Private-Equity Firms Are Finding New Ways to Curb Creditor Power​​​

Private-equity firms are finding new ways to keep a tighter grip on portfolio companies if they get into financial distress, Bloomberg News reported. They’re adding new provisions to debt documents to curb creditor voting rights, and are also pushing back against so-called cooperation agreements between lenders. These proactive measures by buyout firms come as they strive to maintain the power they’ve been gaining over the past decade as lender protections weakened. Blackstone Inc. has at least twice added terms in recent debt sales by portfolio companies to limit the voting rights of any single holder in future credit decisions, according to a person familiar with the matter and documents seen by Bloomberg News. The provisions — added to debt issued by software company Ellucian Holdings Inc. and heating and ventilation firm Copeland Lp — cap the rights of individual debtholders at 20%, no matter the size of their stake, while allowing the borrowers to increase that voting cap for specific creditors. The result is to give the companies and their private-equity owners power to cherry-pick which investors will have a bigger say in future votes. Read more.

Companies Issue Debt in Fast-Growing Hybrid Bond Market, Citing Ratings Benefits​​​

More companies are paying up when they sell debt to protect their credit ratings and preserve their flexibility down the road. Hybrid bonds are a type of debt issued by investment-grade companies, primarily energy and utility companies, that include a few defining features, such as an option to defer coupon payments for several years, the Wall Street Journal reported. Such bonds carry a higher coupon, or interest payment, than traditional bond issuances because they are subordinated, meaning they rank below senior debt in the event of a default. The higher interest rate makes the debt more expensive to issue — and more attractive to some investors. For some finance chiefs, the trade-off of paying a higher coupon is worth it because of how the bonds are treated by credit-ratings firms. All three major ratings firms provide equity credit for hybrid issuances, largely treating them as if they were made up of 50% equity — a boon to the issuer’s credit ratios and ratings. What makes the bonds equity-like is the option for companies to defer coupon payments, as well as the bonds’ ability to absorb losses in the event of a bankruptcy. (Subscription required.) Read more.

Subchapter V Experiences to Share? ABI Wants to Hear from You!

ABI is continuing its study of Subchapter V, and it needs your help! We are particularly interested in learning more about the real-world impact of Subchapter V. So our question is, do you have a story about a distressed business or creditor who has used or benefited from the subchapter? If so, could that case still happen under the lower debt cap for Subchapter V debtors? Any and all responses are welcome. Submit your story at https://abi.org/subvstories.
 

Senators Push for 10 Percent Cap on Credit Card Interest​​​

Sens. Josh Hawley (R-Mo.) and Bernie Sanders (I-Vt.) introduced a bill on Tuesday seeking to cap credit card interest rates at 10 percent, The Hill reported. “Credit card interest rates are out of control. Rates have DOUBLED in recent years. In 2022 alone, credit cards charged Americans $105 billion in interest,” Hawley wrote in a post on the social platform X. “Today @BernieSanders and I are teaming up to introduce a 10% cap on interest rates — just like @realDonaldTrump proposed,” he continued. President Trump first said he backed a cap at a September campaign rally. Hawley and Sanders said that credit card interest rates have become “exploitative,” citing a recent Forbes report that found that the average credit card interest rate is 28.6 percent, even though banks are able to borrow money from the Federal Reserve at less than 4.5 percent. Their proposed cap would be in effect for five years. Read more.

Don't Miss Tuesday's "Five Issues in Subchapter V for 2025" ABI/NCBJ Webinar!​​​

An expert panel will join Tuesday's "Behind the Bench" webinar presented by ABI/NCBJ to offer insights and experiences on where we have been and, perhaps more importantly, where we are heading in subchapter V cases. The panel will focus on their “top five” issues for 2025. Join us on February 11th to continue our collective learning about the subchapter V process and to see if your top five issues make the list! Register for free!

Crypto Industry Looks to New SEC Task Force for Quick Action in Its Favor​​​

Many in the cryptocurrency industry are optimistic that a new task force formed by the U.S. securities regulator will provide a road map for growth in the industry that contrasts with the regulation-by-enforcement approach under the Biden administration, the Wall Street Journal reported. The Securities and Exchange Commission, under acting Chairman Mark Uyeda, said on Jan. 21 it is launching a task force “dedicated to developing a comprehensive and clear regulatory framework for crypto assets.” Republican SEC Commissioner Hester Peirce, known among crypto enthusiasts as “CryptoMom,” is leading the task force. The regulator announced a few more adviser appointments to the task force on Tuesday. The formation of the task force, announced a day after President Trump’s inauguration, was welcomed by the virtual currency industry, which has been eagerly awaiting moves by Trump to bring it greater legitimacy. Crypto policy advisers are already putting out proposals for what the SEC should first tackle under its existing jurisdiction and are hoping the regulator will act right away without waiting for Congress to pass legislation or confirm Trump’s nominee for SEC chairman, Paul Atkins. (Subscription required.) Read more.

Fed Releases 2025 Bank Stress Test Scenarios​​​

The Federal Reserve announced on Wednesday that it would be testing big banks against heightened stress in commercial and residential real estate markets as part of the U.S. central bank's annual stress tests, Reuters reported. The Fed added that the annual exams would include an additional exploratory component that would examine shocks in the non-bank sector, as well as the impact of hypothetical shocks of numerous large hedge funds on big bank finances. The new scenarios largely track with prior year scenarios from the Fed that examine how large banks are situated to weather severe economic downturns, and in turn dictate how much capital they must set aside against potential losses. In the 2025 version, U.S. unemployment would jump 5.9% to 10%, alongside a 33% decline in home prices and a 30% decline in commercial real estate. Large banks with significant trading operations are also tested against the failure of their largest counterparty. Read more.

U.S. Applications for Jobless Benefits Rose to 219,000 Last Week, but Layoffs Remain Relatively Low​​​

More Americans filed unemployment claims last week, but the labor market remains healthy and there are still relatively few layoffs, the Associated Press reported. U.S. applications for jobless benefits rose by 11,000 to 219,000 for the week ending February 1, the Labor Department said Thursday. Analysts were projecting only 213,000 new applications. The four-week average, which evens out some of the weekly volatility, rose by 4,000 to 216,750. While the labor market did start to show some minor signs of weakness last year, jobs remain plentiful and layoffs historically low. Last month, the Labor Department reported that job growth in December surged and unemployment fell. Employers added 256,000 jobs in the final month of 2024 and the unemployment rate ticked down to 4.1%. Read more.

Climate Change to Wipe Away $1.5 Trillion in U.S. Home Values, Study Says​​​

Climate change will cause a $1.47 trillion decline in U.S. home values by 2055, according to a new study from climate-research company First Street, the Wall Street Journal reported. Rising home-insurance costs and more homeowners spurning some risky neighborhoods will drive these declines, First Street said. The study is an attempt to quantify the economic risk that weather events such as hurricanes, drought and heat waves pose to many Americans’ biggest financial asset — their homes. Thousands of displaced Americans are currently contending with the fallout from recent natural disasters including this year’s wildfires in Los Angeles and hurricanes that ravaged the Southeast last fall. The relationship between climate change and home values has become a more urgent question as losses from storms, wildfires and other natural disasters are hitting new records. Climate change is making many of those events worse, scientists say, and more Americans have moved to disaster-prone areas in recent years, increasing the number of properties at risk. (Subscription required.) Read more.

Public Comment Period on Proposed Bankruptcy Amendments Closes on February 17​​​

The comment period is set to close on Feb. 17 for the Judicial Conference Committee on Rules of Practice and Procedure's proposed amendments to Bankruptcy Rules 1007, 3018, 5009, 9006, 9014 and 9017, new Rule 7043 and Official Form 410S1. For more information, including the text of the proposed amendments and supporting materials, please click here.

ABI Seeking Nominations for "Asset Sale of the Year"​​​

ABI’s Asset Sales Committee is seeking nominations for its Seventh Annual ABI Asset Sale of the Year award. Any bankruptcy sale that closed between January 1 and December 31, 2024, and involved at least one professional who is a member of ABI’s Asset Sales Committee (free for ABI Members to join) is eligible. Nominations are due February 28; for more information about the award and submitting a nomination, please click here.

Applications Now Being Accepted for ABI’s Diversity Mentoring Program​​​

Applications are now being accepted for ABI’s Diversity Mentoring Program, hosted by our Diversity, Equity and Inclusion Committee to connect active or recently graduated business and law students with experienced insolvency professionals and ABI members who are offering professional development guidance. Throughout the program, mentors and mentees will meet bi-monthly to discuss a variety of topics with resources from ABI and members of the reorganization community, including judges, trustees, attorneys and accountants. For more information about the Diversity Mentorship Program and to apply to be a mentee for 2025-26, please visit ABI’s Diversity and Inclusion website at diversity.abi.org; applications are due February 24.

Tenth Circuit Accepting Applications for Bankruptcy Judge Vacancies in Utah​​​

The U.S. Court of Appeals for the Tenth Circuit seeks applications to fill two bankruptcy judgeships in the District of Utah. The positions are located in Salt Lake City. One will be available July 1, 2025. The other will be available Sept. 5, 2025. Before appointment, the selected applicants must successfully complete a background investigation. Bankruptcy judges are appointed to 14-year terms pursuant to 28 U.S.C. § 152. The current annual salary is $227,608. Go to https://ca10.uscourts.gov/hr/jobs to view the position requirements and download the application. The deadline for applications is Wednesday, February 12, 2025.

INSOL International Looking for Candidates to Fill CEO Vacancy​​​

INSOL International, a cross-border nonprofit organization and catalyst for a wide range of ancillary groups representing the judiciary, regulators, lenders and academics, is looking for candidates to fill its Chief Executive Officer (CEO) vacancy. The position will play a key role in shaping the future of INSOL International by implementing the organization’s strategy, delivering initiatives, and expanding its influence and membership. For more information on the position and to submit an application, please click here.

Access All Current ABI Titles Through ABI’s New Digital Book Subscription!​​​

One of the best collections of bankruptcy books is now available as an annual digital subscription! ABI’s bankruptcy library opens the door to a constantly evolving area of the law, and our books are continually being updated by top industry professionals. Auto-renewing annual subscriptions guarantee immediate access to this invaluable resource, which is comprised of fully searchable content that’s always available on any digital device. Convenient pricing plans for individual and institutional subscribers offer immediate and unlimited access to our entire digital library of books — nearly 100 treatises! Plus, you get advanced access to new and revised books as soon as they are published — all included in your annual subscription. Learn more!

Have an Idea for a Topic for an ABI Conference Session? Submit Your Proposal via ABI’s “Call for Abstracts” Page!​​​

ABI has launched an online portal for professionals to submit proposals for educational sessions at future ABI conferences. Submitters can describe their proposed topic, outline the session’s focus and learning goals, suggest speakers, and provide contact information via the portal’s detailed form. The portal can be accessed here.

All submissions will be reviewed by an internal Education Committee, which will contact the submitter to ask questions as needed and to discuss the status of the proposal. Submissions will be reviewed on a rolling basis.

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