Chapter 11 is expensive and not always the right tool, particularly for a restructuring of a company with a broken balance sheet, as compared to a business with a broken business model. We have seen a significant uptick in...more
In most chapter 11 cases, existing first lien lenders provide post-petition financing to preserve collateral value and maximize recovery. In some situations, a stressed borrower may threaten to pursue a hostile chapter 11...more
3/24/2025
/ Bankruptcy Code ,
Bankruptcy Court ,
Chapter 11 ,
Collateral ,
Creditors ,
Debt ,
Debt Restructuring ,
Debtors ,
Debtors-in-Possession ,
Lenders ,
Loans ,
Restructuring
The appointment of an independent director is a powerful tool for private credit lenders. The appointment is designed to introduce a voice of neutrality and fairness into the board’s decision-making process with the hope and...more
2/28/2025
/ Bankruptcy Court ,
Board of Directors ,
Commercial Bankruptcy ,
Contract Terms ,
Corporate Governance ,
Corporate Restructuring ,
Creditors ,
Debt Restructuring ,
Fiduciary Duty ,
Lenders ,
Limited Liability Company (LLC)
In many ways, 2024 continued existing trends in private credit: modest levels of M&A activity, competition among direct lenders to deploy capital, higher-for-longer interest rates, persistent inflation, elevated default...more
1/29/2025
/ Appeals ,
Bankruptcy Code ,
Bankruptcy Court ,
Chapter 11 ,
Corporate Restructuring ,
Creditors ,
Debt Restructuring ,
Debtors ,
Lenders ,
Liability ,
Popular ,
Private Equity ,
Reorganizations
The United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) ruled on December 31, 2024 that Serta Simmons Bedding’s (“SSB”) 2020 uptier exchange included a transaction that, contrary to the assertions of...more
1/3/2025
/ Appellate Courts ,
Bankruptcy Court ,
Borrowers ,
Commercial Bankruptcy ,
Credit Agreements ,
Declaratory Judgments ,
Lenders ,
Liens ,
Liquidity ,
Loan Agreements ,
Loan Repayment Issues ,
Motion to Dismiss ,
Texas
NEW YORK, October 23, 2024 – Leading international law firm Proskauer today revealed the results of its Q3 2024 Private Credit Default Index (“Default Index” or the “Index”), with an overall default rate of 1.95%. The Q3...more
After nearly a decade of historically low interest rates, many borrowers will now have to grapple with near-term maturities between 2025 and 2028 on approximately $4.9 trillion of corporate debt.
While some borrowers may...more
10/22/2024
/ Bankruptcy Code ,
Bankruptcy Court ,
Business Operations ,
Chapter 11 ,
Commercial Bankruptcy ,
Compliance ,
Concession Agreements ,
Debtors ,
Equitable Subordination ,
Fraudulent Transfers ,
Interest Rates ,
Lenders ,
Negotiations ,
Restructuring
One common denominator links nearly all stressed businesses: tight liquidity. After the liquidity hole is identified and sized, the discussion inevitably turns to the question of who will fund the necessary capital to extend...more
10/15/2024
/ Borrowers ,
Capital Raising ,
Chapter 11 ,
Commercial Bankruptcy ,
Credit ,
Creditors ,
Enforcement ,
Equity ,
Liquidity ,
Loan Syndication and Trading Association (LSTA) ,
Loans ,
Reorganizations ,
Restructuring ,
Shareholders
Navigating a successful restructuring requires skill and experience to look around corners, anticipate issues, and take proactive steps to minimize risk and uncertainty. In this alert we highlight one of those risks —...more
In a much-anticipated decision, the United States Court of Appeals for the Third Circuit recently held that unsecured noteholders’ claims against a debtor for certain “Applicable Premiums” were the “economic equivalent” to...more
As you know from our prior alerts, creditors of borrowers formed as Delaware LLCs (as opposed to corporations) lack standing under Delaware law to sue directors for breaching fiduciary duties even when, to the surprise of...more
4/26/2024
/ Bankruptcy Code ,
Bankruptcy Court ,
Breach of Duty ,
Chapter 11 ,
Chapter 7 ,
Commercial Bankruptcy ,
Creditors ,
DE Supreme Court ,
Delaware ,
Derivatives ,
Fiduciary Duty ,
Fraudulent Transfers ,
Limited Liability Company (LLC) ,
Standing
NEW YORK, April 23, 2024 – Leading international law firm Proskauer today announced a 1.84% overall default rate for Q1 2024 for loans in its Private Credit Default Index (the “Index”). The Index tracks senior-secured and...more
There is a growing trend of bankruptcy courts approving structured dismissals of chapter 11 cases following a successful sale of a debtor’s assets under section 363 of the Bankruptcy Code. A structured dismissal is a...more
Retaining key management at a distressed company in the midst of an out-of-court restructuring can be necessary for the success of the restructuring. To realign incentives, private credit lenders need to consider reloading...more
When leveraged buyouts (“LBOs”) fail, the selling shareholders are litigation targets. A common suit is a claim by a bankruptcy trustee asserting constructive fraudulent transfer claims seeking to claw-back payments to the...more
While global inflation and higher-for-longer interest rates dominated macroeconomic headlines over the last year, middle-market private credit restructurings witnessed three notable trends.
First, these credits remained...more
1/26/2024
/ Automatic Stay ,
Bankruptcy Code ,
Bankruptcy Court ,
Chapter 11 ,
Debt ,
Debt Restructuring ,
Divestiture ,
High-Yield Markets ,
Interest Rates ,
Lenders ,
Middle Market ,
Motion to Dismiss ,
Price Inflation
Recently, two significant distressed companies with thousands of commercial leases, Rite Aid Corp. and WeWork Inc., each filed Chapter 11 bankruptcy cases, seeking in part to rationalize their geographic footprints through...more
1/11/2024
/ Bankruptcy Appellate Panel (BAP) ,
Bankruptcy Code ,
Chapter 11 ,
Commercial Bankruptcy ,
Commercial Leases ,
Commercial Tenants ,
Debtors ,
Jurisdiction ,
Popular ,
Property Surrender ,
Rent ,
Rent Increases ,
Security Deposits ,
Standby Letters of Credit ,
Tenants ,
Unsecured Debt
Bankruptcy Considerations for Unitranche Transactions with Super-Priority Revolvers without an AAL -
Unitranche debt is not new to the private credit market. It has, however, evolved over time. In the earlier years of the...more
In our prior alert over the summer, we highlighted the Delaware Supreme Court’s decision in Stream TV Networks, Inc. v. SeeCubic, Inc., 279 A.3d 323, 329 (Del. 2022) (“Stream TV”), which held an insolvent corporation could...more
Navigating the Bankruptcy Code can present many traps for unsuspecting debtors, creditors or asset buyers. The U.S. District Court for the District of Delaware recently reminded bankruptcy participants of an often overlooked...more
Restructurings defy a one-size fits all approach because every deal is unique and different tools are required to solve different problems. At one end of the restructuring continuum is the so-called “amend and extend,” where...more
Navigating the Bankruptcy Code can present many traps for unsuspecting debtors, creditors, or asset buyers. The Delaware District Court recently reminded bankruptcy participants of an often overlooked pitfall involving the...more
12/1/2023
/ Bankruptcy Code ,
Bankruptcy Court ,
Chapter 11 ,
Collective Bargaining Agreements (CBA) ,
Creditors ,
Debtors ,
Delaware ,
Free and Clear Transactions ,
NLRA ,
NLRB ,
Non-Discrimination Rules ,
Successor Liability ,
Successors ,
Unions ,
United Steelworkers
Once again, we reflect on the prior year for restructuring trends impacting private credit lenders. Last year it was all about “liability management”—the latest trend in which the limits of sponsor-favorable loan documents...more
1/18/2023
/ Bankruptcy Court ,
Capital Raising ,
Chapter 11 ,
Coronavirus/COVID-19 ,
Delaware ,
Interest Rates ,
Lenders ,
Liquidity ,
Loans ,
Motion to Dismiss ,
NY Supreme Court ,
Restructuring ,
Supply Chain ,
Supply Shortages ,
Ukraine ,
Vaccinations
A common yet contentious liability management strategy is an “uptier” transaction, where lenders holding a majority of loans or notes under a financing agreement seek to elevate or “roll-up” the priority of their debt above...more
In an important decision to private credit lenders, the Fifth Circuit Court of Appeals held that a make-whole premium for an unsecured creditor tied to future interest payments is the “functional equivalent of unmatured...more