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More small businesses filed for bankruptcy in February as some rushed to take advantage of a favorable provision in the law that is set to expire soon. Last month, as many as 213 small businesses elected to file under subchapter V of the Bankruptcy Code, a 78% increase compared with the same month a year ago, according to bankruptcy data provider Epiq, WSJ Pro Bankruptcy reported. Companies with less than $7.5 million in debt can file under a subchapter under the bankruptcy code that went into effect in 2020 as part of the Small Business Reorganization Act, offering small businesses a faster and cheaper way to restructure debt. Since then, more than 7,200 cases have been filed under the subchapter, according to the U.S. Department of Justice. Unless Congress takes action, the $7.5 million eligibility limit on subchapter V is due to sunset on June 21, when the limit could go back to the to its original amount of just over $2.7 million when it went effective in February 2020. adjusted for inflation. Last December, the ABI's Subchapter V Task Force released its preliminary report to legislators saying that the eligibility limit of $7.5 million should be made permanent. Legislation hasn’t yet been formally introduced. Eyal Berger, a bankruptcy partner at law firm Akerman who spoke about subchapter V at an American Bankruptcy Institute event, said the increase is due in part to uncertainty over what will happen to the $7.5 million debt cap in June. If the cap reverts to a lower number, fewer companies would be eligible for subchapter V. The end of government aid distributed during the pandemic and the impact of higher interest rates are also factors, said ABI President Soneet Kapila. Small businesses have begun facing repayment demands for the “economic injury disaster loans” that they received from the Small Business Administration during the pandemic, said David Cox, managing attorney at Cox Law Group. “Many of my clients weren’t ready for those additional expenses.”

U.S. banking regulators confronted an unusually large penalty when they seized Silicon Valley Bank last year: $285 million in fees to prematurely wind down emergency financing from the Federal Home Loan Bank system, Bloomberg News reported. That was the price tag to retire billions in financing that the firm obtained in a last-ditch attempt to survive a run on deposits, according to an internal Federal Deposit Insurance Corp. document obtained by Bloomberg. The fee, which hasn’t been previously reported, was the largest of its kind for any bank failure since before the 2008 financial crisis, the document shows. The ability of FHLBs to generate fees on emergency lending, even when borrowers fail, is sure to stoke the debate in Washington over how to reform the Depression-era system designed to help finance mortgage lending. In November, the Federal Housing Finance Agency, which oversees home-loan banks, said it planned to study prepayment fees and potentially change rules. The regulator aims to ensure such institutions have an incentive “to improve their due diligence” before ramping up financing — known as advances — to struggling members. To be sure, FHLBs incur costs when retiring the debt, and the fees they’re allowed to charge are approved by their regulator. The idea is to let the institutions recoup those expenses so that they remain financially indifferent to prepayments. Such fees “are disclosed to all interested parties, are generally equal to the cost of unwinding the hedged transaction, and are in keeping with safe and sound banking practices,” said Ryan Donovan, chief executive officer of the Council of Federal Home Loan Banks, a trade group. As SVB teetered on the edge of collapse last year, the FHLB of San Francisco quickly ramped up its lending to the struggling bank, eventually providing it with $30 billion. When it collapsed, that money was repaid early, along with fees.

New York Community Bancorp Inc. completed a deal to raise more than $1 billion of capital through an equity investment by backers led by former U.S. Treasury Secretary Steven Mnuchin, Bloomberg News reported. The troubled commercial real estate lender, which announced the agreement last week, said in a statement late Monday that the transaction has closed and that Mnuchin was appointed lead independent director. The investment was anchored by his Liberty Strategic Capital, as well as Hudson Bay Capital and Reverence Capital Partners. “We believe that this transaction has strengthened the company’s balance sheet and liquidity position and look forward to working with management and the dedicated workforce of NYCB to deliver shareholder value,” Mnuchin said in the statement. The transaction included an issuance of common stock at $2 per share to the investors, as well as some convertible preferred stock. The cohort will own about 40% of the firm on a fully diluted basis, according to the statement, and the investors will also get warrants. The company also plans to ask shareholders to amend its certificate of incorporation to call for a minimum reverse stock split of three for one, in part to “make the bid price more attractive to a broader group of institutional and retail investors.” The stock closed at $3.25 on Monday. Joseph Otting, a former comptroller of the currency, will be NYCB’s chief executive officer, the firm had announced last week, replacing Alessandro DiNello, who will return to his role as non-executive chairman. Along with Mnuchin, Otting and two other investors will join the company’s board.

Discount retailer 99 Cents Only Store LLC is exploring a debt restructuring, and some bondholders have hired advisory firm Portage Point Partners for talks, Bloomberg Law reported. Portage’s retention follows the investors’ earlier engagement of Weil Gotshal & Manges for legal advice, Bloomberg News reported last August, after the company moved certain real estate assets out of creditors’ collateral packages. 99 Cents, meanwhile, is working with a cadre of advisers including Jefferies Financial Group Inc. and law firm Milbank. Moody’s Ratings downgraded 99 cents to Caa3 in November, citing factors including the retailer’s “much-weaker-than- anticipated operating performance.” The credit grader said that free cash flow was expected to remain negative. The company’s bond due in 2026 last traded in February around 34 cents the dollar, according to Trace data. 99 Cents operates nearly 400 stores in California and southwestern states.

A bankruptcy judge in Pennsylvania dismissed Boston Market owner Jay Pandya’s second bankruptcy filing Friday, according to court documents, Retail Dive reported. The dismissal includes a six-month ban on filing another Chapter 11 petition. Pandya filed for chapter 11 bankruptcy in February. His first bankruptcy case was dismissed in January after Pandya failed to fulfill the court’s request to provide additional information within a two-week period. It appears unlikely Boston Market will have the finances to stay afloat or grow. Earlier this year, Boston Market was ordered to pay U.S. Foods about $12 million over unpaid bills. The company has also faced several wage and hour violations, and has been sued over 150 times, largely over unpaid bills, Restaurant Business reports. In January, Boston Market laid out what appeared to be a turnaround plan to bring the chain’s food into non-traditional locations and to start rotating various international dishes every six weeks. At the time, the chain said that it was offering no buy-in fees for franchisees and was targeting locations like existing restaurants, delis and gas stations. As of February, Restaurant Dive found that no stores it contacted had heard of or had begun offering the two Indian-inspired dishes mentioned in the original press release.

A Texas bankruptcy judge denied the Justice Department’s motion seeking to dismiss or transfer the Sorrento Therapeutics chapter 11 case, ruling a bank account and mailbox the company’s lawyers established justified its bankruptcy petition in Houston days later, WSJ Pro Bankruptcy reported. Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston on Monday said the motion filed by the U.S. trustee for the Southern District of Texas last month and a similar motion filed by a shareholder weren’t timely, as the case had already been pending for more than a year. Sorrento’s bankrupt subsidiary Scintilla Pharmaceuticals’ representation about the mailbox being its principal place of business had been public ever since it filed the petition last February, the judge said. The judge also said that if the case was transferred to a different state, it would take a long time for another judge to get up to speed on it, and he didn’t think that was in the best interest of the administration of justice. The U.S. trustee, which serves as a bankruptcy watchdog on behalf of the Justice Department, submitted a motion before Monday’s court hearing, arguing that Sorrento was a “case of forum shopping and venue manipulation taken to a new and unprecedented extreme.”

Canadian Overseas Petroleum Ltd. has filed bankruptcy in its home country and the U.S. and said that it intends to restructure, Bloomberg News reported. The Calgary-based oil and gas production company said its existing lenders have offered to provide as much as US$11 million in financing to fund its proposed restructuring. COPL said it has requested the immediate suspension on trading of its shares on both the London Stock Exchange and the Canadian Securities Exchange. COPL has sought a form of chapter 11 protection in Canada and filed for bankruptcy in Delaware to protect its U.S. assets, according to court documents. The company’s oil- and gas-production work is centered on Wyoming. The company said that its day-to-day operations will continue as normal and it intends to continue paying its suppliers but it “believes there is little prospect for a return to shareholders or bond holders.” The bankruptcy filing comes after COPL announced in January that it had appointed restructuring adviser Peter Kravitz as its interim chief executive officer. Kravitz is a founding principal of advisory firm Province LLC and worked on numerous corporate restructurings, according to the company. COPL announced the departure of its chief financial officer last month.

Gizmo Brew Works, a Raleigh, N.C.-based brewery with taprooms across the Triangle, has filed for chapter 11 bankruptcy, according to court documents, Axios.com reported. Founded in 2013, Gizmo expanded significantly in the past few years — going from one location in Raleigh to opening taprooms on Chapel Hill's Franklin Street and in Durham's University Hill development. Gizmo — known for beers like the Raleigh Red red ale and Carolina Pine India pale ale — reported assets between $100,000 to $500,000 and debts between $1 million and $10 million. The brewery's largest debt was nearly $1 million to Wilmington-based Live Oak Bank. It's been a rough stretch for breweries that have tried to expand coming out of the COVID-19 pandemic. Gizmo opened a significant remodel of Chapel Hill's old Rathskeller in February 2020, right before bars were closed by the spread of the disease. Gizmo's management said business after the pandemic has not recovered to a level to balance its debt from expansion.

Endo International’s restructuring plan offers creditors a choice to continue legal battles against the opioid maker and related parties, an option not available in other recent bankruptcy plans that have faced legal challenges for taking away the right to sue, WSJ Pro Bankruptcy reported. Endo’s plan, which aims to resolve a multitude of personal-injury claims stemming from the impact of the opioid maker’s painkillers and other products, would pay more to creditors who agree to relinquish litigation rights. But those who want to continue fighting for more money in court would be allowed to do so if they accept a smaller upfront payment. This two-tiered payout option was added to Endo’s chapter 11 plan after a creditors committee rejected an earlier offer to pay only those who agreed to sign legal releases, and as bankruptcy plans granting such broad releases to companies — and to related third parties not in bankruptcy — have faced scrutiny. Malvern, Pa.-based Endo filed for bankruptcy in 2022 under the weight of thousands of lawsuits from individuals, state and local governments, and private institutions that alleged the company’s Opana ER painkiller helped fuel the nation’s opioid epidemic. Unlike most chapter 11 plans addressing similar personal-injury litigation that have been approved, Endo’s plan won’t provide blanket releases to third parties such as company executives and lenders that aren’t in bankruptcy themselves, lawyers involved in the case said. Instead, Endo’s restructuring plan contains a provision that allows its creditors, including thousands of people who suffered the effects of the opioid epidemic, to continue to litigate against the company, its executives and the lenders who would become the new owners of the restructured company after bankruptcy. The creditors would receive higher monetary awards if they choose to sign away their right to sue.