we at Jones Day are at the forefront in innovating to address and anticipate the needs of our clients. Finally, although much has changed in bankruptcy and restructuring in recent years, our dedication to providing our clients and friends with incisive, informative, and timely analysis of ongoing developments has not. We look forward to our next 20 years of interaction with you.

Heather Lennox

Lawyer Spotlight: Heather Lennox

Heather Lennox, a partner in the Cleveland and New York offices, serves as Global Practice Leader of the Firm's Business Restructuring & Reorganization ("BRR") Practice, effective January 2022.

Heather has been a partner in the Firm's BRR Practice since 2002 and has led some of the most important restructuring cases in the United States over the past two decades, including work on behalf of the City of Detroit, Peabody Energy, Hostess Brands, and FTD. She is a member of the National Bankruptcy Conference, which advises Congress on national bankruptcy policy, and a Fellow in the American College of Bankruptcy. She served as Partner-in-Charge of the Firm's Cleveland Office from 2016 to 2022. 

Heather has been named a "Dealmaker of the Year" by The American Lawyer and is recognized as one of the nation's leading lawyers by legal directories; she also has earned top rankings for many years running in Chambers, Best Lawyers in America, IFLR1000, and Lawdragon 500 Leading Global Restructuring & Insolvency Lawyers. In 2020, Heather was named to Cleveland Magazine's "Cleveland 500" list.

"Heather joined Jones Day as an associate in Cleveland in 1992 and has spent her entire exceptionally successful legal career as a member of our Firm," says Kevyn Orr, Partner-in-Charge of the U.S. Region. "Through her leadership on numerous high-profile restructurings, she has become nationally recognized for her excellence as a bankruptcy lawyer. She is rooted in Jones Day's culture, has been a great leader of the Firm's Cleveland Office as its Partner-in-Charge and in other roles, and will be an excellent Practice Leader."

Heather succeeds Bruce Bennett, who has led Jones Day's BRR Practice since 2016, and will continue to advise clients as a partner in the practice.

In This Issue:

Modification of Secured Loan under Cram-Down Chapter 11 Plan Warranted Due to Plan Feasibility Threat 

In In re Ocean View Motel, LLC, 2022 WL 243213 (Bankr. D.N.J. Jan. 25, 2022), the U.S. Bankruptcy Court for the District of New Jersey ruled that a chapter 11 plan could be confirmed over a secured lender's objection even though a new secured note given to the lender eliminated his prepetition contractual right to file a deed in lieu of foreclosure in the event of the debtor's default. According to the court, the terms of the new note, which was secured by collateral valued significantly greater than the amount of the debt, more than satisfied the Bankruptcy Code's minimum requirements for cram-down confirmation, and if not eliminated, the deed in lieu of foreclosure provision threatened the plan's feasibility and the debtor's prospects for a successful reorganization. [read more …]

Hertz Bankruptcy Court Weighs In on Make-Whole Premiums, Solvent-Debtor Exception and Pendency Interest

In In re The Hertz Corp., 2021 WL 6068390 (Bankr. D. Del. Dec. 22, 2021), the U.S. Bankruptcy Court for the District of Delaware dismissed in part claims asserted by unsecured noteholders for make-whole premiums and pendency interest. In so ruling, the court held that: (i) a make-whole premium was due under the terms of one, but not the other, of two note indentures; (ii) the court would not discount the possibility that the make-whole premiums could be disallowed as the economic equivalent of unmatured interest, but it lacked sufficient evidence to make that determination; (iii) even if make-whole premium claims were disallowed as unmatured interest, such claims would be impaired by the Bankruptcy Code, rather than by the debtors' chapter 11 plan; (iv) the pre-Bankruptcy Code "solvent debtor" exception obligating a solvent debtor to pay interest on unsecured claims only partially survived enactment of the Bankruptcy Code; and (v) the appropriate rate of pendency interest under the "solvent debtor" exception is the federal judgment rate rather than the contract rate. [read more …]

Confirmation Denied: Chapter 11 Plan Did Not Satisfy New Value Exception to Absolute Priority Rule Without Market Testing

In In re Platinum Corral, LLC, 2022 WL 127431 (Bankr. E.D.N.C. Jan. 13, 2022), the U.S. Bankruptcy Court for the Eastern District of North Carolina applied the Bankruptcy Code's "cram-down" confirmation requirements in denying confirmation of a chapter 11 plan under which one of the debtor's existing equity holders would receive 100% of the new equity in the reorganized company in exchange for cancellation of a prepetition unsecured "loan" and a $100,000 cash infusion. According to the court, one of the insider's loans was properly characterized as a capital infusion and the plan violated the "absolute priority rule" because the old owner, whose claims were subordinate to other unsecured claims, would receive value under the plan without paying the more senior dissenting class of unsecured claims in full. The court also found that the owner's promised $100,000 cash infusion did not satisfy the "new value exception" to the absolute priority rule because the value of the new equity to be distributed to him under the plan had not been market tested. [read more …] 

Cross-Border Bankruptcy Update: Bad Faith Not a Basis for Denying Chapter 15 Recognition

In In re Black Gold S.A.R.L., 2022 WL 488438 (B.A.P. 9th Cir. Feb. 17, 2022), a bankruptcy appellate panel for the Ninth Circuit ("BAP") reversed a bankruptcy court order denying chapter 15 recognition of a Monaco bankruptcy proceeding. The bankruptcy court had concluded that the petition was inconsistent with the objectives of chapter 15 due to the debtor's bad faith conduct in attempting to evade payment of a judgment and shield its principals from tort liability. According to the BAP, however, once the Bankruptcy Code's requirements for chapter 15 recognition are satisfied, recognition is mandatory unless it would be "manifestly contrary" to U.S. public policy—a threshold that was not met by the allegations of bad faith. [read more …]

U.S. Supreme Court Bankruptcy Roundup

The Supreme Court recently agreed to review an appeal concerning the constitutionality of a 2018 increase in the quarterly fees levied in chapter 11 cases by the Office of the U.S. Trustee but declined to consider appeals addressing: (i) whether the fraudulent intent of the senior management of the Tribune Company could be imputed to the company for purposes of litigation seeking to avoid Tribune's 2007 leveraged buyout as an actual fraudulent transfer; (ii) whether "inquiry notice," rather than "willful blindness," is the proper standard for pleading a lack of good faith in fraudulent transfer actions commenced as part of a stockbroker liquidation under the Securities Investor Protection Act ("SIPA"), and whether the defendants, rather than the SIPA trustee, bears the burden of pleading on the issue of good faith; and (iii) whether discovery orders entered in a chapter 15 case are immediately appealable. [read more …]


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