I INSOLVENCY LAW, POLICY AND PROCEDURE

i Statutory framework and substantive law

Although individual states in the United States have laws that govern the relationship between debtors and their creditors, insolvency law is primarily dictated by federal law because Article 1, Section 8 of the United States Constitution grants Congress the power to enact 'uniform Laws on the subject of Bankruptcies'.2 While over time several different bankruptcy statutes have been passed by Congress, the US bankruptcy regime is currently set forth in Title 11 of the United States Code3 (the Bankruptcy Code), which codified the Bankruptcy Reform Act of 19784 and subsequent amendments. The most recent significant amendment to the Bankruptcy Code was the 2005 Bankruptcy Abuse and Consumer Protection Act.5

The Bankruptcy Code is composed of nine chapters. Chapters 1, 3 and 5 provide the structural components that generally apply to all bankruptcy cases, and Chapters 7, 9, 11, 12, 13 and 15 lay out general procedures specific to certain types of bankruptcies. In general terms, these specific types of bankruptcies are:

  1. trustee-administered liquidation (Chapter 7);
  2. municipality bankruptcy (Chapter 9);
  3. debtor-in-possession (DIP) managed reorganisation or liquidation (Chapter 11);
  4. family farmer and fisherman bankruptcies (Chapter 12);
  5. individual bankruptcies (Chapter 13);6 and
  6. cross-border cases (Chapter 15).

In general terms, with respect to plenary corporate bankruptcies, US insolvency law provides for two distinct regimes: a trustee-controlled liquidation under Chapter 7 and a DIP-controlled reorganisation or structured liquidation under Chapter 11.7 This chapter focuses on Chapter 11 proceedings. Certain key provisions of US insolvency law are discussed in the remainder of this section.

The automatic stay

One of the most important provisions of the US insolvency regime is the 'automatic stay', which is codified in Section 362 of the Bankruptcy Code. The automatic stay is a statutory injunction that applies immediately upon the commencement of a bankruptcy proceeding. Generally, the automatic stay operates to enjoin most creditors from pursuing actions or exercising remedies to recover against a debtor's property. There are limited exceptions to the automatic stay and it can be modified by a court upon a showing of cause. The automatic stay provides the breathing room necessary for the debtor or trustee to assess and assemble all the property of the estate without creditors seeking remedies to protect their own self-interests. Accordingly, the automatic stay allows for the preservation of a debtor's assets and the maximisation of their value, and for an equitable distribution of those assets to creditors.

Safe harbours

One important exception to the automatic stay is that it generally does not apply to contracts that are colloquially referred to as 'financial contracts'. Specifically, the automatic stay does not apply to certain delineated counterparties' ability to offset, net, liquidate, terminate or accelerate securities contracts,8 commodities contracts,9 forward contracts,10 repurchase agreements,11 swap agreements12 or master netting agreements13 with a debtor, provided that the counterparty may be required to exercise its remedies promptly.14 In addition, a debtor may not avoid as a fraudulent transfer a transfer to such a counterparty under one of these contracts unless the transfer is intentionally fraudulent.

The absolute priority rule

The absolute priority rule provides that creditors with higher priority must be paid in full before creditors of lower priority receive any distribution from a bankruptcy estate, and thereby ensures a 'fair and equitable' distribution of the debtor's property consistent with the priorities under the applicable non-bankruptcy law. As a result, in the absence of consent, secured claims must be paid in full from collateral before general unsecured creditors receive any recovery. Similarly, because equity holders have the lowest priority, in the absence of consent, they cannot receive any distribution until all creditors have received payment in full on account of their allowed claims. Consent to the payment of a junior class can be obtained through a vote of the senior class on a plan of reorganisation.15

Avoidance actions

The Bankruptcy Code also provides a number of procedures that allow a debtor or trustee to avoid a pre-bankruptcy transfer of property from the bankruptcy estate. This allows the debtor to maximise the value of the bankruptcy estate and prevent a depletion of the estate prior to the commencement of the bankruptcy proceeding that may favour certain creditors over others. These protections are found in Chapter 5 of the Bankruptcy Code. The most commonly used of these actions are:

  1. avoidance of preferential transfers, which enables an insolvent debtor, subject to certain defences, to avoid and recover payments based on antecedent debt made to creditors within the 90 days prior to the debtor's filing for bankruptcy – up to one year for payments made to insiders of the debtor;16
  2. avoidance of fraudulent transfers, which enables the debtor to avoid and recover transfers of property that were actually fraudulent or were made while the debtor was insolvent and for less than reasonably equivalent value;17 and
  3. avoidance of unperfected security interests, which enables a debtor to avoid liens on property if those liens were not perfected under the applicable non-bankruptcy law prior to the commencement of the bankruptcy case.18

ii Policy

The goal of US insolvency law is to provide maximum return to the creditors (and, if possible, equity holders) of a debtor and, in that context, to reorganise rather than liquidate business debtors to preserve employment and to realise the 'going concern surplus' of reorganisation value over liquidation value. This is accomplished by reorganising a debtor corporation under the provisions of Chapter 11 of the Bankruptcy Code. However, if a reorganisation is not possible – or if it would not result in a maximisation of value for creditors – the debtor company can be liquidated either under Chapter 11 or Chapter 7 of the Bankruptcy Code. Chapter 7 transfers the control of the liquidation process from the debtor's management, who are likely to have greater familiarity with the assets and their value, to a trustee appointed by the US Trustee19 or elected by the debtor's creditors. Chapter 7 liquidations usually result in lower recoveries for creditors. Therefore, companies are more likely to be liquidated under Chapter 7 if there are not sufficient funds in the estate or available to the estate to run a Chapter 11 process.

iii Insolvency procedures

As discussed in Section I.ii, the Bankruptcy Code provides for two main types of insolvency proceedings available to businesses with assets in the United States: Chapter 7 and Chapter 11.

Chapter 7

Chapter 7 is a trustee-controlled liquidation. The goal of Chapter 7 is to ensure the most efficient, expeditious and orderly liquidation of a debtor's assets to be distributed to the creditors and equity holders. Companies cannot reorganise under Chapter 7.

The Chapter 7 liquidation procedure is administered by a Chapter 7 trustee who is selected either by the US Trustee or by an election conducted by certain creditors. The Chapter 7 trustee is responsible for realising upon all the property of the estate and coordinating the distribution of that property or the proceeds of sales of that property.

Chapter 11

Chapter 11 provides for an insolvency proceeding in which the directors and management of the debtor company remain in control (the DIP) unless a trustee is appointed for cause. Chapter 11 proceedings allow for the reorganisation of a debtor's operations and capital structure in the hope that the company will emerge from the bankruptcy process as a healthier, reorganised company. Chapter 11 gives the debtor the exclusive right to propose a plan of reorganisation for the first 120 days after commencement of the bankruptcy proceedings. This date may be extended until 18 months after the order for relief (the petition date of a voluntary case) if the debtor is making progress with a plan of reorganisation and can show cause why the court should extend the exclusivity period.20 The plan of reorganisation provides for how the debtor's assets will be distributed among the classes of creditors and equity holders. It is also possible for a debtor to liquidate its assets through Chapter 11, which is typically a more structured liquidation than one under Chapter 7.

The culmination of a Chapter 11 proceeding is the filing of the plan of reorganisation. The Chapter 11 plan provides how creditors' claims will be treated by the estate. Under the Chapter 11 plan, creditors and shareholders are divided into classes of holders sharing substantially similar claims or interests. Chapter 11 plans must meet certain standards to be confirmed. Even if a plan is accepted by the requisite vote of all impaired classes, it must be found by the court to be in 'the best interests of creditors' (providing each dissenting class member with at least what would have been recovered in a liquidation). As to a class that rejects the plan, the plan must satisfy the Bankruptcy Code's 'fair and equitable' requirement (described in Section I.i).

The plan of reorganisation is submitted to a vote of the various creditor and shareholder classes. If at least one class that stands to receive less than their asserted claim (an impaired class) votes in support of confirmation, excluding insider 'yes' votes, the plan can be confirmed over the dissent of another impaired class. Dissenting classes can thus be crammed down so long as the plan is fair and equitable and does not discriminate among creditors in a similar situation. Once the plan is approved by the necessary stakeholders, a court can confirm a plan, so long as certain other prerequisites of Section 1129 of the Bankruptcy Code are satisfied.

Chapter 15

Chapter 15 is the Bankruptcy Code's codification of the United Nations Commission on International Trade Law (UNCITRAL) Model Law and allows a foreign debtor, through its 'foreign representative', to commence an ancillary proceeding in the United States to support its foreign insolvency proceeding.

iv Starting proceedings

As set forth in Section I.i, the US Bankruptcy Code provides for different types of insolvency proceedings, not all of which are available for all types of companies. Specifically, insurance companies and banking institutions cannot file for Chapter 7 or Chapter 11 bankruptcy; a railroad can be a debtor under Chapter 11 but not Chapter 7, and stockbrokers and commodity brokers can file for bankruptcy under Chapter 7 but not Chapter 11. Regardless of the type of bankruptcy case, under Section 301(a) of the Bankruptcy Code, a debtor voluntarily commences a plenary insolvency proceeding by filing a petition with the bankruptcy court.

A bankruptcy proceeding can also be commenced against a debtor company, which is known as an 'involuntary' bankruptcy case. An involuntary case is commenced upon the filing of a petition with the bankruptcy court by three or more holders21 of non-contingent, undisputed claims, and those claims aggregate at least US$15,775 more than the value of any lien on property of the debtor securing such claims.22 A bankruptcy court will order relief against the debtor in an involuntary case only if the debtor is generally not paying its debts as they become due, unless those debts are the subject of a bona fide dispute as to liability or amount,23 or if a custodian as described in Section 303(h)(2) of the Bankruptcy Code has been appointed.

A Chapter 15 case is commenced when the foreign representative of the debtor company files a petition for recognition of the foreign proceeding with the US bankruptcy court.24

v Control of insolvency proceedings

Under Chapter 7, the insolvency proceeding is controlled by a trustee who is appointed by the US Trustee or elected by the debtor's creditors to administer the debtor's assets. The Chapter 7 Trustee is responsible for, among other things, 'collect[ing] and reduc[ing] to money the property of the estate for which such trustee serves, and closes such estate as expeditiously as is compatible with the best interests of parties in interest'.25 Although the Chapter 7 Trustee can continue business operations for a short period if value is maximised by doing so, generally, once a Chapter 7 Trustee has been appointed, the debtor company is expeditiously liquidated.

Chapter 11 proceedings allow for a debtor's existing management and directors to stay in place and operate the business during the bankruptcy case. For this reason, a debtor in a Chapter 11 proceeding is referred to as the 'DIP'. The board of directors' primary duties in connection with an insolvency proceeding are the same as they are outside bankruptcy26 – to maximise the value of the company.27 The key distinction is that when a company is insolvent, the creditors, not the shareholders, are the residual beneficiaries of the board's fiduciary duties to the corporation and are, thus, able to bring actions for breach of fiduciary duty.28 If it is in the best interests of the estate and its creditors, a trustee may be appointed to replace the DIP and administer a Chapter 11 case.29

During a Chapter 7 or Chapter 11 case, the DIP or trustee may take actions that are in the ordinary course of the debtor's business without approval of the bankruptcy court. Actions after entry of the order for relief outside the ordinary course of business are subject to bankruptcy court approval.

Bankruptcy courts in the United States are courts of limited jurisdiction. This is because, unlike federal district and circuit courts, they were not created under Article III of the United States Constitution. Instead, Congress created the bankruptcy courts because they were 'necessary and proper' to effectuate Congress's enumerated powers to enact bankruptcy law. For this reason, bankruptcy courts may only oversee matters that are 'core' to the bankruptcy case unless the parties knowingly and voluntarily consent to adjudication of a 'non-core' matter by the bankruptcy court. Without consent, matters that are not 'core' to the insolvency proceeding must be decided by a federal district court. Appeals of bankruptcy court decisions are generally heard, in the first instance, by the federal district court sitting in the same jurisdiction as the applicable bankruptcy court.30 Bankruptcy court jurisdiction is the subject of much debate under a series of recent Supreme Court cases.31

Among other things, the bankruptcy court manages filing deadlines, hears evidence on contested issues and issues orders regarding requests for relief by the parties. Nevertheless, and despite the involvement of the court, many aspects of the bankruptcy process are negotiated by the parties outside the courtroom and the DIP or trustee is free to enter into settlement agreements, which are then subject to the approval of the bankruptcy court.32

vi Special regimes

Securities broker-dealers are not eligible for relief under Chapter 11. Instead, insolvent broker-dealers may liquidate under Chapter 7 of the Bankruptcy Code,33 but are more likely to be resolved in a proceeding under the Securities Investor Protection Act of 1970 (SIPA).34 SIPA proceedings are liquidation proceedings, and upon commencement thereof, the broker-dealer will cease to conduct business as a broker-dealer, subject to certain limited exceptions. In SIPA proceedings, a trustee (the SIPA trustee) will take control of all property, premises, bank accounts, records, systems and other assets of the broker-dealer and displace management. The SIPA trustee's primary duties are to marshal assets, recover and return customer property (including through effectuating bulk account transfers to a solvent broker-dealer) and liquidate the broker-dealer.

In SIPA proceedings, the provisions of Chapters 1, 3 and 5 and Subchapters I and II of Chapter 7 of the Bankruptcy Code will also apply, to the extent consistent with SIPA, and the SIPA trustee will generally be subject to the same duties as a trustee under Chapter 7 of the Bankruptcy Code, with certain limited exceptions regarding securities that are the property of customers of the broker-dealer. If the broker-dealer is a registered futures commission merchant under the Commodity Exchange Act of 1936,35 the SIPA trustee will have additional obligations under the Part 190 regulations36 promulgated by the Commodity Futures Trading Commission, with respect to any commodity customer accounts that have not been transferred to another futures commission merchant prior to the filing date.

Although bank holding companies can file for Chapter 11 relief, their subsidiary depository institutions are not eligible for relief under the Bankruptcy Code, and are typically resolved by the Federal Deposit Insurance Corporation (FDIC) under the Federal Deposit Insurance Act.37 The FDIC has the authority to market a failed depository institution for sale to another depository institution, or the FDIC can insert itself as a receiver, close the bank and liquidate its assets to pay off creditors. The powers of the FDIC as receiver are very similar to those of a trustee in bankruptcy.38

Additionally, the Dodd–Frank Wall Street Reform and Consumer Protection Act39 established the Orderly Liquidation Authority (OLA), which provides that the FDIC may be appointed as receiver for a top-tier holding company of a failing financial institution that poses a systemic risk to financial stability in the United States. OLA sets forth the procedures that the federal government can take to cause the wind-down of financial institutions that were once considered 'too big to fail'. Pursuant to OLA, the FDIC can exercise many of the same powers it has as a bank receiver to liquidate systemically risky financial institutions. Moreover, under the Dodd–Frank Act, institutions that may be subject to OLA must provide the FDIC with resolution plans (commonly known as living wills) to serve as road maps in the event that the financial institution requires resolution.

State law governs all regulation of insurance companies, including the resolution of insolvent insurance companies.40

The Bankruptcy Code has mechanisms for dealing with the insolvency proceedings of corporate groups and there is no special regime to address these types of filings. If multiple affiliated companies in the same corporate group seek relief under the US Bankruptcy Code, they will file separate bankruptcy petitions but will often seek joint administration of the various bankruptcy proceedings, meaning that the bankruptcy cases of each member of the group will be overseen by the same judge, which provides for greater efficiency in the administration of the cases. Importantly, joint administration does not mean that the assets and liabilities of the group will be combined. Rather, corporate separateness will be observed despite the joint administration of the cases, unless there is cause to breach corporate separateness and 'substantively consolidate' the assets and liabilities of the debtor.

vii Cross-border issues

As part of the 2005 Bankruptcy Abuse and Consumer Protection Act, the United States enacted Chapter 15 of the Bankruptcy Code, which is based on the UNCITRAL Model Law on Cross-Border Insolvency (the Model Law).41 Chapter 15 governs how a US court should treat a foreign insolvency proceeding when no plenary proceedings have been commenced in the United States and provides a mechanism for the cooperation between the US court and the foreign court overseeing a debtor's plenary insolvency proceeding. Generally, Chapter 15 allows for the commencement of an ancillary proceeding upon recognition of the debtor's foreign proceeding. Once the foreign proceeding is recognised by the US bankruptcy court, the automatic stay applies to the debtor and the property of the debtor that is within the territorial jurisdiction of the United States42 and the debtor's foreign representative enjoys certain powers and privileges under the Bankruptcy Code, such as the right to intervene in any court proceeding in the United States in which the foreign debtor is a party, the right to sue and be sued in the United States on the foreign debtor's behalf, the authority to operate the debtor's business and the authority to initiate avoidance actions in a case pending under another chapter of the Bankruptcy Code.

The bar for accessing plenary proceedings in the US bankruptcy courts is relatively low. A company can be eligible to commence a Chapter 11 proceeding in a US bankruptcy court so long as it is incorporated or has any property or operations in the United States. Because of the perceived debtor-friendliness of US bankruptcy courts and the courts' vast experience in restructuring large multinational companies, many multinational companies are filing for Chapter 11, even if their principal place of business, or centre of main interest, is located outside the United States. This trend has been particularly prevalent in the shipping industry. For example, the Taiwan-based TMT Group opened an office in Houston only a few days before filing for Chapter 11 protection in the United States Bankruptcy Court for the Southern District of Texas.43

II INSOLVENCY METRICS

Since the global financial crisis, when gross domestic product adjusted for inflation (real GDP) dropped by 2.8 per cent from 2008 to 2009, the US economy has experienced a period of slow growth. Real GDP increased in the fourth quarter of 2018 at an average annual rate of 2.2 per cent and at an average annual rate of 2.1 per cent in the second quarter of 2019.44 Furthermore, reported unemployment continues to abate: the rate for July 2019 was 3.7 per cent, down slightly from 3.9 per cent in July of the previous year and from its October 2009 high of 10 per cent.45

Additionally, credit has been readily available to US businesses. In 2018, US corporations issued almost US$1.53 trillion in bonds, a decline from the US$1.81 trillion issued in 2017 but still more than the US$1.49 trillion issued in 2016.46 During the first five months of 2019, more than US$750 billion worth of bonds were issued.47 The 10-year Treasury rate has ranged between 1.52 per cent and 2.79 per cent in the current calendar year, while in 2018, the rate ranged between 2.44 per cent and 3.24 per cent.48

US equity markets have remained robust during July 2019, though volatility has been increasing in recent months. Specifically, US equity and equity-related proceeds totalled US$213.3 billion on 898 deals in 2018,49 which represents a 3.4 per cent increase in proceeds compared to the US$206.2 billion raised in 2017,50 though the number of deals declined by approximately 1.8 per cent from the 914 in 2017.51 US equity and equity-related proceeds in 2017 were approximately 14.5 per cent more than the US$180 billion raised in 2016 and 7.5 per cent less than the US$229.3 billion raised in 2015.52 Similarly, the number of deals in 2018 was 25.4 per cent greater than the 716 in 2016 and 5.4 per cent more than the 852 in 2015.53

US corporate default rates have fluctuated since 2018. Moody's measured the US speculative-grade default rate in March 2019 at 2.4 per cent,54 compared to default rates of 2.8 per cent55 at the end of 2018 and 3.4 per cent at the end of 2017.56 Moody's indicated that the leveraged loan default rate has held steady at 1.9 per cent from December 2018 to March 2019,57 compared with the March 2018 rate of 2.9 per cent58 and 2017 first quarter rate of 2.2 per cent.59

The frequency of business bankruptcy filings remains well below its peak in 2010,60 and although many businesses continue to seek bankruptcy relief as a result of significant challenges in sectors of the US economy, 2018 marked a significant decrease in filings as compared to recent years: 58 public companies filed Chapter 7 or Chapter 11 bankruptcy proceedings, representing an 18.3 per cent decrease from 71 public companies in 2017.61 Aggregate pre-petition assets totalled approximately US$52.056 billion in 2018, down from 2017's aggregate pre-petition assets of approximately US$106.931 billion.62 Following downturns in 2017, filings in the oil and gas/energy/mining sector and the retail industry represented seven of the top 10 public company Chapter 7 and Chapter 11 filings in 2018.63 As described in further detail in Section V.i, the energy/oil and gas and retail industries have continued to produce many of the most significant bankruptcies in the early part of 2019.

Ninety-eight companies commenced Chapter 15 proceedings in the 12 months ending on 31 March 2019,64 compared with the 64 Chapter 15 cases that were initiated during the 12 months ending on 30 June 2018.65 Further, tariffs and trade wars hang over the economy but have not yet materially affected filings.

III PLENARY INSOLVENCY PROCEEDINGS

i iHeartMedia, Inc

iHeartMedia, Inc is a media, entertainment and data company that is largely known for its 849 radio stations but is also engaged in numerous consumer-focused platforms, including social media, live concerts and events, and independent media representation, among others.66

iHeartMedia, Inc, with 38 direct and indirect subsidiaries, filed for bankruptcy in the US Bankruptcy Court for the Southern District of Texas, Houston Division on 15 March 2018. The company had been acquired in a leveraged buyout in 2007 that contributed to the debtors' US$16 billion in funded debt, and both the 2008 financial crisis and industry-specific issues contributed to declining cash flows and limited growth. The restructuring was framed as a balance sheet reorganisation, designed to set up the business for long-term success.67 As of the petition date, iHeartMedia, Inc was the borrower/issuer of the following amounts:

    1. an asset-based lending (ABL) facility with approximately US$371 million of outstanding borrowings;
    2. a term loan facility with two tranches of loans in an aggregate amount of approximately US$6.3 billion;
    3. approximately US$6.752 billion in priority guarantee notes (PGNs);
    4. approximately US$2.235 billion in senior unsecured notes; and

e approximately US$532 million in three series of senior unsecured 'legacy' notes.68

Certain of iHeartMedia's subsidiaries guaranteed each of the obligations listed above except for the legacy notes, which were not guaranteed by any subsidiaries of iHeartMedia.

Although the debtors went into their first-day hearing with a restructuring support agreement in place with at least 67 per cent of the aggregate outstanding principal amount of term loan, PGN and junior debt claims, a group of approximately US$190 million of legacy noteholders opposed the agreement from the outset.69 Shortly after the petition date, Wilmington Savings Fund Society (WSFS), as indenture trustee for the legacy notes, filed an adversary complaint against debtors alleging violations of the legacy notes indenture 'by not granting 'equal and ratable' mortgages'.70 This dispute with the legacy noteholders was the primary hurdle to confirmation of a plan.

In its adversary complaint, the indenture trustee noted that the indentures governing the PGNs contained provisions under which the debtors were required to grant 'springing liens' on certain 'principal property' to the PGN holders if and when the outstanding balance of the legacy notes fell below US$500 million. This trigger would have occurred following the repayment of a series of legacy notes due in 2016 (the 2016 Legacy Notes). However, rather than paying the principal on the 2016 Legacy Notes at maturity, the issuer directed a subsidiary to purchase a portion of the notes and then intentionally failed to repay the principal amount due, taking the position that 2016 Legacy Notes remained outstanding. As such, the balance of the legacy notes remained in excess of US$500 million, and the debtors asserted that they were not required to grant the springing liens.71

WSFS asserted that (1) iHeart was required to grant springing liens to the PGN holders and (2) pursuant to the equal and ratable clause, holders of legacy notes were entitled to mortgages on the same principal property securing the PGNs.72 On 15 January 2019, Judge Isgur issued his long-awaited opinion, concluding that the springing lien trigger had not occurred and, therefore, the equal and ratable clause had not been breached.73

The court's ruling in the legacy notes adversary proceeding paved the way for confirmation of the debtors' proposed plan, which contemplated that the iHeart business would be separated from the businesses of non-debtor subsidiary Clear Channel Outdoor Holdings, Inc, which was 89.5 per cent owned by the debtors (the other 10.5 per cent was publicly traded). iHeart would emerge substantially delevered, with US$5.75 billion of new debt, including new term loans, new secured notes and new unsecured notes, plus a new ABL facility.74 On 22 January 2019, the court confirmed the debtors' fifth amended plan.75 The settlement with WSFS became effective when the debtors emerged from bankruptcy on 1 May 2019.76, 77

ii Pacific Drilling

Pacific Drilling SA and its affiliates (known collectively as Pacific Drilling) operate an international offshore drilling business that specialises in ultra-deepwater and complex well construction services. Pacific Drilling employs a fleet of high-specification drill ships, specialist management and technical teams, and proprietary technology and business processes. On 12 November 2017, Pacific Drilling SA and certain of its affiliates commenced bankruptcy proceedings in the US Bankruptcy Court for the Southern District of New York. The debtors entered Chapter 11 with approximately US$3 billion in pre-petition funded debt.78

One of the key disputes in the Chapter 11 cases involved the structure of the debtors' rights offering. After rounds of mediation, the debtors negotiated the key terms of a reorganisation plan and rights offering with their major stakeholders. This rights offering included, among other things, a US$100 million allocation that was exclusively available to an ad hoc group of bondholders.79

At a hearing held on 18 September 2018, the court rejected the terms of the original rights offering, finding that the deal (particularly the US$100 million private placement to the ad hoc group) improperly amounted to paying a large group of creditors in exchange for their support of the plan.80 In response to the court's decision, the debtors subsequently modified the terms of the rights offering and eliminated the exclusive subscription rights of the ad hoc group. Consistent therewith, the entirety of the equity rights offering and a majority of the equity issuance were made available on a pro rata basis to holders of undersecured claims, as defined in the equity rights agreement, including the members of the ad hoc lender group.81

In its ruling approving the modified equity commitment agreement, the court noted that it took issue with 'special allocations and rights offerings or private placements that are limited to the bigger creditors who sit at the negotiating table, or big fees for backstops that are provided by the bigger creditors who are at the negotiating table but that are not even open to other creditors, and in particular to other creditors in the same class' finding that 'it is far too easy for the people who sit at the negotiating table to use those tools primarily to take for themselves a bigger recovery than smaller creditors in the same classes will get'.82

The plan was confirmed on 31 October 201883 and came into effect on 19 November 2018.84

iii PG&E

PG&E Corporation is a holding company whose primary operating subsidiary is Pacific Gas and Electric Company (the Utility). The Utility provides natural gas and utility services to approximately 16 million customers. As at 30 September 2018, PG&E Corporation, the Utility, and their debtor affiliates (the Debtors or PG&E) had reported approximately US$71.4 billion in consolidated total assets and approximately US$51.7 billion in consolidated total liabilities. As a result of numerous wildfires in California, the Debtors determined that their potential exposure with respect to the 2017 and 2018 northern California wildfires could exceed US$30 billion, exclusive of potential punitive damages, fines and penalties, or damages with respect to future claims. Consequently, PG&E's credit profile deteriorated severely. During 2018 and 2019, the Debtors' credit ratings were subject to multiple downgrades by the rating agencies, and are currently rated below 'investment grade' by all three major rating agencies. On 13 November 2018, PG&E Corporation and the Utility drew all amounts available under their respective revolving credit facilities to assure access to additional liquidity.85

After a comprehensive review, PG&E concluded that temporarily extending the Debtors' liquidity runway was not in the best interests of its economic stakeholders and would not address – and indeed would merely postpone addressing – the fundamental issues facing PG&E and jeopardise its long-term viability. Accordingly, the Debtors commenced the Chapter 11 cases on 29 January 2019.86

Excluding potential wildfire liabilities, the debtors pre-petition debt structure included approximately US$3.15 billion under multiple unsecured revolving credit facilities, US$600 million in multiple unsecured term loan obligations, US$17.5 billion in senior unsecured notes, US$860 million in pollution control bonds, and US$2.1 billion in trade payables.87

On 25 June 2019, the ad hoc committee of senior noteholders filed a motion to terminate the debtors' exclusive periods to file a Chapter 11 plan.88 The motion included a term sheet for a 'viable, confirmable plan of reorganization, the centrepiece of which is up to US$30 billion of new money investment (the vast majority of which is equity) in the Debtors by members of the Ad Hoc Committee'.89 The term sheet provides that US$16 billion (or 'up to US$2(+) billion more' in certain circumstances) of this new investment will be used to compensate all holders of pre-petition wildfire claims.90 The new investment would also fund a US$4 billion contribution to a long-term California state-wide wildfire fund.91 On 17 July 2019, the ad hoc senior noteholder group filed a revised commitment letter through which the group commits to fund up to US$25.4 billion in new PG&E equity and new PG&E senior unsecured notes.92

In their opposition to the exclusivity termination motion, the Debtors referred to the term sheet as an 'aspirational value grab, with no ability to satisfy the requirements for confirmation under section 1129 of the Bankruptcy Code'.93 The Debtors further noted that they are in the process of developing a Chapter 11 plan that would fully address each recent legislative enactment and ensure that they emerge from Chapter 11 by 30 June 2020.94 The Debtors emphasised that they have received commitments, in connection with their plan, from more than 20 financial institutions for approximately US$10.25 billion in equity capital as at 12 August 2019.95 The court would eventually side with the Debtors in denying the motion to terminate exclusivity.96

At the time of writing, the PG&E Chapter 11 cases remain pending. Among the many challenges presented by these cases are (1) how to quantify the wildfire claims97 and (2) the 30 June 2020 deadline for the Chapter 11 cases to be resolved, pursuant to a plan, for the debtors to be eligible to participate in a new wildfire insurance fund, established pursuant to recent California legislation intended to 'support the creditworthiness of electrical corporations, and provide a mechanism to attract capital for investment in safe, clean, and reliable power for California at a reasonable cost to ratepayers'.98

iv FullBeauty

FullBeauty is a leading direct-to-consumer retailer in the growing US plus-size apparel market with approximately US$825.3 million in sales in 2018. It serves both women and men, offering an assortment of plus-size apparel, swimwear, footwear and home décor.99

FullBeauty's pre-petition capital structure consisted of (1) a US$68.9 million ABL facility, (2) a US$75.0 million first-in, last-out (FILO) facility, (3) a US$781.6 million first lien credit facility, and (4) a US$345 million second lien credit facility. In the face of deteriorating liquidity, the debtors engaged restructuring advisers to address their balance sheet concerns.100 Prior to the petition date, FullBeauty negotiated a reorganisation plan with its stakeholders that would result in the following recoveries:

      1. ABL claims: unimpaired;
      2. FILO claims: pro rata share, at the debtors' election of either:
        • US$75 million of the new first lien term loan and payment of any accrued but unpaid interest, fees and expenses in cash; or
        • US$75 million plus any accrued but unpaid interest, fees and expenses of the new first lien term loan;
      3. first lien claims: a pro rata share of:
        • US$175 million of the new first lien term loan; and
        • subject to Article III.B.6.c of the reorganisation plan, 87.5 per cent of the new common stock, subject to dilution; provided that holders of an allowed first lien claim had the option to elect to receive new junior loans in lieu of new common stock on the terms set forth in the reorganisation plan; and
      4. second lien claims: a pro rata share of:
        • US$15 million of the new junior loan;
        • 10 per cent of the new common stock, subject to dilution; and
        • the second lien warrant package described in the warrant documents.101

On 3 February 2019, FullBeauty filed for Chapter 11 to implement the pre-packaged plan. The debtors immediately scheduled a confirmation hearing for 4 February 2019.102 In opposition to plan confirmation, the Office of the United States Trustee (the US Trustee) filed an objection noting, among other things, that the debtors failed to provide sufficient notice of the commencement of the Chapter 11 cases.103 The US Trustee articulated that the Federal Rules of Bankruptcy Procedure require at least 28 days' notice to all holders of claims and interests of (1) the hearing on approval of the disclosure statement and (2) for filing objections to the plan.104 The debtors, on the other hand, asserted that they provided all impaired creditors with notice of the confirmation hearing 28 days prior to the petition date.105

In siding with the debtors and rejecting the US Trustee's arguments, the court confirmed FullBeauty's plan on 4 February 2019.106 The court noted that 'Congress specifically contemplated pre-packaged bankruptcy plans and did not provide for a specific date after the commencement of a case for plans to be confirmed'.107 The confirmation of FullBeauty's plan, which occurred less than 24 hours after the company filed for Chapter 11, is the fastest in the history of the Bankruptcy Code.108

IV ANCILLARY INSOLVENCY PROCEEDINGS

i Ballantyne Re Plc

Ballantyne Re Plc (Ballantyne) is a public limited company that operated as a special purpose vehicle for providing reinsurance with respect to life insurance policies issued in the United States. In summer 2019, Ballantyne completed a restructuring of more than US$1.65 billion in funded debt obligations.

In 2006, Ballantyne had issued secured notes among Ballantyne, as issuer, and The Bank of New York Mellon Corporation, as indenture trustee, to fund its obligations under an existing indemnity reinsurance agreement.109 Ballantyne issued multiple series of Class A notes, in an aggregate amount of US$1.65 billion, with a series of Class B notes, Class C notes and Class D notes that totalled US$270.5 million. Ambac Assurance UK Limited (Ambac) or Assured Guaranty (Europe) plc (Assured) provided guarantees for the scheduled interest payments and the ultimate repayment of principle of certain series of Class A notes but not others. During 2007–2009, the assets in the reinsurance trust account that were held to satisfy Ballantyne obligations for reinsurance were invested in subprime and Alt-A securities. Ballantyne suffered severe losses that totalled approximately US$1 billion.110

On 12 April 2019, Ballantyne entered into a lock-up support agreement with numerous parties, including Ambac, Assured, Security Life of Denver Insurance Company and Swiss Re Life and Health America Inc. Pursuant to the lock-up support agreement, Ballantyne and its stakeholders agreed to support the terms of a restructuring to be implemented through an Irish scheme of arrangement (the Scheme).111 The restructuring involved, among other things, the novation of Ballantyne's reinsurance obligations, disbursement of its assets to Class A noteholders in satisfaction of their claims, the commutation of the obligation under the Ambac guarantees, and the extinguishment of the Class B notes, Class C notes and Class D notes.112 In exchange for the release of the Ambac guarantees, holders of applicable Class A notes received a portion of Ambac's commutation payment.113 The Assured guarantees were preserved through a holding period trust.114

To implement the restructuring, Ballantyne commenced a proceeding on 25 April 2019 to convene the Scheme in the High Court of Ireland (the Irish Court). On 17 May 2019, Ballantyne petitioned the US Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) for recognition of the Scheme under Chapter 15 of the US Bankruptcy Code and enforcement of the terms thereof, which included third-party releases and the Ambac commutation.115

On 7 June 2019, the Irish Court entered an order sanctioning the Scheme and overruling all objections thereto, and on 12 June 2019, the Bankruptcy Court granted recognition of the Scheme and all other relief sought by the foreign representative, including enforcement of the Scheme and the third party releases.116, 117

ii Constellation

Servicos de Petróleo Constellation SA (with its debtor affiliates, Constellation) was incorporated in 1980 and primarily provides services to Petrobras. The company's main operational activities include offshore drilling, onshore drilling and investments in several joint ventures related to operating floating production storage and offloading (FPSO) units. Its assets consist of nine onshore rigs, eight offshore rigs and drillships, and five FPSO units.118 On 29 November 2018, the company entered into a plan support agreement for a reorganisation plan to be implemented through a Brazilian bankruptcy (RJ) proceeding, with lenders holding at least 97.5 per cent of the combined amount of principal under certain loans and certain other stakeholders.119

On 6 December 2018, the company commenced the RJ in Brazil and filed a petition for Chapter 15 recognition in the US Bankruptcy Court for the Southern District of New York.120 On 29 January 2019, Alperton Capital Ltd (Alperton), a contingent creditor of one of the 10 Chapter 15 debtors (Constellation Overseas), filed a limited objection to the petition for recognition of the Brazilian RJ proceeding, arguing, among other things, that the centre of main interests (COMI) for certain debtors was not in Brazil.121

On 9 May 2019, the Court granted the petitioner's recognition motion, concluding that, with respect to seven of the 10 Chapter 15 debtors, the COMI was located in Brazil.122 Accordingly, the Court recognised these proceedings as foreign main proceedings. The Court determined that the proceeding of the parent company was a foreign non-main proceeding as its COMI was located in Luxembourg, and abstained from ruling on the two debtors whose cases were dismissed by the Brazilian court.123

Shortly thereafter, creditors holding approximately 90 per cent of affected claims approved the amended Brazilian restructuring plan in a general creditors' meeting. On 1 July 2019, the Brazilian bankruptcy court approved the plan.124 Two weeks later, the petitioner filed a motion with the US Bankruptcy Court seeking to enforce the plan.125 Both Alperton and PIMCO (a major creditor) subsequently objected to the motion for enforcement.126 On 1 August 2019, the Court entered an order staying the motion to enforce, noting that 'two objections to the Motion to Enforce have been filed' and '[i]t is enough at this point to say that many of the arguments raised by the two objections to recognition and enforcement of the Brazilian Reorganization Plan in the United States are challenging and substantial. Many of those same issues are also raised in the pending appeals in Brazil. These are serious issues bearing on the fairness of the RJ Proceedings, whether due process standards were satisfied in the RJ Proceedings, and whether the interests of creditors and interest holders such as PIMCO and Alperton are sufficiently protected'.127 Accordingly, the Court stayed the motion to enforce until the pending appeals of the Brazilian plan are resolved.

V TRENDS AND OTHER RECENT DEVELOPMENTS

While bankruptcy filings in the United States increased in 2015 and 2016 following a steady decline from their 2009–2010 peak, the number of public company bankruptcy filings in 2018 represented an 18.3 per cent decline as compared with 2017. While certain observers believe that there will be an increase again in 2019128 and certain industries, notably retail, have already experienced a significant number of filings,129 other indicators suggest that the number of bankruptcy filings may decline further or remain stable.130

The sections below highlight recent trends in the energy and retail sectors, and offer some detail on recent decisions and other developments that may be relevant in US bankruptcy practice in the coming years.

i Industry downturns

Energy industry downturn

The energy industry has experienced a high number of bankruptcies in the past few years despite the general availability of cheap credit. According to reports by Haynes and Boone LLP, 185 oilfield services131 companies and 192 oil and gas producers132 filed for bankruptcy between the beginning of 2015 and August 2019. In 2017, the pace of oil and gas bankruptcies slowed as many companies have cycled through Chapter 11 and higher commodity prices provided some relief. Exploration and production bankruptcy filings decreased by 67 per cent year-on-year in 2017. However, in 2018, the number of oil and gas bankruptcies began to increase again as natural gas prices remained depressed from historical highs and crude oil prices remained as volatile as ever. In the fourth quarter of 2018, oil prices fell by 40 per cent to around US$46 per barrel. Since January 2019, however, oil prices have rebounded and are above US$60 per barrel as at 1 May 2019.

Despite the continued challenges facing the industry, there has been growing optimism that the energy industry is rebounding. As noted above, one of the determinative factors that could facilitate (or hinder) an industry recovery is the price of oil. To drill profitably at low oil prices, oil producers must cut costs. But realising these cost savings could prove challenging, as service companies must raise prices to support taking rigs and hydraulic fracturing equipment out of storage and hiring capable professionals to operate them, driving up the break-even oil price for operators.133 For these and other reasons, the price of oil will continue to play a determinative role.

Despite the improved market environment, there remains plenty of bankruptcy activity in the energy industry. Recent notable cases include Parker Drilling Company,134 Arsenal Energy Holdings LLC,135 Weatherly Oil & Gas LLC,136 Vanguard Natural Resources, Inc,137 Southcross Energy Partners, LP,138 EdgeMarc Energy Holdings, LLC,139 Jones Energy, Inc,140 Legacy Reserves, Inc,141 Weatherford International plc142 and Halcón Resources Corporation.143

Retail industry downturn

While the energy industry has shown some signs of life, the retail industry finds itself squarely in the midst of what has been called a 'retail apocalypse' (or, perhaps more charitably, a 'retail pandemic').144 By one count, as at 13 June 2019, 19 major retailers had filed for bankruptcy in 2019, up from 14 for the same period last year.145 Notable examples include Beauty Brands, LLC,146 Payless Holdings LLC,147 Charlotte Russe Holding, Inc,148 Diesel USA,149 FullBeauty Brands Holding Corporation,150 Gymboree Group, Inc,151 Innovative Mattress Solutions, LLC,152 Shopko153 and Barneys New York, Inc.154 Furthermore, certain high-profile retail Chapter 11 debtors have been unable to reorganise as going concerns and have been wound down or liquidated.155

While bankruptcies in the retail space in 2018 and early 2019 have been occurring with striking frequency, the trend has been developing for some time. In March 2016, Sports Authority sought Chapter 11 protection, ushering in a wave of retail bankruptcies. In April 2016, Vestis Retail Group, which manages Eastern Mountain Sports, Bob's Stores and Sports Chalet, also filed for protection under Chapter 11. Aeropostale, an apparel company, filed in May 2016.156 The trend continued in 2017; a number of well-known brands sought bankruptcy protection, including Gymboree, rue21, Payless Shoes and Toys 'R' Us. Underscoring the pressure on bricks-and-mortar operations, JCPenney, Staples and Abercombie & Fitch, among others, have closed several hundred stores in the past few years.157 Retail store locations closed at an even faster rate in the first half of 2018 than they did in 2017.158

Dynamics in the retail industry have created myriad operational challenges for retailers, despite the overall health of the economy. Recent market headwinds for retailers include a shift from traditional bricks-and-mortar stores to online shopping sites, a highly competitive market with an oversaturation of shopping malls and a shift in consumer spending from goods to travelling and dining.159 These dynamics have left some retailers with insufficient revenue to cover high fixed costs such as leases for their stores,160 in addition to the costs of servicing excessive amounts of debt.161

ii Gifting

A trend in bankruptcy settlements for many years has been the increasing use of gifting, that is to say, a consensual arrangement in which a senior creditor class gives a junior class or equity some of its share of recoveries otherwise due to it under a reorganisation plan. The rationale underlying this practice, at first glance, seems benign, as sophisticated parties with bargaining power seemingly may opt to transfer their rights to junior parties in exchange for a more swift resolution to the bankruptcy proceedings. However, this analysis becomes more complicated when an intermediate creditor is involved and the priority regime outlined in Section 507 of the Bankruptcy Code is considered. Under Section 507, there is a hierarchy in resolving the claims of various creditors against the assets of the debtor. Viewed in this light, a creditor with intermediate priority can object that junior creditors are receiving distributions before senior claims are paid in full, in violation of the absolute priority rule.

In 2011, the US Court of Appeals for the Second Circuit handed down a decision in In re DBSD North America, which limited the ability of senior creditors to gift their share of a distribution to more junior creditors. In DBSD, the court considered whether the decision by senior creditors to gift some of its cash distribution to equity holders, bypassing junior creditors with claims of higher priority relative to the equity holders, ran afoul of the absolute priority rule.162 The Court invalidated the plan, holding that the senior creditors had no right to gift property of the debtor's 'estate' in contravention of the statutorily contemplated hierarchy. The decision left unresolved the propriety of a senior creditor bypassing an intermediate creditor in gifting non-estate property to a junior creditor. In a decision that limited the scope of the DBSD holding, the Third Circuit held that the holding was limited to gifting estate property. However, senior creditors remained free to gift non-estate property.163

An arrangement known as a 'structured dismissal' has become an increasingly popular technique for parties seeking to implement a gifting arrangement without running afoul of the absolute priority rule. A structured dismissal is a dismissal of a Chapter 11 case combined with additional provisions in the dismissal order, which often include mutual releases, procedures for claims reconciliation, gifting of funds to junior creditors and retention of jurisdiction by the bankruptcy court. Structured dismissals are often employed in situations where the debtors have insufficient unencumbered assets to finance a confirmable Chapter 11 plan (e.g., after a sale of all or substantially all of such debtors' assets pursuant to Section 363 of the Bankruptcy Code). However, the Supreme Court's decision in Czyzewski v. Jevic Holding Corp164 indicates that priority deviations implemented through non-consensual structured dismissals may not be allowed. Commentators and courts are still grappling with the ultimate scope of Jevic;165 while some courts have interpreted Jevic broadly to deny priority-skipping distributions that are not tied to 'a significant Code-related objective',166 others have read Jevic narrowly and approved priority-skipping distributions in connection with a Chapter 11 plan167 or a settlement.168

iii Covenants/DIP loans

Many large corporate bankruptcies involve the debtor securing post-petition debtor-in-possession financing (a DIP loan). A DIP loan provides the debtor with the cash necessary to continue its operations throughout the bankruptcy and to cover the costs of the bankruptcy. The lender extending a DIP loan to the debtor, often a pre-petition creditor of the debtor interested in protecting its pre-petition position, will place covenants in the DIP loan, setting milestones that the debtor must meet under the terms of the loan. These milestones can include, among others, deadlines to file a disclosure statement and solicit votes on a reorganisation plan and deadlines to obtain critical relief (e.g., the filing of a motion under Section 1113 of the Bankruptcy Code seeking to modify collective bargaining agreements, deadlines to file sale procedures and sale motions, if applicable, and deadlines to obtain confirmation of a plan).

There is an inherent tension in the restrictiveness of these milestones, which can be constraining and onerous for a debtor and the need for financing. On the one hand, debtors need DIP financing, and lenders need assurances as inducement to make these loans to a bankrupt company. On the other hand, strict covenants can tie the hands of debtors and add additional complexity and expense if other creditors contest the plan supported by the DIP lenders.

The trend has been towards more DIP lenders insisting on more restrictive milestones in DIP covenants (though there have been recent exceptions to this trend, notably Toys 'R' Us). However, striking the right balance on the restrictiveness of milestones in DIP loans is still an open question. For instance, in response to the trend towards more restrictive covenants, the ABI Commission to Study the Reform of Chapter 11 recommended adding to the Bankruptcy Code that no milestones can require actions within 60 days of the petition date. It will be interesting to see where the market settles on this issue.

iv Pre-packaged bankruptcies

In a pre-packaged bankruptcy, a debtor negotiates a plan with its key creditors prior to the commencement of a Chapter 11 case.169 Solicitation of votes on the plan commences before the actual bankruptcy filing.170 While the Bankruptcy Code expressly contemplates this type of proceeding, there has been a trend towards increasingly fast-paced cases in which the debtors spend minimal time in bankruptcy. For example, the 2017 cases of Roust Corporation171 and Global A&T Electronics Ltd172 represented two of the shortest pre-packaged Chapter 11 cases since the enactment of the Bankruptcy Code. In fact, both of the aforementioned cases involved Chapter 11 plans that were confirmed in less than one week.

This trend continued in the first half of 2019, when debtors have been entering and emerging from Chapter 11 faster than ever before. As discussed in Section III.iv, FullBeauty Brands filed for Chapter 11 on 3 February 2019. Its plan was confirmed the next day and the company emerged from bankruptcy on 7 February 2019.173 Two months later, Sungard Availability Services Capital, Inc filed its pre-packaged Chapter 11 case. Less than one day after the filing, the court confirmed the debtors' pre-packaged reorganisation plan. The debtors emerged from bankruptcy less than 40 hours after filing.174

Although each of the four cases discussed above took place in front of Judge Robert Drain of the US Bankruptcy Court for the Southern District of New York, this trend is not limited to this venue. On 4 February 2019, Arsenal Energy Holdings LLC and its debtor affiliates filed for Chapter 11 in the US District Court for the District of Delaware.175 One week later, the Court confirmed Arsenal's pre-packaged plan.176

Proponents of these expedited procedures argue that swifter pre-packaged bankruptcies minimise disruptions to a company and its trade creditors, critical vendors and employees.177 However, critics assert that such cases short-circuit the bankruptcy process and undermine the notice requirements of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.178 As debtors continue to seek out more efficient methods of effectuating balance sheet restructurings, the trend towards faster pre-packaged bankruptcies is likely to continue in the short term.


Footnotes

1 Donald S Bernstein and Timothy Graulich are partners and Christopher S Robertson and Thomas S Green are associates at Davis Polk & Wardwell LLP.

2 US Constitution, Article I, § 8.

3 11 U.S.C. §§ 101 to 1532 (2012).

4 Pub. L. No. 95-598 (1978).

5 Pub. L. No. 109-8 (2005).

6 Individuals can also seek relief under Chapters 7 and 11 of the Bankruptcy Code.

7 A trustee can be appointed in Chapter 11 for cause. 11 U.S.C. § 1104(a)(1).

8 11 U.S.C. § 555.

9 11 U.S.C. § 556.

10 ibid.

11 11 U.S.C. § 559.

12 11 U.S.C. § 560.

13 11 U.S.C. § 561.

14 See In re Lehman Brothers Holdings Inc., Case No. 08-13555 (JMP) (Bankr. S.D.N.Y. 15 Sep. 2009).

15 A plan of reorganisation is approved by a class when a majority in number of the class members vote in favour of it and the class members who voted in favour hold at least two-thirds of the total value of the claims in that class. 11 U.S.C. § 1126.

16 11 U.S.C. § 547.

17 11 U.S.C. 11 544(b), 548. Under Section 548, the trustee can avoid a fraudulent transfer of an interest of the debtor in property that took place within two years before the date of the filing of the petition. Under Section 544(b), a trustee can avoid a transfer of an interest of the debtor in property under applicable state law, which can extend the look-back period beyond two years. However, a debtor might not be able to avoid and recover subsequent transfers of property received abroad by a foreign transferee from a foreign transferor. See Securities Investor Protection Corp v. Bernard L Madoff Inv Sec LLC, Case No. 12-00115 (S.D.N.Y. 7 Jul 2014).

18 11 U.S.C. § 552(a).

19 The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the federal bankruptcy system. The Program monitors the conduct of parties in interest in bankruptcy cases, oversees related administrative functions and acts to ensure compliance with applicable laws and procedures. It also identifies and helps investigate bankruptcy fraud and abuse in coordination with various law enforcement agencies. The US Trustee is distinct from the trustee appointed to administer Chapter 7 and certain Chapter 11 cases.

20 11 U.S.C. §§ 1121(b), (d)(2)(A).

21 Only a single holder is necessary to commence an involuntary case if there are fewer than 12 overall holders of claims against the debtor.

22 11 U.S.C. §§ 303(b)(1), (2).

23 11 U.S.C. § 303(h)(1).

24 11 U.S.C. §§ 1504, 1515.

25 11 U.S.C. §704(a)(1).

26 The Supreme Court has observed that 'the willingness of courts to leave debtors in possession' is premised upon an assurance that the officers and managing employees can be depended upon to carry out the fiduciary responsibilities of a trustee'. Commodity Futures Trading Comm'n v. Weintraub, 471 US 343, 355 (1985), citing Wolf v. Weinstein, 372 US 633, 651 (1963). Officers and directors may therefore owe fiduciary duties to the estate even if their fiduciary duties to the company were limited under state law prior to the bankruptcy. In re Houston Regional Sports Network, LP, Case No. 13-35998 (Bankr. S.D. Tex. 12 Feb. 2014).

27 'Even when [a] company is insolvent the board may pursue, in good faith, strategies to maximise the value of the firm.' Trenwick America Litig Trust v. Ernst & Young, 906 A.2d 168, 175 (Del. Ch. 2006), aff'd, 931 A.2d 438 (Del. 2007).

28 Marshall S Huebner and Darren S Klein, 'The Fiduciary Duties of Directors of Troubled Companies', American Bankruptcy Institute Journal, Vol. XXXIV, No. 2 (Feb 2015).

29 11 U.S.C. § 1104.

30 The 1st, 6th, 8th, 9th, and 10th circuits have established Bankruptcy Appellate Panels [BAPs], which are panels composed of three bankruptcy judges who are authorised to hear appeals of bankruptcy court decisions. These panels are units of the federal courts of appeals. BAP judges continue to serve as active bankruptcy judges in addition to fulfilling their BAP duties. If a BAP has been established in a given circuit, the BAP will hear an appeal of a bankruptcy court decision unless a party to the appeal elects to have it heard by the district court. Decisions of a BAP may be appealed to the appropriate circuit court of appeals. United States Courts, Bankruptcy Appellate Panels, available at www.uscourts.gov/FederalCourts/UnderstandingtheFederalCourts/CourtofAppeals/BankruptcyAppellatePanels.aspx.

31 See Stern v. Marshall, 546 U.S. 462 (2011) (holding that the bankruptcy court lacked constitutional authority to enter a final judgment on a debtor's tortious interference counterclaim even though the counterclaim was a 'core proceeding' under 28 U.S.C. § 157(b)(2)), Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014) (providing that, when a 'Stern claim' is encountered, the bankruptcy court may issue proposed findings of facts and conclusions of law to be reviewed de novo by the district court), Wellness Int'l Network, Ltd v. Sharif, 135 S. Ct. 1932 (2015) (holding that bankruptcy judges may enter final judgment on claims that seek only to add to the bankruptcy estate and would exist outside bankruptcy proceedings if the parties knowingly and voluntarily consent).

32 Fed. R. Bankr. P. 9019.

33 11 U.S.C. §§ 741 to 753.

34 Pub. L. No. 91-598 (1970), codified at 15 U.S.C. §§ 78aaa et seq.

35 Pub. L. No. 74-675 (1936), codified at 7 U.S.C. § 1 et seq.

36 17 C.F.R. Part 190.

37 Pub. L. No. 81-797 (1950).

38 Federal Deposit Insurance Company, 'Overview: The Resolution Handbook at a Glance' www.fdic.gov/about/Freedom/drr_handbook.pdf#page=10>.

39 Pub. L. 111-203 (2010).

40 11 U.S.C. § 1011.

41 'United Nations Commission on International Trade Law (UNCITRAL): UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment', 30 May 1997 www.uncitral.org/pdf/english/texts/insolven/insolvency-e.pdf>.

42 11 U.S.C. § 1520.

43 In re TMT Procurement Corp., No. 13-33763 (MI) (Bankr. S.D. Tex. 20 Jun. 2013). There are limits to a foreign-based company's ability to seek Chapter 11 protection. See In re Yukos Oil Co, 321 B.R. 396, 410 and 411 (Bankr. S.D. Tex. 2005) (the bankruptcy court declines to exercise jurisdiction over Chapter 11 case of a Russian oil company seeking to use the automatic stay to prevent a foreclosure sale by the Russian government).

44 National Income and Product Accounts: Gross Domestic Product: Second Quarter 2019 (Third Estimate); Corporate Profits, First Quarter 2019 (Revised Estimate) (17 Jul 2019) https://www.bea.gov/data/gdp/gross-domestic-product>.

45 United States Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey http://data.bls.gov/timeseries/LNS14000000>.

46 Federal Reserve Board, New Securities Issues, US Corporations, (July 2019) www.federalreserve.gov/econresdata/releases/corpsecure/current.htm>.

47 ibid.

49 Thomson Reuters, Global Equity Capital Markets Review: Full Year 2018 (last accessed 18 July 2019) https://thesource.refinitiv.com/thesource/getfile/index/364e2ac9-823b-495a-8dd7-f07559ccb4e6>.

50 ibid.

51 ibid.

52 Thomson Reuters, Global Equity Capital Markets Review: Full Year 2016 (last accessed 18 July 2019) http://share.thomsonreuters.com/general/PR/ECM_4Q_2016_E.pdf>.

53 ibid.

54 Moody's – US Speculative-Grade Default Rate Dips in Q1 2019; Credit Strains Building Modestly, (1 May 2019) https://www.moodys.com/research/Moodys-US-speculative-grade-default-rate-dips-
in-Q1-2019--PBC_1173717.

55 ibid.

56 Moody's Investor Services Announcement: US Speculative-Grade Default Rate Swings Higher in Q1 2018; Retail Defaults Increase (July 18, 2018), https://www.moodys.com/research/Moodys- US-speculative-grade-
default-rate-swings-higher-in-Q1--PR_383170.

57 Moody's Investors Service March Default Report (8 April 2019) https://www.lma.eu.com/application/files/9515/5810/4301/2019_Moodys__March_Default_Report.pdf>.

58 ibid.

59 Moody's Investor Services Announcement: Retail Corporate Defaults Hit All-Time High in First Quarter 2018 (10 April 2018) https://www.moodys.com/research/Moodys-Retail-corporate-defaults-hit-all-time-high-
in-first--PR_382085.

60 United States Courts, US Bankruptcy Courts – Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code, During the 12-Month Period Ending June 30, 2010 www.uscourts.gov/uscourts/Statistics/BankruptcyStatistics/BankruptcyFilings/2010/0610_f2.pdf>.

61 PRWeb, BankruptcyData Releases 2018 Corporate Bankruptcy Review (13 January 2019) https://www.prweb.com/releases/bankruptcydata_releases_2018_corporate_bankruptcy_review/prweb16030090.htm>.

62 ibid.

63 ibid.

64 United States Courts, US Bankruptcy Courts – Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code, During the 12-Month Period Ending March 31, 2019 https://www.uscourts.gov/sites/default/files/data_tables/bf_f2_0331.2019.pdf>.

65 United States Courts, US Bankruptcy Courts – Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code, During the 12-Month Period Ending June 30, 2018 www.uscourts.gov/sites/default/files/bf_f2_0630.2018.pdf>.

66 Declaration of Brian Coleman, Senior Vice President and Treasurer of iHeartMedia, Inc., in Support of Chapter 11 Petitions and First Day Motions, Case No. 18-31274, ECF No. 25 at 1–2 (Bankr. S.D. Tex. 15 Mar. 2018).

67 ibid.

68 ibid.

69 ibid.

70 'WSFS Files Adversary Proceeding to “Protect Legacy Noteholders' Rights”; Seeks Constructive Trust or Equitable Lien Over Springing Lien Collateral', Reorg Research (21 March 2018) https://platform.reorg-research.com/app#company/2897/intel/view/51485>.

71 ibid.

72 ibid.

73 'In Victory for iHeart, Judge Isgur Rules That Equal and Ratable Clause in Legacy Notes Indenture Was Not Breached', Reorg Research (15 January 2018) https://app.reorg.com/file/18474/CC_Media_Holdings__Inc
__-_2019-01-15_17_41_01_-_In_Victory_for_iHeart__Judge_Isgur_Rules_That_Equal_and_Ratable_
Clause_in_Legacy_Notes_Indenture_Was_N-37038-0.pdf.

74 Amended Joint Chapter 11 Plan of Reorganization of iHeartMedia, Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code, Case No. 18-31274, ECF No. 1213 (Bankr. S.D. Tex. 5 Aug. 2018).

75 'iHeart Achieves Plan Confirmation After 10 Months in Chapter 11; Plan Expected to Go Effective in First Half of 2019', Reorg Research (22 January 2019) https://app.reorg.com/file/18480/CC_Media_
Holdings__Inc__-_2019-01-15_-_2019-01-22-37038-0.pdf.

76 Update 2: iHeart, WSFS Jointly Move to Stay Appeal of Springing Lien Adversary Ruling, Reorg Research (30 January 2019) https://app.reorg.com/file/20761/CC_Media_Holdings__Inc__-_2019-01-17
_-_2019-01-30-37038-0.pdf.

77 Notice of (I) Entry of Order Confirming the Modified Fifth Amended Joint Chapter 11 Plan of Reorganization Of iHeartmedia, Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code and (II) Occurrence of the Effective Date, Case No. 18-31274, ECF No. 3298 (Bankr. S.D. Tex. 1 May 2019).

78 Declaration of Paul T Reese Pursuant to Rule 1007-2 of the Local Bankruptcy Rules for the Southern District of New York in Support of Chapter 11 Petitions and First Day Motions and Applications, Case No. 17-13193, ECF No. 28 (MEW) (Bankr. S.D.N.Y. 14 Nov. 2017).

79 Motion of Debtors Pursuant to Sections 105(a), 362, 363, 503 and 507 of the Bankruptcy Code for an Order Authorizing the Debtors to Enter into Equity Commitment Agreement and Pay Related Fees and Expenses, Case No. 17-13193 (MEW), ECF No. 535 (Bankr. S.D.N.Y. 28 Aug. 2018).

80 Hr'g Tr., Case No. 17-13193 (MEW), ECF No. 622 (Bankr. S.D.N.Y. 18 Sep. 2018).

81 Supplemental Brief in Support of the Debtors' Motion Pursuant to Sections 105(a), 362, 363, 503 and 507 of the Bankruptcy Code for an Order Authorizing the Debtors to Enter Into Equity Commitment Agreement and Pay Related Fees and Expenses, Case No. 17-13193 (MEW), ECF No. 607 (Bankr. S.D.N.Y. 25 Sep. 2018).

82 'Court Approves Pacific Drilling DS, Sets Confirmation Hearing for Oct. 31; Revised Equity Commitment Agreement Approved Notwithstanding Court's “Misgivings”', Reorg Research (25 September 2018) https://app.reorg.com/file/18496/Pacific_Drilling_S_a__-_2018-09-25_19_13_25_-_Court_Approves_
Pacific_Drilling_DS__Sets_Confirmation_Hearing_for_Oct__31__Revised_EquityCommitment_Agr-37038-0.pdf.

83 'Pacific Drilling Targets November Emergence after Court Confirms Plan over Individual Shareholders' Objections', Reorg Research (31 October 2018) https://app.reorg.com/file/18507/Pacific_Drilling_
S_a__-_2018-09-25_-_2018-10-31-37038-0.pdf.

84 Notice of Occurrence of Effective Date of Modified Fourth Amended Joint Plan of Reorganization for Pacific Drilling SA and Certain Of Its Affiliates Pursuant To Chapter 11 Of The Bankruptcy Code, Case No. 17-13193 (MEW), ECF No. 791 (Bankr. S.D.N.Y. 19 Nov. 2018).

85 Amended Declaration of Jason P Wells in Support of First Day Motions and Related Relief, Case No. 19-30088 (DM), ECF No. 263 (Bankr. N.D. Ca. 1 Feb. 2019).

86 ibid.

87 ibid.

88 Motion of the Ad Hoc Committee of Senior Unsecured Noteholders to Terminate the Debtors' Exclusive Periods Pursuant to Section 1121(d)(1) of the Bankruptcy Code, Case No. 19-30088 (DM), ECF No. 2741 (Bankr. N.D. Ca. 25 Jun. 2019).

89 ibid.

90 Ad Hoc Noteholders Group's 'Rate-Neutral' Plan Would Include $30B in New Money, $18B Through Equity Issuance; Would Fund $16B+ Wildfire Claims Trust, Reorg Research (25 June 2019) https://app.reorg.com/file/18539/Pacific_Gas_and_Electric_Co__-_2019-06-25_13_55_01_-_Ad_Hoc_
Noteholders_Group___s____Rate Neutral____Plan_Would_Include__30B_in_New_Money___
18B_Throug-37038-0.pdf.

91 ibid.

92 Ad Hoc Noteholder Group Commitment Letter, Amended Term Sheet Provides for Up to $20B in New PG&E Equity, $5.4B in New PG&E Notes; Top-End Commitment Range Would Result in Ownership of 95% of Fully Diluted New Equity, Reorg Research (17 July 2019) https://app.reorg.com/file/18540/Pacific_Gas_and_Electric_Co__-_2019-06-25_-_2019-07-17-37038-0.pdf>.

93 Debtors' Objection to Motion of the Ad Hoc Committee of Senior Unsecured Noteholders to Terminate the Debtors' Exclusive Periods Pursuant to Section 1121(d)(1) of the Bankruptcy Code, Case No. 19-30088 (DM), ECF No. 3075 (Bankr. N.D. Ca. 18 Jul. 2019).

94 PG&E Details Plan Timeline Including Sept. 9 Plan Filing; Describes Equity Commitment, Currently at $10.25B, as 'Substantially Superior' to Ad Hoc Noteholder Proposal, Reorg Research (12 August 2019) https://app.reorg.com/file/18542/Pacific_Gas_and_Electric_Co__-_2019-08-12_17_52_47_-_PG_
E_Details_Plan_Timeline_Including_Sept__9_Plan_Filing__Describes_Equity_Commitment__
Currently_-37038-0.pdf.

95 ibid.

96 Memorandum Decision Regarding Motions to Terminate Exclusivity, Case No. 19-30088 (DM), ECF No. 3568 (Bankr. N.D. Ca. 16 Aug. 2019).

97 See Debtors' Motion Pursuant to 11 U.S.C. §§ 105(a) and 502(c) For the Establishment of Wildfire Claims Estimation Procedures, Case No. 19-30088 (DM), ECF No. 3091 (Bankr. N.D. Ca. 18 Jul. 2019).

98 ibid.; also A.B. 1054, 2019 Assemb. (Cal. 2019).

99 Declaration of Robert J Riesbeck, Chief Financial Officer of FullBeauty Brands Holdings Corp, in Support of Debtors' Chapter 11 Petitions and First Day Motions, Case No. 19-22185 (RDD), ECF No. 10 (Bankr. S.D.N.Y. 3 Feb. 2019) [FullBeauty First Day Declaration].

100 ibid.

101 ibid. The foregoing represents a partial summary of the plan. All capitalised terms are as defined in the FullBeauty First Day Declaration.

102 ibid.

103 Objection of the United States Trustee to Confirmation of the Plan and Related Relief, Case No. 19-22185 (RDD), ECF No. 34 (Bankr. S.D.N.Y. 4 Feb. 2019).

104 ibid.

105 Debtors' Supplemental Brief in Support of Confirmation of the First Amended Joint Prepackaged Chapter 11 Plan of Reorganization of FullBeauty Brands Holdings Corp. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code, Case No. 19-22185 (RDD), ECF No. 20 (Bankr. S.D.N.Y. 3 Feb. 2019).

106 'Judge Drain Confirms FullBeauty Prepackaged Plan on First Full Day of Case, Overrules UST Objections on Timing, Notice', Reorg Research (4 February 2019) https://app.reorg.com/s3/intel/FullBeauty_
Brands_-_2019-02-04_17_28_17_-_Judge_Drain_Confirms_FullBeauty_Prepackaged_Plan_
on_First_Full_Day_of_Case__Overrules_UST_Objections_on_Timi-37038-0.pdf.

107 ibid.

108 Katherine Doherty, 'Fullbeauty Breaks Record for Fastest U.S. Bankruptcy,' Bloomberg (4 February 2019) https://www.bloomberg.com/news/articles/2019-02-04/fullbeauty-on-track-to-break-record-for-
fastest-u-s-bankruptcy.

109 Motion for (I) Recognition of Foreign Main Proceeding, (II) Recognition of Foreign Representative, (III) Recognition of Sanction Order and Related Scheme, and (IV) Related Relief Under Chapter 15 of the Bankruptcy Code, Case No. 19-11490 (JLG) (Bankr. S. D. N.Y. 12 Jun. 2019).

110 ibid.

111 ibid.

112 'Ambac Announces Closing of Ballantyne Restructuring Following Irish and U.S. Court Approvals', Reorg-Research (18 June 2019) https://app.reorg.com/v3#/items/wires/2028?item_id=5d08e13a6bfe0966028b45bf>.

113 Recognition Motion.

114 Recognition Motion.

115 Motion for (I) Recognition of Foreign Main Proceeding, (II) Recognition of Foreign Representative, (III) Recognition of Sanction Order and Related Scheme, and (IV) Related Relief Under Chapter 15 of the Bankruptcy Code, Case No. 19-11490 (JLG) (Bankr S. D. N.Y. 12 Jun. 2019).

116 Order Granting (I) Recognition of Foreign Main Proceeding, (II) Recognition of Foreign Representative, (III) Recognition of Sanction Order and Related Scheme, and (IV) Related Relief Under Chapter 15 of the Bankruptcy Code, Case No. 19-11490 (JLG) (Bankr S. D. N.Y. 12 Jun. 2019).

117 In light of the uncertainty over Brexit, future debtors may also choose Ireland over the United Kingdom as a preferred forum to restructure their debts. This was the case with Indah Kiat Pulp & Paper, who recently used an Irish scheme of arrangement to restructure US$612.4 million in debt that remained from the 2011 collapse of Asia Pulp & Paper. Declan Bush, 'Indonesian debtor chose Ireland to restructure amid Brexit uncertainty', Global Restructuring Review (19 August 2019) https://globalrestructuringreview.com/article/1196497/indonesian-debtor-chose-ireland-to-restructure-amid-brexit-uncertainty>.

118 Memorandum Opinion Recognizing Foreign Debtors' Foreign Main and Foreign Nonmain Proceeding, Case No. 18-13952 (MG), ECF No. 86 (Bankr. S.D.N.Y. 9 May 2019).

119 Case Summary: 97.5% of A/L/B Lenders Enter Into QGOG RSA, Bondholders Expected to Support Restructuring; Shareholders Invest $27M, Reorg Research (7 December 2019) https://app.reorg.com/file/18561/QGOG_Constellation_-_2018-12-07_14_42_56_-_CASE_
SUMMARY__97_5__of_A_L_B_Lenders_Enter_Into_QGOG_RSA__Bondholders_Expected_to_
Support_Restructuring__Sh-37038-0.pdf.

120 ibid.

121 Limited Objection of Alperton to the Petition for Recognition of the Brazilian RJ Proceeding, Case No. 18-13952 (MG), ECF No. 35 (Bankr. S.D.N.Y. 29 Jan. 2019).

122 See Recognition Opinion.

123 See Recognition Opinion.

124 'Creditors Approve Amended QGOG Restructuring Plan, Enter Second Amended PSA; Olinda Excluded From RJ', Reorg Research (4 July 2019) https://app.reorg.com/file/18569/QGOG_Constellation_-_
2019-07-04_08_07_15_-_Creditors_Approve_Amended_QGOG_Restructuring_Plan__Enter_
Second_Amended_PSA__Olinda_Excluded_From_RJ-37038-0.pdf.

125 Motion for Order Pursuant to 11 U.S.C. §§ 105(a), 1145, 1507(a), 1521(a) and 1525(a) (I) Enforcing the Brazilian Reorganization Plan and (II) Granting Related Relief, Case No. 18-13952 (MG), ECF No. 100 (Bankr. S.D.N.Y. 17 Jul. 2019).

126 'Constellation Former JV Partner Alperton Files Objection to Enforcement Motion, Intends to Request Arbitral Tribunal Reinstate Injunction Against Constellation', Reorg Research (30 July 2019) https://app.reorg.com/file/18570/QGOG_Constellation_-_2019-07-30_18_13_29_-_UPDATE_2__Constellation_Former_JV_Partner_Alperton_Files_Objection_to_Enforcement_Motion__Intends_to_
Reques-37038-0.pdf.

127 ibid.

128 See Mark Curriden, 'Business bankruptcies: “Calm before the storm” in Texas', Houston Chronicle (16 August 2019)' https://www.houstonchronicle.com/business/texas-inc/article/Business-bankruptcies-
Calm-before-the-14307376.php.

129 e.g., Janice Williams, 'Barneys New York and 11 Other Major Retailers to File for Bankruptcy in 2019', Newsweek (6 August 2019) https://www.newsweek.com/barneys-new-york-bankruptcy-stores-
closing-1452833.

130 'Research Announcement: Moody's - US speculative-grade default tally changed minimally between first and second quarters of 2019', Moody's Investor Services (31 July 2019)  https://www.moodys.com/research/Moodys-US-speculative-grade-default-tally-changed-minimally-between-first--PBC_1188150?WT.mc_id=AM%7ERmluYW56ZW4ubmV0X1JTQl9SYXRpbmdzX05ld3NfTm9fVHJhbnNsYXRpb25z%7E20190731_PBC_1188150> ('The default rate trend is expected to remain fairly steady and low over the next 12 months, supported by a robust economy and stable corporate earnings growth, with the credit markets largely open to speculative-grade issuers.').

131 'Haynes and Boone, LLP Oilfield Services Bankruptcy Tracker (as at 12 August 2019 – updated periodically) https://www.haynesboone.com/-/media/files/energy_bankruptcy_reports/oilfield_services_bankruptcy_
tracker.ashx?la=en&hash=2BE6456FA3C1725E6C3588DE59C001602CD646DE.

132 'Haynes and Boone, LLP Oil Patch Bankruptcy Monitor' (as at 12 August 2019 – updated periodically) https://www.haynesboone.com/-/media/files/energy_bankruptcy_reports/oil_patch_bankruptcy_
monitor.ashx?la=en&hash=D2114D98614039A2D2D5A43A61146B13387AA3AE.

133 Lynn Cook and Alison Sider, 'Despite Optimism, Oil Firms Keep Cutting Jobs' (22 July 2016) www.wsj.com/articles/despite-optimism-oil-firms-keep-cutting-jobs-1469209897>.

134 Case No. 18-36958 (Bankr. S.D. Tex.; filed 12 Dec. 2018).

135 Case No. 19-10226 (Bankr. D. Del.; filed 4 Feb. 2019).

136 Case No. 19-31087 (Bankr. S.D. Tex.; filed 28 Feb. 2019).

137 Case No. 19-31786 (Bankr. S.D. Tex.; filed 31 Mar. 2019).

138 Case No. 19-10702 (Bankr. D. Del.; filed 1 Apr. 2019).

139 Case No. 19-11104 (Bankr. D. Del.; filed 15 May 2019).

140 Case No. 19-32112 (Bankr. S.D. Tex.; filed 14 Apr. 2019).

141 Case No. 19-33395 (Bankr. S.D. Tex.; filed 18 Jun. 2019).

142 Case No. 19-33694 (Bankr. S.D. Tex.; filed 1 Jul. 2019).

143 Case No. 19-34446 (Bankr. S.D. Tex.; filed 7 Aug. 2019).

144 Pamela N Danziger, 'Retail's Bankruptcy Pandemic May Have Peaked, But It's Not Over Yet', Forbes (4 December 2017) https://www.forbes.com/sites/pamdanziger/2018/03/14/retails-bankruptcy-
pandemic-may-have-peaked-but-its-not-over-yet/#40b7c06f1680.

145 Matma Badkar, 'US retailers file for bankruptcy at swift pace in 2019', Financial Times (19 June 2019) https://www.ft.com/content/4e3a2138-9282-11e9-aea1-2b1d33ac3271>.

146 Case No. 19-10031 (Bankr. D. Del.; filed 6 Jan. 2019).

147 Case No. 19-40883 (Bankr. E.D. Mo.; filed 18 Feb. 2019).

148 Case No. 19-10210 (Bankr. D. Del.; filed 3 Feb. 2019).

149 Case No. 19-10432 (Bank. D. Del.; filed 5 Mar. 2019).

150 Case No. 19-22185 (Bankr. S.D.N.Y.; filed 3 Feb. 2019).

151 Case No. 19-30258 (Bankr. E.D. Va.; filed 16 Jan. 2019).

152 Case No. 19-50042 (Bankr. E.D. Ky.; filed 11 Jan. 2019).

153 Case No. 19-80064 (Bankr. D. Neb.; filed 16 Jan. 2019).

154 Case No. 19-36300 (Bankr. S.D.N.Y.; filed 6 Aug. 2019).

155 See Lillian Rizzo, 'Bon-Ton to Liquidate Stores', Wall Street Journal (18 April 2018) https://www.wsj.com/articles/bon-ton-to-liquidate-stores-1524090764>.

156 'So far, 2016 is a boom year for retail bankruptcies', PYMNTS (5 May 2016) www.pymnts.com/news/risk-management/2016/chapter-11-retail-bankruptcy-debt-restructuring/>.

157 J D Heyes, '“Retail tsunami” of bankruptcies and closings now sweeping America,' Natural News (24 April 2014) www.naturalnews.com/044840_retail_tsunami_bankruptcies_store_closings.html>.

158 Ciara Linnane, 'Retail Defaults May Increase in 2018 as Companies are Still Stressed', MarketWatch (4 March 2018) https://www.marketwatch.com/story/retail-sector-may-see-more-defaults-in-
2018-than-2017-sp-cautions-2018-03-01.

159 Derek Thompson, 'What in the World Is Causing the Retail Meltdown of 2017?' The Atlantic (10 April 2017) https://www.theatlantic.com/business/archive/2017/04/retail-meltdown-of-2017/522384/>.

160 At least one commentator has suggested that, in addition to the market forces driving the downturn, the mandatory 210-day limit on the time by which a debtor must assume or reject a commercial real estate lease under Section 365(d)(4) of the Bankruptcy Code leaves retailer debtors with insufficient time to negotiate with their landlords and properly emerge from Chapter 11 as a stand-alone entity. See Lawrence C Gottlieb, 'The Disappearance of Retail Reorganizations Under the Amended Section 365(d)(4)' http://business-finance-restructuring.weil.com/wp-content/uploads/2013/06/Gottlieb-Paper.pdf>.

161 Ciara Linnane, 'Retail Defaults May Increase in 2018 as Companies are Still Stressed', MarketWatch (4 March 2018) https://www.marketwatch.com/story/retail-sector-may-see-more-defaults-in- 2018-than-
2017-sp-cautions-2018-03-01.

162 In re DBSD North America, Inc, 634 F.3d 79 (2d Cir. 2011).

163 In re ICL Holding Company, Inc, No. 14-2709 (3d Cir. 2015).

164 137 S. Ct. 973, 986 (2017).

165 e.g., Robert J Keach and Andrew C Helman, 'Life After Jevic: An End to Priority-Skipping Distributions?', ABI Journal, September 2017, at 12, 74.

166 In re Fryar, 570 B.R. 602, 610 (Bankr. E.D. Tenn. 2017); see also In re Pioneer Health Svcs., Inc., 570 B.R. 228, 235 (Bankr. S.D. Miss. 2017) (requiring a 'significant offsetting bankruptcy related justification' to justify critical vendor payments, citing Jevic).

167 In re Nuverra Environmental Solutions, No. 17-10949 (Bankr. D. Del. 24 Jul. 2017).

168 In re Short Bark Industries Inc., No. 17-11502 (Bankr. D. Del. 11 Sep. 2017).

169 United States Courts, US Bankruptcy Courts – Chapter 11 – Bankruptcy Basics https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics>.

170 ibid.

171 'UPDATE: Judge Drain Confirms Prepackaged Roust Plan, Grants First Day Relief at Joint Hearing,' Reorg Research (9 January 2017) https://app.reorg.com/file/19020/Roust_Trading_Ltd__-_2017-01-09_
18_50_08_-_UPDATE__Judge_Drain_Confirms_Prepackaged_Roust_Plan__Grants_First_Day_
Relief_at_Joint_Hearing-37038-0.pdf.

172 'Global A&T Prepack Chapter 11 Plan Approved Including Modified Release, Exculpation Provisions; Section 1125(e)-Related Exculpation Not Limited to Fiduciaries', Reorg Research (21 December 2017) https://app.reorg.com/file/19023/Global_A_T_Electronics__Ltd__-_2017-12-21_14_53_46
_-_Global_A_T_Prepack_Chapter_11_Plan_Approved_Including_Modified_Release__Exculpation_
Provisions__S-37038-0.pdf.

175 Case No. 19-10226 (Bankr. D. Del.; filed 4 Feb. 2019).

176 Order (I) Approving (A) The Adequacy of the Disclosure Statement and (B) The Prepetition Solicitation Procedures and (II) Confirming the Pre-Packaged Plan of Reorganization of Arsenal Energy Holdings LLC, Case No. 19-10226 (BLS), ECF No. 61 (Bankr. D. Del. 13 Feb. 2019).

177 Katherine Doherty, 'Fullbeauty Breaks Record for Fastest U.S. Bankruptcy', Bloomberg (4 February 2019), available at https://www.bloomberg.com/news/articles/2019-02-04/fullbeauty-on-track-to-break-record-
for-fastest-u-s-bankruptcy ('In this situation, every day in court is another day of costs without any corresponding benefit') (quoting Jon Henes at Kirkland & Ellis).

178 Objection of the United States Trustee to Confirmation of the Plan and Related Relief, Case No. 19-22185 (RDD), ECF No. 34 (Bankr. S.D.N.Y. 4 Feb. 2019).