Business Bankruptcy and Restructuring: 2015/2016
by | posted in: Bankruptcy Administration and Jurisdiction | 0

By Harold S. Novikoff, et al., Wachtell, Lipton, Rosen & Katz

Prior to 2015, corporate defaults and bankruptcy filings were at relatively low levels, amid continuing low interest rates and well-performing credit markets.

In 2015, those trends began to reverse.  There were 75 chapter 11 filings in 2015 involving debt of $100 million or more, the highest number since 2010.  During the second half of the year, credit and commodity markets proved increasingly volatile.  In addition, near the end of the year, several investment funds specializing in high-yield debt suspended redemptions or announced liquidations or closings.

Looking forward, we expect many of the trends from 2015 to continue.  In particular, low commodity prices will continue to create a challenging environment in the oil and gas and related sectors.  Retailers will also face pressure, including from internet shopping.  Faced with market volatility and the high costs of bankruptcy, we expect distressed borrowers to continue pursuing out-of-court strategies, including exchange offers, bespoke financing arrangements and equity capital infusions.

In this memo, we discuss several important developments and themes from 2015, as well as expectations for the year ahead.  Among other things, the memo discusses issues regarding secured creditor cramdown, the Trust Indenture Act, Puerto Rico and extraterritorial reach of the Bankruptcy Code.

The full memo is available here.

Supreme Court Permits Bankruptcy Courts to Issue Final Judgments with Parties’ Consent
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By Harold S. Novikoff, Douglas K. Mayer, Ian Boczko, Emil A. Kleinhaus, and Alexander B. Lees of Wachtell, Lipton, Rosen & Katz

The Supreme Court’s latest decision regarding the power of bankruptcy judges to resolve claims between bankruptcy estates and their creditors is Wellness International Network, Ltd. v. Sharif, handed down on May 26, 2015. In its landmark 2011 ruling in Stern v. Marshall, the Court held that bankruptcy judges have limited authority under Article III of the Constitution to determine claims asserted by an estate against creditors. However, Stern left open the question, which has split lower courts, whether parties can nonetheless consent to bankruptcy court adjudication. In Wellness, the Supreme Court held that bankruptcy litigants may waive Article III rights, and suggested that parties may forfeit untimely objections to a bankruptcy court’s lack of authority.

For a fuller analysis and summary, click here for our memo on Wellness.