Biden Approves $5.8 Billion in Additional Student Debt Cancellation​​​

The Biden administration continued its efforts to extend student debt relief today, erasing an additional $5.8 billion in federal loans for nearly 78,000 borrowers, including teachers, firefighters and others who largely work in the public sector, the New York Times reported. To date, the administration has canceled $143.6 billion in loans for nearly four million borrowers through various actions, fixes and federal relief programs. That’s the largest amount of student debt eliminated since the government began backing loans more than six decades ago, but it’s still far less than President Biden’s initial proposal, which would have canceled up to $400 billion in debt for 43 million borrowers but was blocked by the Supreme Court. The latest debt erasures apply to government and nonprofit employees in the Public Service Loan Forgiveness program, which can eliminate their balance after 120 payments. The P.S.L.F. program, which was plagued with administrative and other problems, has improved in recent years since the administration made a series of fixes. As of October 2021, more than 871,000 public service and nonprofit workers have received debt cancellations totaling $62.5 billion; before that, just 7,000 had reached forgiveness since the program was created more than 15 years ago. Read more.

Big Corporate Mergers Get Fresh Tax Scrutiny on Capitol Hill​​​

A progressive Democrat and a populist Republican are teaming up to attack big mergers, offering a new proposal that would remove a cornerstone of the corporate tax code and potentially reshape dealmaking, the Wall Street Journal reported. Sens. Sheldon Whitehouse (D-R.I.) and J.D. Vance (R-Ohio) want to eliminate companies’ ability to do tax-free mergers like the pending Capital One/Discover deal. Under their bill, shareholders who receive stock through such deals would owe capital-gains taxes immediately, instead of deferring those taxes until they sell their shares. The senators introduced the legislation on Thursday; it has exceptions for companies with annual revenue below $500 million. The Whitehouse-Vance legislation stands little chance of becoming law soon, given that Congress is struggling to pass a tax bill that a majority of lawmakers support. But the bill is a sign of political sentiment against corporate power that unites some Republicans and Democrats who are otherwise far apart on tax policy — and it is a rare attempt to address competition policy through the tax code. “Our bipartisan bill will end a massive tax giveaway for giant corporate mergers and get our government out of the business of subsidizing corporate consolidation,” Whitehouse said, arguing that mergers drive up consumers’ costs. Tax-free reorganizations have been part of U.S. law for a century, and there have been few, if any, serious proposals to eliminate them. They are a common structure for mergers, though not the only one that companies use. Tax-free reorganizations let companies merge in stock or asset transactions without forcing the companies or their shareholders to pay taxes. In addition to the Capital One deal, the senators list AT&T’s Time Warner deal and Canadian Pacific’s purchase of Kansas City Southern as examples of mergers that could have been affected had their bill been law. Under the proposal, shareholders in all-stock mergers would pay taxes on the difference between their shares’ value when they bought them and what they receive in the deal, rather than delaying taxes until they sell the new shares. Whitehouse and Vance describe their bill as removing a tax break, and it would make stock-for-stock deals similar to all-cash deals, which already trigger shareholder taxes. (Subscription required.) Read more.

Analysis: Private Credit’s Default Recovery Rates Are Worse than Its Biggest Rival​​​

The dangers of private credit firms overvaluing their own assets has become one of the booming $1.7 trillion industry’s most contentious topics in recent weeks, Bloomberg News reported. New data on how much money they expect to get back from defaulting borrowers will only add fuel to that fire. As the private credit industry has battled with investment bankers over the lucrative business of lending companies money, one of its biggest selling points has been that its tougher loan protections and one-to-one relations with borrowers would give it extra protection when those companies hit trouble. New analysis by KBRA Direct Lending Deals casts doubt on those assumptions. Looking at loans to companies that defaulted over the past year, the data shows that those made by private credit firms were valued at an average of 48 cents in the aftermath of the default, showing how much they’d expect to recover on each dollar lent. That’s worse than loans by bank-led syndicates, where the average value was 55 cents a month after default. The analysis also shows that direct lenders tend to be much more optimistic about their loans’ prospects in the months running up to a default, a finding that goes to the heart of the current debate about the wisdom of relying on private credit fund managers to “mark” their own loans. In the six months before a default, the average direct loan was valued at 76 cents, and 70 cents three months prior. For syndicated loans it was 67 cents and 61 cents, respectively. Read more.

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FDIC Draft Proposal: Bank Mergers Above $100 Billion to Get Extra Scrutiny​​​

Mergers that could result in banks with more than $100 billion in assets should expect heightened scrutiny from the U.S. Federal Deposit Insurance Corp., according to draft guidance the agency released today, Reuters reported. The FDIC's board of directors is poised to vote on the proposal today. If adopted, the proposal would update the agency's merger guidance for the first time in 16 years and put special emphasis on maintaining the stability of the banking sector, agency staff said ahead of the vote. The draft proposal, which offers a statement of principles rather than set procedures, says officials would also focus on other financial stability concerns, such as whether the resulting merged bank would cause the financial system to become more complex, and the extent of its cross-border activities. Following three of the largest-ever U.S. bank failures last year, lawmakers from both major parties have lambasted the FDIC's handling of subsequent mergers. Read more.

Applications for U.S. Unemployment Benefits Dip to 210,000​​​

The number of Americans signing up for unemployment benefits fell slightly last week, another sign that the labor market remains strong and most workers are enjoying extraordinary job security, the Associated Press reported. The Labor Department reported Thursday that jobless claims dipped by 2,000 to 210,000. The four-week average of claims, which smooths out week-to-week ups and downs, rose by 2,500 to 211,250. Overall, 1.8 million Americans were collecting unemployment benefits the week that ended March 9, up a modest 4,000 from the week before. Applications for unemployment benefits are viewed as a proxy for layoffs and a sign of where the job market is headed. Despite high-profile job cuts at tech companies such as Google parent Alphabet, eBay and Cisco Systems, overall layoffs remain below pre-pandemic levels. Read more.

Don't Miss Tuesday's ABI/NCBJ Behind the Bench Webinar: "Chapter 11 Tactics: Is That Coercion, or Just a Bankruptcy Thing?"​​​

Don't miss the latest in a webinar series hosted by ABI and the National Conference of Bankruptcy Judges, featuring Hon. David S. Jones (S.D.N.Y.), Hon. John Sherwood (D. N.J.), Hon. J. Kate Stickles (D. Del.) and Jamila Willis of DLA Piper LLP. Jordan Chavez of Haynes and Boone, LLP will moderate the panel, set to take place on Tuesday at 1:00 p.m. ET. The Behind the Bench webinar series is designed to keep both business and consumer practitioners up to date with the latest perspectives from the bankruptcy bench. Register today!

Get Your Copy of The Purdue Papers to access Amicus Briefs and Commentaries Related to Purdue Pharma Case!​​​

A petition by the U.S. Trustee regarding the case of Purdue Pharma L.P. is currently being considered by the U.S. Supreme Court. Regardless of how the Court rules, the case has already generated a mountain of commentary in the form of amicus briefs, petitions and other related background material. ABI, guided by editor David R. Kuney (who represented one group of amicus filers), has gathered together all of this material in a fully searchable form — more than 3,000 pages worth! This collection will be updated with the final Supreme Court decision — expected later in 2024 — as well as a final commentary by ABI Editor-at-Large Bill Rochelle, who writes Rochelle’s Daily Wire. This collection is an invaluable resource for anyone working in the area of third-party releases, either as a practitioner, an academic or just an interested party. Get your digital copy for only $25!

Applications for ABI’s 2024 “40 Under 40” Class Now Being Accepted Through June 30 ​​​

The ABI "40 Under 40" annual program continues to highlight the best up-and-comers in the industry. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Nominations and applications are due June 30. Click here for more information and to submit a nomination or application. 

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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