In this time of COVID-19, creditors and debtors alike have looked for ways to address the financial squeeze the pandemic has imposed on the global economy. On the one hand, debtors are likely to look for more time for their business operations to return to “normal.” On the other hand, creditors are likely to look for certainty of results in an otherwise uncertain time.
It may seem counterintuitive for banks and other lenders to provide loans to companies in bankruptcy, but they often do. All companies, especially those in bankruptcy, need liquidity to continue operating. Ensuring the availability of cash is one of the most important considerations in a chapter 11 reorganization, because debtors are often unable to reorganize without adequate cash flow.
This year has been like no other. With the rest of the world, ABI’s Secured Credit Committee was jilted by the speed at which our in-person conferences and activities came to a halt. At the same time, we marveled at how efficiently the Annual Spring Meeting was retooled for virtual happy hours, networking opportunities and webinars that have lasted through these trying months. Alas, our ASM panel prepared with the Claims Trading Committee, “Claims Traders: Sharks or Saints?,” was lost in the process, but in the early days of the pandemic, who knew what would come?
Throughout 2019, the retail industry continued to struggle as numerous retailers — from a variety of product and apparel categories — sought bankruptcy relief. Further, many retailers entered chapter 11 with an intent to liquidate all, or substantially all, of their assets quickly and efficiently. In doing so, debtors and secured lenders utilized standard practices seen across all industries, such as sale-related milestones in DIP orders, but also sought relief unique to the retail industry.
When asked whether a foreclosure sale can be avoided in bankruptcy, the first answer that comes to many practitioners’ minds is “no” because of the Supreme Court’s opinion in BFP v. Resolution Trust Corp.[1] The correct answer, though, is a much more nuanced “it depends.” The Third Circuit’s Sept. 12, 2019, precedential opinion in Hackler v. Arianna Holdings Company LLC[2] is an excellent reminder why.