Does Chapter 11 Still Work?

Corporate restructuring has recently experienced a significant transformation. Traditional business “rehabilitations” (sweeping and lengthy chapter 11 proceedings) have become truncated, and “pre-arranged” cases often follow a strategic liability-management exercise (LME). Jurisprudence that had long constrained debtor-in-possession (DIP) financing (e.g., the sub rosa plan doctrine) has seemingly lost its importance. In many cases, the creditors' committee — as well as the bankruptcy court — are boxed into restructuring support agreement (RSA) terms that are, in turn, embedded into DIP covenants, and those covenants often compel a particular (rightful or wrongful) case outcome. This panel evaluates whether chapter 11 still reliably delivers on its legislative purpose.