(Reuters) - U.S. shale oil and gas producer Chesapeake Energy Corp plans to cut 15% of its workforce, an email sent to employees revealed, as it closes on new financing that will allow it to emerge from bankruptcy court protection next week.

Once the second-largest U.S. natural gas producer, Chesapeake was felled by a long slide in gas prices. The company is resetting our business to emerge a stronger and more competitive enterprise, according to the email to employees by Chief Executive Doug Lawler dated Tuesday, and reviewed by Reuters.

Most of the 220 layoffs will happen at the Oklahoma City headquarters, the email said.

Chesapeake on Tuesday said it planned to raise $1 billion in notes to complete its bankruptcy exit.

The companys bankruptcy plan was approved by a U.S. judge last month, giving lenders control of the firm and ending a contentious trial.

Chesapeake filed for court protection in June, reeling from overspending on assets and from a sudden decline in demand and prices spurred by the coronavirus pandemic.

As we prepare to conclude our restructuring, we continue to prudently manage our business and staffing levels to adapt to challenging market conditions and position Chesapeake for sustainable success, company spokesman Gordon Pennoyer said by email, when asked about the planned layoffs.

People losing their jobs will be given severance packages and career assistance, according to Lawlers email. The companys headquarters was closed on Wednesday and workers were notified by phone about layoffs because of the current health concerns known to all, the email said.

Reporting by Jennifer Hiller; editing by Richard Pullin and Marguerita Choy

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Chesapeake Energy cuts 15% of workers as it emerges from bankruptcy - Reuters

This year started where 2020 finished, with another bankruptcy record.

Some 56 New Hampshire individuals and businesses filed for bankruptcy in January, the lowest number seen in any January indeed, any month since January 1988. The total was 11 fewer than December 2020 and four fewer than November 2020.

The low number of bankruptcies persists despite the resurgence of the pandemic in December and January and the states relatively high unemployment, particularly in the hospitality industry, with some restaurants and hotels going into hibernation following a muted Christmas.

Bankruptcy filings in the state have been in the double digits for 10 straight months, dropping in April just after the pandemic first struck and after a generation of monthly bankruptcy filings in the hundreds.

For months, bankruptcy attorneys have predicted an increase in filings, but that hasnt happened. Businesses and individuals, bolstered by federal and state aid and sheltered from most evictions and foreclosures, have managed to hang on, with the hope of future assistance or an easing of the pandemic as the vaccine rollout continues. Others particularly brick-and-motor retailers might have been hanging on at least until Christmas before making any decision.

But Christmas is long gone, and most businesses and individuals are not throwing in the towel.

Januarys total is less than a sixth of the 381 that were filed in January 2010, in the midst of the last recession. It was less than half of the 121 filed in January of 2020, a 54% decrease.

In all of total there was a total of 1,054 filings, or an average of 88 a month. In 2019, the total was 1,774, for a monthly average of 148. In 2010 the yearly total was 5,507, or 459 a month. You have to go back to 1988 in the midst of a booming economy to get a lower annual total 835, or 70 a month.

In January there were three bankruptcy filings with business-related debt, but only one was filed by the business directly, and it is conjunction with a sale free and clear of all liens:

Parrillo Designs LLC, dba Derailed Boutique, Kingston, filed Jan. 15, Chapter 7. Assets: $37,405. Liabilities: $82,201.

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Bankruptcy filings continue their record lows in New Hampshire - New Hampshire Business Review

As discussed in previous posts, the Consolidated Appropriations Act of 2021 (the Act) was signed into law on December 27, 2020, largely to address the harsh economic impact of the COVID-19 pandemic. For bankruptcy litigators or any business which has been frustrated to receive a demand letter after one of its customers filed bankruptcy one particular amendment stands out in the sprawling 5,593-page bill. The Act amended Section 547 of the Bankruptcy Code to provide suppliers and landlords with an additional potential challenge to actions brought to claw back payments made by a debtor in the 90 days preceding bankruptcy.

Generally speaking, Section 547 of the Bankruptcy Code enables a bankruptcy trustee (or debtor-in-possession) to claw back certain payments made by a debtor to its creditors in the 90 days preceding a bankruptcy case, unless the creditor can establish one of the statutory defenses, including: (1) the payment was made at the same time as the creditor provided goods or services to the debtor (i.e., a contemporaneous exchange); (2) the payment was made in the ordinary course of business (i.e., in the same manner as payments were made before the debtor experienced financial distress) or according to ordinary business terms; or (3) the creditor provided additional goods and services to the debtor on credit after receiving the payment. The purpose of Section 547 is to prevent creditors from racing to dismantle a financially distressed company, and more importantly, to ensure certain creditors are not receiving preferential treatment by the company while others are left holding the bag.

The Act added a new subsection 547(j) to the Bankruptcy Code, generally providing that a trustee (or debtor-in-possession) may not avoid and recover as a preferential transfer:

This new provision, which sunsets on December 27, 2022, is subject to certain limitations, including:

The policy objectives underlying new Section 547(j) seem apparent: (i) ensuring landlords and suppliers are not penalized for accepting deferred payments (out of the ordinary course) under arrangements they have entered into with businesses hit hard by the global pandemic, and (ii) incentivizing landlords and suppliers to explore financial accommodations with their distressed counterparties going forward, instead of exercising default and termination rights under existing agreements. While salutary, these policy objectives are, to some extent, in conflict with Section 547s general purpose of ensuring equal distributions for all creditors of businesses in distress. Notably, the statute does not protect certain types of creditors such as lenders even though an agreement by any creditor to accept a deferred payment would, presumably, benefit a distressed business just as much as a suppliers or landlords agreement to do so.

In any event, the actual language adopted by Congress leaves plenty of room for interpretation. For instance, a payment to a supplier must be made pursuant to an executory contract. But it is unclear whether the contract need still be executory on the petition date. If the supplier accepts an otherwise exempt deferred payment and then terminates the contract prior to bankruptcy, does the supplier still have the benefit of Section 547(j)?

In addition, it is likely the courts will face questions regarding what constitutes a deferral agreement or arrangement for purposes of the statute, and whether such agreement or arrangement qualifies for protection if deferring or postponing payment of arrearages is part of a larger agreement to restructure the parties business relationship involving various forms of consideration. Finally, the language of the statute may leave room for parties to potentially game the system. For instance, Section 547(j) is an exception from the avoidance power under 547(b), not a defense, meaning payments to insider landlords and suppliers during the year preceding the bankruptcy appear to also be subject to the exemption. Thus, affiliated companies with intercompany debts may be incentivized to enter into friendly agreements to defer payments for the purpose of ensuring catch-up payments are exempted from avoidance.

Only time (and the courts) will tell whether this new provision will accomplish the intended Congressional objectives, and what avenues parties may exploit to take advantage of this otherwise well-intentioned response to the fallout from the coronavirus pandemic. In the meantime, landlords and suppliers who have deferred payments during the pandemic should ensure they document these deferrals and avoid charging interest or penalties prohibited by statute in order to take advantage of Section 547(j) should their tenant or customer file bankruptcy.

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Consolidated Appropriations Act of 2021 Amends Bankruptcy Code - Part 3: Congress Gives Suppliers and Landlords a Shiny New Arrow in their Quiver to...

Background

The Commodity Futures Trading Commission (CFTC) recently adopted final amendments to Part 190 of the CFTC's regulations (the "Final Rules"), governing bankruptcy proceedings with respect to commodity brokers.1 The Final Rules represent the first comprehensive update to the CFTC's bankruptcy rules since the Part 190 rules were initially adopted in 1983. Approved unanimously, the Final Rules serve to modernize and revise the CFTC's regulations to reflect changes in the commodity brokerage industry over that time.

Subchapter IV, chapter 7 of the Bankruptcy Code ("Code") sets out the essential provisions governing the liquidation of a commodity broker in bankruptcy. However, the CFTC is authorized under section 20 of the Commodity Exchange Act (CEA), "notwithstanding the Code," to adopt rules that provide, among other things: (1) that certain cash, securities, other propertyor commodity contracts are to be included in or excluded from customer property or member property; and (2) the method by which the business of such commodity broker is to be conducted or liquidated after the date of the filing of the petition under the Code. Part 190 of the CFTC's regulations are promulgated under this authority as well as the CFTC's general rulemaking authority under section 8a(5) of the CEA.

Since the initial adoption of the Part 190 rules, there have been significant developments in practices with respect to commodity broker bankruptcies, including as a result of judicial decisions and certain high-profile bankruptcies (like that of MF Global Inc. and Peregrine Financial Group Inc.). As emphasized in former Chairman Heath Tarbert's statement in support of the Final Rules, they seek to clarify and codify key principles and approaches or practices that have developed over time as the existing Part 190 rules were applied to real-world bankruptcy situations.

Highlights of the Final Rules

At a high level, the Final Rules address the following major topics:

Statutory Authority, Organization, Core Concepts, Scope and Construction. The Final Rules adopt new CFTC Rule 190.00, which sets forth the statutory authority, organization, core concepts, scope and rules of construction for Part 190 of the CFTC's regulations. In particular, new CFTC Rule 190.00 sets out the CFTC's intent regarding bankruptcies for the benefit of market participants, trustees and the general public.

Default of a Derivatives Clearing Organization. The Final Rules adopt new Subpart C to Part 190 of the CFTC's regulations, which governs the bankruptcy of a DCO. Among other things, new Subpart C provides that the trustee should follow, to the extent practicable and appropriate, the DCO's pre-existing default management rules and procedures and recovery and wind-down plans that have been submitted to the CFTC. These rules, procedures and plans will, in most cases, have been developed pursuant to Part 39 of the CFTC's regulations, subject to CFTC staff oversight. This approach relieves the trustee of the burden of developing, in the moment, models to address an extraordinarily complex situation.

Priority of Customers and Customer Property. The Final Rules clarify that shortfalls in segregated property should be made up from the general assets of the FCM. The Final Rules also clarify that, with respect to customer property, public customers are favored over non-public customers.

Securities Investors Protection Act (SIPA) and Federal Deposit Insurance Corporation (FDIC). The Final Rules confirm the applicability of Part 190 of the CFTC's regulations in the context of an FCM that also is registered with the Securities and Exchange Commission (SEC) as a broker-dealer and subject to a proceeding guided primarily by the SIPA. Likewise, the Final Rules clarify the applicability of Part 190 in the context of a proceeding in which the FDIC is acting as receiver.

Letters of Credit as Collateral. The Final Rules confirm the treatment of letters of credit used as collateral. Specifically, the Final Rules make clear that customers posting letters of credit as collateral will be subject to the same pro rata loss as customers that post other types of collateral, such as cash and securities, both during business as usual and during bankruptcy.The pro-rata loss would be calculated based on the face value of the posted letter of credit, even if only a portion was drawn down by a customer at the time of the bankruptcy.

Greater Trustee Discretion. The Final Rules grant trustees greater discretion by, among other things, permitting the trustees to treat public customers on an aggregated basis. This greater discretion generally favors the cost effective and prompt distribution of customer property over the precision of valuing each customer's entitlements on an individual basis.

Transferring Rather Than Liquidating Customer Positions. The Final Rules further confirm the CFTC's longstanding preference for transferring positions of public customers rather than liquidating the positions.

Reflect Changes to CFTC's Regulatory Framework. The Final Rules update Part 190 of the CFTC's regulations to better reflect changes to the CFTC's regulatory framework over the years, including the CFTC's recent revisions to its customer protection rules. The Final Rules also update cross-references to other CFTC rules.

Changes in Technology. The Final Rules also reflect changes in technology, including a recognition that many records are captured and stored electronically rather than on paper.

Non-Substantive Clarifications. The Final Rules provide non-substantive changes to clarify language in the CFTC's regulations. These clarifications are intended to address ambiguities that have complicated past bankruptcies.

A chart summarizing all of the provisions in the Final Rules is available in this advisory's appendix.

Effective Date of the Final Rules

The Final Rules are effective 30 days after publication in the Federal Register.

Principal Changes From the Proposed Rules and Supplemental Proposed Rules

The Final Rules differ from the proposed amendments2 and supplemental amendments,3 published in the Federal Register on June 12, 2020 and September 24, 2020, respectively, in a few key respects. In particular, the Final Rules clarify in CFTC Rule 190.11 that if a debtor clearing organization is organized outside the United States, then only selected provisions in Part 190 of the CFTC's regulations would apply, including (1) the general provisions in Subpart A to Part 190; (2) the reports and records requirements in CFTC Rule 190.12; and (3) the prohibition on avoidance of transfers in Rule 190.13 and the net equity calculation and treatment of property requirements in Rules 190.17 and 190.18, but only with respect to an FCM clearing member's public customers. The CFTC expressed its rationale in adopting the final scheme as a balance between protecting customers and mitigating conflict with foreign proceedings.

Additionally, the CFTC adopted a simplified CFTC Rule 190.14(b) that is consistent with DCO rules governing the default of the DCO. As originally proposed, Rule 190.14(b) included additional provisions that were intended to provide a brief opportunity, after the order for relief, to enable alternatives (i.e., resolution under Title II of the DoddFrank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") or the transfer of clearing operations to another DCO) in lieu of liquidation. In response to comments following the Proposed Rules, the CFTC withdrew proposed paragraphs (b)(2) and (b)(3) and issued the Supplemental Proposed Rules with an alternative approach to facilitate the potential resolution of a systemically important DCO under Title II of the Dodd-Frank Act. In adopting the Final Rules, the CFTC determined not to go forward with the Supplemental Proposed Rules. As adopted, Rule 190.14(b) provides only that subsequent to the order for relief, the DCO must cease making calls for variation settlement or initial margin. Relatedly, former Chairman Heath Tarbert noted that the CFTC will engage in "further analysis and development before proposing this, or any other, alternative approach."

Katten's prior advisory, "More Than a Refresh but Much Less Than A Substantial Overhaul: The CFTC Proposes Comprehensive Amendments to Its Bankruptcy Rules," includes a discussion of the Proposed Rules.

See the CFTC's Supplemental Proposed Rules.

_______________

Appendix: Chart Summarizing Changes to Part 190 of CFTC Regulations

Elias Wright, an associate in the Financial Markets and Funds practice and candidate for admission to the New York State bar, contributed to this advisory.

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The CFTC Adopts Comprehensive Amendments to Its Bankruptcy Rules - JD Supra

Understanding each homeowners best options is key to being a real estate professional who advises homeowners in need of selling their home, especially when they are upside down or in default of their mortgage.

For many homeowners, bankruptcy may be a much smarter choice than facing foreclosure. But they may not have all the information they need to make the right decision. Thats where the agent comes in.

The purpose of bankruptcy is to offer financial relief to individuals when burdened with debt and looking for a fresh start.

In bankruptcy, homeowners have the option to retain or surrender their home. If they chose to retain, the homeowner must bring their home current or qualify for a modification. The harsh reality is that the vast majority of homeowners who are delinquent in bankruptcy end up in foreclosure. For homeowners that chose to surrender their home, the bankruptcy trustee becomes the legal seller and has the right to sell the home and settle the debts. However, over 98% of surrendered homes are abandoned by the trustee pushing the obligation back on the homeowner and right into foreclosure litigation.

Today many real estate professionals learn how to sell bankruptcy real estate and become something of a knight in shining armor to their clients in need.

Offering professional real estate experience to homeowners in bankruptcy is extremely rewarding and builds long term goodwill. It is always a good feeling to help a seller in need.

Selling properties in bankruptcy is complicated but can also be very profitable. ost real estate professionals shy away from them, unsure how to assist homeowners through the process. A homeowner in bankruptcy is called a debtor, and a debtor goes through many stages while in bankruptcy, and understanding these stages and what options they have is key. Debtors have many options.

Today, real estate agents and brokers have teamed up with BK Global, a company specializing in the sale of bankruptcy properties nationwide. BK Global has built an online platform giving the over 1,250 bankruptcy trustees and mortgage servicers the ability to connect and collaborate online to simplify selling real estate assets in bankruptcy.

BK Global offers a Bankruptcy Specialist Certification that empowers real estate agents and brokers with the knowledge and solutions needed to work with a homeowner in bankruptcy.

Weve put together a training program where we certify brokers as bankruptcy-certified specialists, and we train them so that they know how to work these situations in bankruptcy, said Brad Geisen, CEO of BK Global. Brokers and agents know the best way to assist through our program. When talking to a homeowner, they know what to do and what to say. There are over 800,000 properties in bankruptcy between Chapter 7 and Chapter 13 right now, and thats before the surge.

Once you complete the certification, you are part of the BK Global broker network. BK Global assigns listings from trustees to certified agents and brokers in the local market and will refer homeowner listing opportunities on select cases. As part of their network, BK Global will help you work with the trustee and obtain lender approval from the mortgage servicer.

BK Global also provides access to all of the bankruptcy listings in your area, and you can approach the homeowners directly. You would be surprised to see how many homeowners are in bankruptcy. You can click on the link below and type in your zip or city and see current bankruptcy opportunities.

To learn to become a Certified Bankruptcy Specialist click here.

BK Global was founded by Brad Geisen, a 35-year veteran of the default real estate industry, to mitigate real estate assets in bankruptcy better. In his career, he created or operated websites such as Foreclosure.com, HomePath.com, HomeSteps.com, TaxLiens.com, HUDHouses.com, and many more. He developed and ran a pilot program for the HUD, which became the highly effective HUD M&M Program that still operates today. Mr. Geisen created the first online offer management platform which has become the industry standard used by mortgage lenders and Government-Sponsored Enterprises (GSEs).He also created a national training and education platform for GSEs and Mortgage Servicers to improve vendor performance and ensure compliance. He also developed a National Short Sale Platform, to facilitate fast, efficient approvals.

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How to help homeowners when they file bankruptcy - Inman

Thursday, January 28, 2021

The mammoth spending and COVID-19 pandemic relief bill contains provisions related to commercial real estate leases in bankruptcy. Landlords and business lessees in, or contemplating, bankruptcy will want to familiarize themselves with the new provisions.

By way of background, filing bankruptcy does not give you the automatic right to stop paying rent. Under the Bankruptcy Code, a Chapter 11 debtor must assume or reject its unexpired leases. There are conditions. First, assumption or rejection is subject to court approval. Second, the debtor must assume or reject within 120 days of filing bankruptcy or the date of an order confirming a plan of reorganization whichever is earlier. The debtor may get a 90-day extension if it can show good cause to do so, but any further extensions are subject to court approval and the lessor's consent. Third, to assume a lease, the debtor must cure all defaults. So if the lease is three months past due, the lessee must bring it current as a condition of assumption. Finally, before assuming or rejecting a lease, the debtor must "timely perform" all its obligations under the lease.

The CAA extends the assumption or rejection period from 120 days to 210 days with no court approval. Lessee debtors now have an additional three months of breathing room, and landlords now face an equally-extended period of uncertainty. A debtor can extend the period even further up to 300 days if the bankruptcy court finds good cause to do so.

As to payment of rent, bankruptcy courts now may grant subchapter V small business debtors additional time to satisfy post-petition rent obligations if the debtor is experiencing pandemic-induced financial hardship. Before the CAA, debtors could extend post-petition rent obligations up to 60 day after the petition date. Bankruptcy courts could not extend that time period beyond 60 days. The CAA allows bankruptcy courts to extend the 60-day period to 120 days for subchapter V debtors. Subchapter V debtors that receive this extraordinary relief may also repay the delayed administrative rent over time under their subchapter V plan, rather than repay it in full upon plan confirmation.

The Bankruptcy Code allows debtors and trustees to avoid and recover payments to creditors made within 90 days of the bankruptcy filing, subject to certain defenses. The specter of having to return payments can make it difficult for landlords to grant forbearance or deferralsto lessees in the shadow of bankruptcy. The CAA amends the Code to prohibit avoidance of preferential payments made by a debtor to landlords under agreements to defer or postpone payments entered into with a debtor after March 12, 2020.

These new CAA provisions are effective until the end of 2022.

2020 Ward and Smith, P.A.. All Rights Reserved.National Law Review, Volume XI, Number 28

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Breathing Room for Commercial Tenants in Bankruptcy - The National Law Review

The attorneys and professionals in the Weinstein Co. bankruptcy case have received $26 million in fees thus far, considerably more than the $17.1 million that Harvey Weinsteins victims will receive.

The legal bills are still coming in, and will likely exhaust the $3.3 million remaining in the companys accounts, according to testimony from Robert Peck, the companys former controller.

The fees represent a sizable chunk of the cost of resolving the case, but have received far less attention than the payouts to other stakeholders.

Last Monday, U.S. Bankruptcy Judge Mary Walrath approved a $35.2 million settlement, which includes the $17.1 million fund that will be paid out to more than 50 of Weinsteins sexual misconduct accusers. The plan, which is funded by insurance policies, will also pay $9.7 million to cover defense costs for Weinstein Co. directors and officers, and $8.4 million to the companys trade creditors, including law firms and other entertainment companies.

The women with the most serious allegations rape or sexual assault will be paid something in the range of $500,000 to $1 million. While not insignificant, that is much less than they would receive if the company were solvent. Likewise, the trade creditors will get just a small fraction of what they are owed.

But under bankruptcy law, the lawyers and professionals who worked on the case will be paid close to the full amount billed. Experts in the field said they were not surprised by the fee amount.

Is it a staggeringly high number? Absolutely, said Nancy Rapoport, a law professor at the University of Nevada, Las Vegas. Does it shock me for a big case? Absolutely not.

Lynn LoPucki, a law professor at UCLA, has tracked fees in bankruptcy cases for decades, and waged a lonely battle to try to rein them in. Asked about the Weinstein Co. fees, he said, Theyre high. They are high in all bankruptcy cases, because theres no one controlling them.

Cravath, Swaine & Moore, the debtors lead counsel, has billed more than $12.4 million in fees and expenses. Paul Zumbro, the firm partner who has done most of the talking in Delaware bankruptcy court, has billed the debtor at the rate of $1,725 an hour a substantial hike from the $1,360 an hour he was billing when the case began nearly three years ago. In total, Cravath has billed more than $12.4 million in fees and expenses.

The relationship between Cravath and the Weinstein Co. dates from before the companys collapse. In 2017, two Cravath attorneys Karin DeMasi and Evan Chesler represented the company in a distribution dispute. The firm continued to represent the company in litigation against Harvey Weinstein after he was fired in October 2017.

Richards, Layton and Finger, based in Wilmington, was brought in to represent the company as local counsel in the Delaware bankruptcy court. That firm, which advertises itself as Delawares largest, has billed another $4.4 million. And Pachulski Stang Ziehl & Jones has billed more than $4.8 million to represent the committee of unsecured creditors, which included three trade creditors and two sexual misconduct claimants.

Debra Grassgreen, a senior partner at Pachulski Stang who billed at the rate of $1,095 an hour, told the court at the confirmation hearing that she had had emotional conversations with many of the women. She argued that the settlement was best deal the victims were likely to get.

These women need closure, she said.

But the opponents of the deal argued that it offered protection to Weinstein and his cohorts, who otherwise could face civil liability for allegations that they enabled his abuses. The settlement bars anyone even those who opposed the bankruptcy plan from suing Weinstein Co. board members Bob Weinstein, Tarak Ben Ammar, James Dolan, Richard Koenigsberg, Marc Lasry, Lance Maerov, Jeff Sackman, Tim Sarnoff, Paul Tudor Jones, and Dirk Ziff. It also protects ex-Weinstein Co. employees Frank Gil, David Glasser, and Barbara Schneeweiss from liability.

The deal also also offers accusers a powerful inducement to settle their claims against Weinstein. A claims examiner will review each womans allegations and divide up the victims fund based on a point scale. But in order to get the full amount, the accusers must relinquish any civil claims against Harvey Weinstein. If they refuse, they will forfeit 75% of the award.

The objectors argued the deal granted Weinstein the benefit of discharging a liability, without forcing him to declare personal bankruptcy or forfeit his own assets.

Theyre effectively protecting Harvey Weinstein. Thats what the whole bottom line in this situation is, LoPucki said. Why is the bankruptcy court protecting Harvey Weinstein? Harveys not in bankruptcy. Why is he getting the same benefits he would get if he did file bankruptcy?

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Weinstein Co. Bankruptcy Attorneys to Receive Millions More Than Victims - Variety

On January 25, 2021, the Alberta Court of Appeal (the ABCA) released its reasons in PricewaterhouseCoopers Inc. v Perpetual Energy Inc., 2021 ABCA 16 (Perpetual Energy). While the issue before the ABCA was of a preliminary nature namely whether the claims of the trustee in bankruptcy (the Trustee) should be summarily dismissed or struck as not disclosing a cause of action the legal principles considered by the ABCA extend far beyond the immediate parties and include broader questions around the nature and role of abandonment and reclamation obligations (AROs) after bankruptcy, the scope of a trustee in bankruptcys duties to third parties, the duties of a director in respect of a companys environmental liabilities, and the scope of releases in favour of directors.

In particular, the ABCA considered (and in some cases, emphasized or determined) the following important issues:

In the result, the ABCA determined that the case management judges criticisms of the Trustee were entirely unwarranted. According to the ABCA, the claims raised by the Trustee were complex and, in some cases, raised novel issues, which did not permit for fair disposition on a summary basis. The ABCA accordingly allowed the Trustees appeal, set aside the award of costs made by the case management judge against the Trustee, found that the award of costs made by the case management judge against the Trustee in its personal capacity was inappropriate, and dismissed the appeal of Perpetual Energy Inc. (Perpetual Energy Parent), Susan Riddell Rose (Ms. Rose) and the other respondents.

Background

Perpetual Energy involved complex claims by the Trustee of Sequoia Resources Corp., formerly known as Perpetual Energy Operating Corp. (Perpetual/Sequoia), against a former director of Sequoia and certain other companies in the Perpetual Energy Group arising from a pre-bankruptcy multi-step transaction.

Transaction

In 2016, Perpetual Energy Parent entered into a multi-step transaction (the Aggregate Transaction) whereby certain mature legacy oil and gas assets, which had significant AROs associated with them, were sold to Kailas Capital Corp. (Kailas). The Aggregate Transaction was structured such that the legacy assets could be transferred without triggering a regulatory review process from the Alberta Energy Regulator (AER).

As part of the Aggregate Transaction, Perpetual Operating Trust, the holder of the legacy assets, initially transferred the beneficial interest in the assets to its trustee, Perpetual/Sequoia, which was then a member of the Perpetual Energy Group (the Asset Transaction). Then, Perpetual Energy Parent sold all of its shares in Perpetual/Sequoia to a subsidiary of Kailas for $1.00, resulting in Kailas becoming the new parent corporation of Perpetual/Sequoia. As is common in sale transactions, Kailas and the sole director of Perpetual/Sequoia, Ms. Rose, signed a resignation and mutual release (the Release) pursuant to which Ms. Rose and Perpetual/Sequoia released each other from claims that they might otherwise be entitled to bring against the other.

Approximately 18 months after the Aggregate Transaction, Perpetual/Sequoia assigned itself into bankruptcy, and PricewaterhouseCoopers Inc. was appointed as Trustee.

Dispute

Following its appointment, the Trustee reviewed Perpetual/Sequoias affairs and concluded that the Asset Transaction was not in the best interests of Perpetual/Sequoia. In particular, the Trustee alleged that Perpetual/Sequoia obtained only $5.67 million in value for the assets but assumed more than $223 million in obligations, including AROs.

The Trustee commenced litigation against Perpetual Energy Parent, Ms. Rose and other members of the Perpetual Energy Group, alleging that

Both the Trustee and the defendants applied for summary judgment of the claims.

Summary judgment decisions

The case management judge struck or summarily dismissed most of the Trustees claims. In particular, the Oppression Claim was struck for failure to disclose a cause of action, because the Trustee was not a proper person to be a complainant pursuant to the Business Corporations Act (Alberta), or alternatively because the oppression claim lacked merit. The claim against Ms. Rose was struck for failure to disclose a cause of action, and it was also summarily dismissed on the basis that the Release was a complete defence.

Subsequently, the case management judge ruled that the Trustee should pay 85% of Ms. Roses solicitor and client costs, and that the Trustee should be personally liable for those costs. In his costs judgment, the case management judge set out several new duties that he found the Trustee owed to Ms. Rose (which duties he found the Trustee had breached), including that the Trustee owed a duty of procedural fairness to Ms. Rose in the course of conducting its investigations.

The Trustee and the Perpetual Energy defendants both appealed the summary judgment decisions, and the Trustee also appealed the costs award.

Result

The ABCA:

Analysis

Nature of AROs

Central to these decisions was the SCCs decision in Redwater, which confirmed that the AER was not a creditor with respect to AROs and that AROs were not claims provable in bankruptcy. In reliance on this proposition, the case management judge determined that AROs were assumptions and speculations that did not exist, were not obligations of Perpetual/Sequoia, and therefore should be valued as nil on Perpetual/Sequoias balance sheet.

Rejecting the case management judges interpretation of Redwater, the ABCA noted that AROs may not be current liabilities or obligations of a company, but are nevertheless real liabilities. While such obligations may be contingent in the sense that the moment that production will cease and such obligations come into existence may be uncertain, they are not contingent in the sense that they will only come into existence upon the occurrence of a defined condition precedent. The existence of AROs is a certainty, as their coming into existence is inevitable.

As a result of this analysis, the ABCA noted that while AROs may not be conventional debt, they are an obligation of oil and gas companies owed to the public and surface landowners that the trustee in bankruptcy cannot ignore. AROs operate in the insolvency context by depressing the value of the assets and, as the SCC held in Redwater, are obligations that must be discharged even in priority to paying secured creditors.

The ABCAs conclusions regarding the nature of AROs had a significant impact on the result reached by the Court:

The ABCAs determination that AROs are real obligations and liabilities of oil and gas companies in Alberta accords with common understandings of the term in Alberta and with what the ABCA found to be common practice amongst many oil and gas companies to report such obligations on their balance sheets. The decision resolves what has been criticized as the absurd interpretation of AROs reached by the case management judge, which has been noted as open[ing] the door to interpretations where general laws become meaningless and only debts owed to creditors count[4] a result expressly rejected by the SCC in Redwater. The ABCAs decision resolves the apparent disjunction between, on the one hand, the polluter pays principle endorsed by the SCC in Redwater and, on the other hand, the case management judges application of Redwater in a manner that permitted the Perpetual Energy Parent to take the benefit of oil and gas assets while producing, and then shed associated AROs when no longer economically viable.

While simply a byproduct of the ABCAs decision, the result reached by the ABCA establishes a thread of consistency between the courts and the AER to create greater accountability for environmental protection and remediation by those who choose to participate in Albertas oil and gas industry. View information on the latest steps taken by the AER to implement its new Liability Management Framework.

The status of the Trustee in advancing oppression claims

In declining to grant the Trustee status as a complainant, the ABCA held that the case management judge failed to appreciate the collective nature of the role of the trustee in bankruptcy. The Trustee was not purporting to bring the oppression action on behalf of individual creditors, but on behalf of the entire estate of Perpetual/Sequoia. As the ABCA noted, by definition, the Trustee represents all creditors of the bankrupt, and the aggregate claims in a bankruptcy always consist of a number of individual claims.

Importantly, the ABCA confirmed prior jurisprudence establishing that oppression claims are not to be used as a method of debt collection; the mere fact that a corporation does not or cannot pay its debts as they come due does not amount to oppression. However, as the ABCA clarified, the Trustee was not asserting that Perpetual/Sequoia could not simply pay a debt. The Trustees allegation was that Perpetual/Sequoia had been reorganized in such a way that it had been rendered unable to pay its debts. The Trustee alleged that the Asset Transaction was unfairly prejudicial to the creditors of Perpetual/Sequoia.

Whether the Trustee will be able to prove this claim remains to be seen, but the ABCA held that the oppression claim ought not to have been summarily dismissed. Noting the complexity of the issues raised by the Trustee, the ABCA determined that the oppression claim should be restored and the Trustee granted complainant status to pursue such claim if it so wished.

The scope of directors duties

Without deciding the issue, the ABCA highlighted that a director may potentially owe an obligation to ensure that the corporation complies with its environmental obligations. Such obligation is currently potential and ill-defined, and could be owed to the public, not necessarily to the corporation exclusively. The ABCA emphasized that the Trustee sought to hold Ms. Rose to account for allegedly having structured the affairs of Perpetual/Sequoia in such a way that made it impossible for Perpetual/Sequoia to discharge its public obligations. This was a novel claim that should not have been resolved summarily.

The ABCA observed that generalized releases of directors (which are commonly used in change of control situations) may not cover a directors potential obligation regarding environmental liabilities. Since this obligation may be owed to the public, private parties may not be able to release a director from it.

The ABCA also emphasized that there is no change in a directors duties when a director is acting for a special purpose corporation or wholly owned subsidiary: a director must always act in the best interest of the corporation. As sole director, Ms. Rose was responsible for ensuring that the Asset Transaction was in the best interests of Perpetual/Sequoia: if Ms. Rose did not agree that the instructions [from Perpetual Energy Parent] were in the best interests of Perpetual/Sequoia, her obligation was to resign. At this stage, it was inappropriate to strike or dismiss the Trustees claim for breach of directors duties.

Finally, this decision suggests that directors and officers should take care to evaluate separately all steps involved in multi-step transactions, which are often used for tax planning purposes. Although it has long been accepted that a taxpayer can structure its affairs to reduce tax liability, that concept does not apply to Section 96 of the BIA. When addressing the Trustees claim that the Asset Transaction was void pursuant to Section 96, the Perpetual Energy Group argued that the Asset Transaction should be analyzed only as a component of the overall Aggregate Transaction which was, writ large, an arms-length transaction and not voidable under Section 96. However, the ABCA indicated a willingness to analyze the transactions on a step-by-step basis, and not in the aggregate. The ABCA observed that if a transaction is entered into in violation of Section 96, it is no defence that it was connected to a number of other transactions that did not engage Section 96 at all. The ABCA did not determine whether an oil and gas company can arrange its affairs so as to avoid regulatory scrutiny, in a manner that is analogous to income tax law. Redwater does not provide an answer on this point and this type of novel issue must be tested at trial.

The scope of the duties of a trustee

The case management judge heard a subsequent application by Ms. Rose for enhanced costs and concluded that the Trustee should pay 85% of Ms. Roses solicitor and client costs and that the Trustee should be personally liable for those costs. The case management judge made that determination on the basis that the Trustee, as an officer of the court, should be held to a higher standard than normal litigants. Such higher standard required the Trustee to comply with principles of procedural fairness; comply with duties imposed by the courts of equity on trustees in general (that is, not trustees in bankruptcy); present facts to the court without opinions, argument or evidence; and complete an appropriate investigation prior to commencing litigation. The case management judge concluded that in failing to meet those higher standards, the Trustees conduct was egregious and the Trustee exercised very poor judgment that equate to positive misconduct.

Overturning the case management judge, the ABCA found that there was nothing egregious about the Trustees conduct, that the criticisms levied by the case management judge against the Trustee were unwarranted, and that the case management judge had made errors both in principle and in law in awarding costs against the Trustee. Most importantly, the ABCA affirmed that while a trustee in bankruptcy is an officer of the court, a trustee in bankruptcys primary duty is to the creditors of the estate through the inspectors. A trustee in bankruptcy does not owe duties to potential defendants in estate litigation, and in fact would be placed in a conflict of interest if it was also under a legal duty to third parties. As the ABCA noted, a trustee in bankruptcy is not an administrative tribunal, and the principles of administrative law have no application in civil commercial matters. As a result, the Trustee had no obligation to hear the defendants views before pursuing litigation or provide the defendants with advance notice of a statement of claim.

Furthermore, as the ABCA noted, a trustee in bankruptcys position and exercise of judgment could require it to take an adversarial role in litigation. Once the Trustee came to the conclusion that Perpetual/Sequoia had potential claims against various defendants, the Trustee was not only correct to pursue those claims but obliged to do so.

Overall, the ABCA judgment strongly affirms a trustee in bankruptcys duty to creditors and its obligation to exercise its own judgment, under the supervision of inspectors, for the benefit of the bankrupt estate. In pursuing this duty, a trustee is not burdened by administrative law obligations and has no generalized duty of fairness to third parties.

PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2021 ABQB 2

Prior to the release of the ABCAs decision, the case management judge released a further decision on the merits of the Section 96 Claim on January 14, 2021, in PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2021 ABQB 2. In this decision, the Alberta Court of Queens Bench (the ABQB) found that Perpetual/Sequoia was not insolvent at the time of the Asset Transaction or rendered insolvent by the Asset Transaction. Underpinning this finding was the assertion that AROs should be valued at nil for the purposes of the BIA. As the ABCA has now unequivocally rejected this view, thereby undermining the foundation of the ABQB decision, the ABCA may have a further opportunity to revisit these issues in short order.

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Sequoia Resources: Environmental obligations and the role of the trustee in bankruptcy - Lexology

Fox Business Flash top headlines are here. Check out what's clicking on FoxBusiness.com.

The National Rifle Association (NRA) touted that it's in its bestfinancial position in years, despite declaringbankruptcyearlier this month.

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The nations most politically influential gun-rights advocacy groupannounced on Jan. 15 that it was seeking relief in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. However, the NRA has said it is looking to re-incorporate in Texas from New York where it has beenincorporated for 150 years. The group's longtime home state has filed a lawsuit to dissolve the organization.

According to a note on the NRA's website,however, the group isn't under financial constraints at all.

"Is the NRA going bankrupt? aQ&Asection on the gun lobbying group's website read.

The NRA's response: "No. In fact, this move comes at a time when the NRA is in its strongest financial condition in years."The group continued,saying "the NRA is not insolvent."

The NRA's website alluded to the fact that its decision to file had nothing to do with its financial position at all, but instead the result of a lawsuit against them from the state of New York.

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"This action is necessitated primarily by one thing: the unhinged and political attack against the NRA by the New York Attorney General," the NRA's website reads.

In August, New York Attorney General Letitia Jamessued the organization over claims that top executives illegally diverted tens of millions of dollars for lavish personal trips, no-show contracts for associates and other questionable expenditures.

Letitia James, New York's attorney general, speaks during a news conference in New York on Aug. 6, 2020. (Photographer: Peter Foley/Bloomberg via Getty Images)

The suithighlighted misspending and self-dealing claims that have roiled the NRA and its longtime leader, Wayne LaPierre, in recent years from hair and makeup for his wife to a $17 million post-employment contract for himself.

James said the group had been "failing to carry out its stated mission" for many years and rather"operated as a breeding ground for greed, abuse and brazen illegality."

NRA FILES FOR BANKRUPTCY, ANNOUNCES IT'S DITCHING NEW YORK FOR TEXAS

Meanwhile, NRA President Carolyn Meadows had labeled James a political opportunist who was pursuing a rank vendetta with an attack on its members Second Amendment rights.

The move to Texas and the decision to reincorporate as a nonprofit is part of the group's strategic plan called Project Freedom.

The group claims restructuring is a "proven mechanism for streamlining legal and business affairs" and will ensure its "continued success."

By moving to Texas, home to more than 400,000 NRA members, the NRA aims to "streamline costs and expenses" while proceeding "with pending litigation in a coordinated and structured manner."

However,their tactic drew even more criticism from James

The NRAs claimed financial status has finally met its moral status: bankrupt," she said in a statement after their Jan. 15 filing. "While we review this filing, we will not allow the NRA to use this or any other tactic to evade accountability and my offices oversight.

Although the NRA is headquartered in Virginia, the NRA was chartered as a nonprofit in New York in 1871 and is incorporated in the state.

The Associated Press contributed to his report.

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NRA says strongest financial position 'in years' despite filing for bankruptcy. Here's why - Fox Business

On December 3, 2020, the United States Bankruptcy Court for the District of Delaware entered an opinion in In re Extraction Oil & Gas, Inc., Case No. 20-11548 (CSS), holding that two entities (the State Court Plaintiffs) violated the automatic stay of 11 U.S.C. 362(a) when those entities commenced and prosecuted litigation against non-debtor entities in Colorado state court and entered into a settlement agreement with the non-debtor entities. The Courts opinion provides useful guidance regarding the scope of the automatic stay of 11 U.S.C. 362(a).

Prior to the commencement of the bankruptcy case, the Debtors who were in the business of extracting hydrocarbons from land in Colorado entered into a Transportation Services Agreement (TSA) with the State Court Plaintiffs. The Debtors TSA with the State Court Plaintiffs required, among other things, that the Debtors ship a minimum volume of oil using the State Court Plaintiffs pipelines or make cash payments to the State Court Plaintiffs if the Debtors failed to do so.

Post-petition, the Debtors moved to reject the TSA and engaged alternative service providers (the Alternative Service Providers) to transport the Debtors oil. Asserting that the Debtors actions would cause irreparable harm, the State Court Plaintiffs commenced the Colorado state court action against the Alternative Service Providers, but not the Debtors, and sought a temporary restraining order against those entities. The Court in the Colorado state court action granted the State Court Plaintiffs request for a temporary restraining order, requiring the Alternative Service Providers to cease all diversion and transport of crude oil from the Extraction wells. Thereafter, the State Court Plaintiffs and the Alternative Service Providers entered into a settlement agreement (the Settlement Agreement) in which the Alternative Service Providers agreed to, among other things, not receive oil from certain locations identified in the Colorado state court litigation.

In the bankruptcy case, the Debtors moved the Court for an order finding that the State Court Plaintiffs commencement of the Colorado state court action and entry into the Settlement Agreement violated the automatic stay of 11 U.S.C. 362(a). In response, the State Court Plaintiffs argued that the Debtors were impermissibly seeking to extend the automatic stay of 11 U.S.C. 362(a) to non-debtors as they commenced the Colorado state court action against the Alternative Service Providers, not the Debtors.

The Court disagreed with the State Court Plaintiffs. The Court explained that 11 U.S.C. 362(a)(3) prohibits any act to obtain possession of property of the estate or to exercise control over property of the estate. The Court further explained that the Debtors contractual and business relationships with the Alternative Service Providers are property of the Debtors bankruptcy estates. The Court then found that the State Court Plaintiffs attempted to exercise control over of the Debtors contractual and business relationships with the Alternative Service Providers through their prosecution of the Colorado state court action and entry into the Settlement Agreement. As such, the State Court Plaintiffs violated the automatic stay of 11 U.S.C. 362(a) despite the fact that they had commenced the Colorado state court action against the Alternative Service Providers and not the Debtors.

The key takeaway from the Courts decision is that a creditor may violate the automatic stay of 11 U.S.C. 362(a) even where it commences an action against an entity other than a debtor in bankruptcy. Indeed, the relevant inquiry for the Court was not whether the State Court Plaintiffs had taken action against the Debtors, but rather whether the State Court Plaintiffs sought to exercise control over property of the Debtors bankruptcy estates.

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Delaware Bankruptcy Court Provides Guidance on the Scope of The Automatic Stay - JD Supra

By Kevin Hardy

The Kansas City Star

AMC Theatres says it has raised nearly $1 billion in recent weeks a sum that should help the struggling movie theater chain avoid filing for bankruptcy protection.

The Leawood, Kan.-chain announced Monday that it had raised $917 million in new equity and debt financing. In a news release, AMC CEO and President Adam Aron said the sun is shining on AMC.

This means that any talk of an imminent bankruptcy for AMC is completely off the table, his statement said.

AMC operates movie theaters in Hummels Wharf, Williamsport and Bloomsburg.

In October, AMC warned investors it could run out of cash by the beginning of 2021. Movie theaters have been hit particularly hard by the pandemic, as both consumer demand has sunk and studios have limited the release of new films.

AMC, the worlds largest movie theater chain, said its latest infusion of cash should allow the company to make it through this dark coronavirus-impacted winter.

Still, the future remains uncertain: AMC lost money in 2017 and 2019, carried more than $4 billion in debt and had little cash on hand going into the pandemic. And its unclear how many consumers will go back to movie theaters after the pandemic is under control, particularly as Hollywood has more quickly moved content directly to streaming services.

One expert predicts as many as a quarter of the 7,800 movie theaters in the United States could close because of the pandemic.

Liberty, Mo.-based B&B Theatres, a family owned chain, also has publicly acknowledged the possibility of a bankruptcy restructuring,

In a filing with the Securities and Exchange Commission, AMC acknowledged that its survival is still dependent on future consumer traffic.

AMC says its latest fundraising should keep the chain alive through July 2021 if theater attendance does not improve. If attendance increases and the chain can obtain more rent concessions from landlords, it could have enough cash to operate through the end of 2021, the filing said.

Looking ahead, for AMC to succeed over the medium term, we are going to need for much of the general public in the U.S. and abroad to be vaccinated, Aron said in Mondays news release. To that end, we are grateful to the worlds medical communities for their heroic efforts to thwart the COVID virus. Similarly, we welcome the commitment by the new Biden administration and of other governments domestically and internationally to a broad-based vaccination program.

We are making critical coverage of the coronavirus available for free. Please consider subscribing so we can continue to bring you the latest news and information on this developing story.

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AMC Theatres raises nearly $1 billion and avoids 'imminent' bankruptcy - Sunbury Daily Item

UPPER WEST SIDE, NY The Upper West Side recently lost another retail store, as the body, face, fragrance, and home retailer L'Occintane shuttered its Columbus location over the past week.

L'Occitane on Columbus Avenue and 69th Street had occupied the space for 31 years, becoming a staple of the neighborhood and earning a cameo in the 1998 film "You've Got Mail."

The L'Occitane at 75th and Broadway also looks to be closing soon. The store was shuttered over the weekend with no inventory in the retailer and a sign on the store window directing customers to its Columbus Circle location.

The closings come days after L'Occitane filed for bankruptcy.

L'Occtitane mentioned in the filings a 56 percent decrease in revenue from April to December 2020 due to the COVID-19 pandemic and that landlords have been reluctant to negotiate new leases given the current circumstances.

L'Occitane management intends to "reject certain leases in order to right-size its brick-and-mortar footprint to better position itself for long-term success," according to the filing.

The Columbus location was one of these leases rejected and it looks like the Broadway lease isn't far behind.

Additionally, the L'Occitane on Broadway was sued for back rent in December by its landlord. The lawsuit claimed that pay its $62,000 per month rent between April and December.

While the Upper West Side looks like it's losing two L'Occitane locations, at least one will remain within the Shops at Columbus Circle.

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UWS LOccitane Closes Amid Bankruptcy After 30 Years Of Service - Upper West Side, NY Patch

The dismal financial outlook in Newfoundland and Labrador was centre stage in an election debate Wednesday night, with party leaders sparring over what to do about the provinces massive debt and spending problems.

Liberal Leader and incumbent Premier Andrew Furey said he disliked how his opponent uses the term bankruptcy to define the provinces fiscal troubles. By using that word on the campaign trail, Progressive Conservative Leader Ches Crosbie was already waving the flag of defeat, Furey said.

Mr. Crosbie is campaigning to be the last premier of Newfoundland and Labrador, the Premier added.

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The Tory leader hit back: Im a straight shooter. And thats why I use words like bankrupt, because it cuts to the heart of the matter.

With a net debt of $16.4-billion, the Atlantic province of about 520,000 people has the highest debt-to-GDP ratio in the country. Debt-servicing costs are the provinces second-largest expense after health care. Experts say with no sign of resuscitation in the local offshore oil industry, those costs will only get worse if drastic measures arent taken.

The debate gave voters a look at Fureys fiscal priorities after a Liberal campaign defined largely by low-stakes announcements about community gardens and programs to unite youth and seniors.

Furey repeatedly brought up the troubled Muskrat Falls hydroelectric project, whose costs essentially doubled to $13.1-billion since it was given the green light in 2012 under a previous Tory government. Without a change in course, electricity rates in the province could also double, in order to pay for the project.

We have to deal with Muskrat Falls first, Furey insisted as he defended himself against attacks from Crosbie, who said Furey didnt know how to get the province out of its fiscal hole. Furey touted the recent deal hed struck with Ottawa, allowing the province to defer $840 million in financing payments for the project, emphasizing that talks with the federal government about the staggering costs and burden of the ill-fated project had only just begun.

These are all the things Ive brought to the table in the first five months gimme four years, he said.

The Liberal leader also had to fend off accusations from NDP Leader Alison Coffin, who said he wasnt willing to make the right investments to help struggling voters escape poverty.

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Furey said no magic bullet is going to fix Newfoundland and Labradors financial mess. He didnt give specific details on how he would pull the province out of debt, but said mass layoffs arent the answer.

We didnt get into these fiscal issue because of the hard work of nurses, Furey said.

Well Im glad to hear we wont be cutting, Coffin told Furey. But, she added, the province should be spending more on public sector employees like nurses and paramedics. Front-line health-care workers are overworked and stressed out, Coffin said, adding that they need more support, not less.

Furey, who was an orthopedic surgeon before he became premier in August, reminded his colleagues that he was the only one in the room who had direct experience working alongside overburdened health-care workers.

Coffin also called for a $15 minimum wage and dismissed Fureys suggestion that raising the minimum wage would make the province uncompetitive. We dont want to be known as the place where you can come and get cheap labour, she said.

Crosbie, meanwhile, said he wanted to go over the provinces expenditures line by line to cut waste. But thats only half of what is required, he said, adding that the province needs to increase economic growth.

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With just 10 days left before the Feb. 13 vote, only one party the NDP had released a platform by Wednesday night. The Liberals and Progressive Conservatives have said they will release their platforms this week, though neither provided an exact date.

Heading into the election, the Liberals held 19 of the legislatures 40 seats, the Progressive Conservatives held 15 seats, the NDP had three and there were three Independents.

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Party leaders spar over how to handle N.L. looming bankruptcy at leaders debate - The Globe and Mail

Photo courtesy Belk

The Belk department store chain announced this week it will file for Chapter 11 bankruptcy and enter into a restructuring agreement with majority owner Sycamore Partners.

Stores will remain open and Belk plans to continue normal operations throughout the process, the company said in a news release.

Customers will continue to receive the quality merchandise and service they expect when shopping at Belks stores across the southeast and online, the release said. The infusion of new capital is expected to support Belks continued investment in strategic initiatives, including delivering a seamless omnichannel shopping experience and expanding Belks product offerings in Home Goods, Outdoor and Wellness.

The Charlotte-based company said it has received financing commitments for $225 million in new capital from Sycamore, KKR and Blackstone, along with some of its existing lenders, CNBC reported.

Belk, which opened its first store in 1888, hopes to exit Chapter 11 bankruptcy by the end of February. Belk has an Outer Banks store in the Dare Centre in Kill Devil Hills.

Belk has a 130-year legacy of providing quality products at great prices, saidLisa Harper, Belk CEO. Like all retailers navigating COVID-19, our priority has been the safety of our associates, customers and communities. As the ongoing effects of the pandemic have continued, weve been assessing potential options to protect our future.

Were confident that this agreement puts us on the right long-term path toward significantly reducing our debt and providing us with greater financial flexibility to meet our obligations and to continue investing in our business, including further enhancements and additions to Belks omnichannel capabilities.

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Belk plans to file for Chapter 11 bankruptcy protection, but stores will remain open - OBXToday.com

The coronavirus pandemic appeared to be the final straw for a number of retailers that filed for bankruptcy in 2020, a year in which major apparel companies including J.C. Penney Co. Inc., Neiman Marcus Group, J. Crew Group Inc., Brooks Brothers, Tailored Brands Inc. and more filed for Chapter 11.

But the economic downturn sparked by the pandemic is expected to have the slow-burn effect it often does, with more companies headed for financial trouble as the pandemic persists into 2021 and the point of widespread vaccinations still lies months away, experts said.

I think there are a lot of retailers out there who were just on the edge, and trying to make it through, hoping that the holiday season would be successful for them, and successful enough to see a greater future that would allow them to avoid bankruptcy, said Schuyler Carroll, a partner at Loeb & Loeb LLP.

What Im hearing is that there are some of those, and there are some of those that are not going to be able to make it and will be looking to a bankruptcy to try and preserve some future, he added.

I think most of the retailers that have made it this far, theyre hoping to avoid a liquidation, he said. If their holiday season was not good enough, theyll have to resort to liquidation or resort to bankruptcy to bring in new investors, or a sale, or slim down their operations in some way.

Bankruptcy attorneys are also anticipating a ripple effect from retailers financial troubles, expecting that the impact on landlords and suppliers will start to become more apparent in 2021.

More recently, real estate investment trusts including mall operator CBL & Associates Properties Inc. and the Pennsylvanian REIT have filed for bankruptcy protection.

From the landlord perspective, the economics have shifted, said Brad Sandler, who co-chairs the creditors committee practice group at Pachulski Stang Ziehl & Jones. REITs that are less stablethey tend to be [those] that have the B- and C-quality malls and I think that we very well may see some of them restructure, either in or out of court in 2021.

The U.S. courts system issued findings in July that said business bankruptcy filings at that point were about the same as a year ago, at nearly 22,500 filings.

Bankruptcy filings tend to escalate gradually after an economic downturn starts, according to the report. Following the Great Recession, new filings escalated over a two-year period until they peaked in 2010.

But the pandemic has accelerated trends that were already eroding traditional retail. In August, mall traffic at large real estate companies including Simon Property Group Inc., Brookfield Property, Taubman Centers Inc. and others had declined roughly 15 percent from last year, according to a report by S&P Global Market Intelligence analysis based on information from data collection company AirSage.

E-commerce has continued to soar, with online sales over the 2020 holiday season increasing 49 percent from last year, according to data from Mastercards data arm Mastercard SpendingPulse.

An issue tied to all of that is going to be dealing with the supply chain, and drawing customers in and making sure your supply chain doesnt get tied up with disruptions, said Sandler of Pachulski Stang Ziehl & Jones. Its going to be really important for retailers in 2021 to focus on their supply chain management.

Bankruptcy courts, meanwhile, have stayed busy and functional throughout the pandemic, with judges adapting their processes, hosting virtual hearings, conferences and mediations to shepherd cases along, and granting rent deferrals during the bankruptcy where retailers seek it.

Having remote proceedings has allowed stakeholders who previously might not have been able to travel to physical proceedings to now simply appear electronically and be heard in court, said Melanie Cyganowski of Otterbourg PC, a former bankruptcy judge in New York.

I think the bottom line is that the bankruptcy courts are very sensitive, and are able to respond to the nuances of the time period that theyre facing, said Cyganowski. And so, if the bankruptcy laws permit a flexible approach, more likely than not, they will take it.

Another development that has made the bankruptcy court more accessible is the relatively new Subchapter V process, which was created by the Small Business Reorganization Act of 2019 to make the process more affordable for small businesses with smaller debt loads. Furla USA, for instance, is currently in the process of reorganizing through Subchapter V of the Chapter 11 process.

The amount of fees that will be spent in these Chapter 11s is enormous, if youre somebody who has one store, or two stores, you typically really couldnt do it, because it was so expensive, said Paul Aloe, partner at Kudman Trachten Aloe Posner LLP.

I think Subchapter V is going to be very important, he said. You really have an expedited, streamlined procedure.

Ultimately, the fashion industrys recovery and fate will hinge on keeping up with the role of clothing in a pandemic world. The restricted opportunities for dressing up, from corporate offices continuing to allow employees to work remotely to the dwindling number of social events, will have implications for how people think about their wardrobes, said Cyganowski, the former bankruptcy judge.

What are we using clothes for, if people are not going out, if theyre not going out to dinner, if theyre not going on dates, if theyre not going to the theater, if theyre not going to work? she reflected.

Its like, 75 percent of a wardrobe is not being used if people dont get excited about, Oh, Ive got to get a holiday dress, Ive got to get a winter coat, she said.

The pandemic is affecting so much of a part of our lives, that I just think that retail is going to have a very difficult time coming back, Cyganowski said.

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The State of Retail Bankruptcies in 2021 - WWD

Law360 (January 3, 2021, 12:02 PM EST) -- Even as programs guarding against COVID-19 are being unveiled and bringing hope of a return to normalcy, restructuring professionals say the vaccines won't be a shot in the arm for struggling businesses as the financial hardship triggered by the pandemic will continue into 2021.

Commercial Real Estate

The last year saw thousands of retail locations shuttered permanently as the pandemic exposed long-running weaknesses in the industry, and with no end to the challenges created by the coronavirus, landlords will begin feeling the pain of empty storefronts in the new year.

According to Kevin J. Clancy, global director of the restructuring and...

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Bankruptcy Trends To Watch In 2021 - Law360

The new Consolidated Appropriations Act, 2021 (the Act), which was signed into law on December 27, 2020 (H.R. 133), includes within its 5,593 pages a number of new bankruptcy relief provisions for businesses as part of what the legislation calls the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. Additional bankruptcy relief provisions are found in a miscellaneous section of the Act. A summary of the relief provisions that will affect businesses, predominately small businesses, follows.

Under regulations adopted by the SBA in response to the CARES Act, businesses in bankruptcy were disqualified from receiving PPP loans. The SBA regulations spawned an avalanche of litigation which challenged them on grounds that they were unlawfully discriminatory under 11 U.S.C. 525(a), see e.g. In re Springfield Hospital, Inc., 618 B.R. 70, 80-93 (Bankr. D. Vt. June 22, 2020), appeal pending Nos. 20-3902, 20-3903 (2d Cir.), or were arbitrary and capricious or exceeded the SBAs rulemaking authority. See e.g. In re Gateway Radiology Consultants, P.C., 2020 WL 7579338 (11th Cir. Dec. 22, 2020) (reversing bankruptcy courts ruling striking down the regulations as exceeding SBA authority and as arbitrary and capricious).

In somewhat of quizzical intermediate approach, the new law provides that only debtors that are proceeding under Subchapter V of Chapter 11, which is the Small Business Reorganization Act of 2019 (SBRA), as well as Chapter 12 and Chapter 13 debtors, may apply to the bankruptcy court for a PPP loan. The provisions of SBRA are summarized here,with the caveat that the debt limitations to qualify for SBRA were expanded by the CARES Act to $7.5 million. This new provision is yet another advantage to seeking relief under Subchapter V, but does nothing to resolve the pending litigation over the SBAs prohibition against extending PPP loans to Chapter 11 debtors that are not proceeding under Subchapter V.

Under the new provision, which amends 364 of the Bankruptcy Code, a qualifying debtor may apply for and obtain authority to receive a PPP loan which, if not forgiven, will be treated as a superpriority administrative expense in the Chapter 11 proceeding, which means it will come ahead of all administrative expenses in the case. If such an application is made, the bankruptcy court is required to hear it within seven days of the filing and service of the application. In addition, the debtors plan of reorganization may provide that the PPP loan, if not forgiven, may be paid back under the terms on which it was originally made, which are favorable.

Section 365(d)(3) of the Bankruptcy Code requires that Chapter 11 debtors continue to pay rent and comply with all other obligations under a lease of commercial real estate from and after the bankruptcy filing date, but vests authority in the bankruptcy court to extend the time of performance under such a lease for up to 60 days. In yet another plum given to Subchapter V debtors, that section has been amended to allow the bankruptcy court to extend the time for performance under these type of leases for a Subchapter V debtor for an additional 60 days, but only if the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the COVID-19 pandemic.

The period of time within which a Chapter 11 debtor has to either assume or reject a lease of commercial real estate has also been changed. With the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), a Chapter 11 debtor became limited to a period of 120 days, or 210 days with the court's permission, to decide whether to assume or reject nonresidential real property leases. Prior to BAPCPA, the initial period of time to make that decision was 60 days, but it could be extended by the bankruptcy court for cause without any outside time limitation.

Under the Act, the period of time to decide whether to assume or reject a lease of commercial real estate has been expanded to 210 days, subject to an additional 90 days with the bankruptcy courts permission.

There is a sunset provision for the foregoing amendments that is two years after the date of enactment of the Act.

The Act appears to recognize that many landlords and suppliers have entered into forbearance or deferral agreements with businesses in financial trouble due to the pandemic, and laudably provides preference protection for payments that are made pursuant to these types of agreements. Generally, a payment to a creditor that is made within 90 days of a bankruptcy filing on account of a pre-existing debt can be recovered, or clawed back to the bankruptcy estate, as a preferential transfer (subject to certain defenses).

For landlords of a commercial tenant, any covered payment of rental arrearages will be protected from avoidance as a preference if: (i) the payment is made pursuant to an agreement or arrangement to defer or postpone the payment of rent or other charges under the lease, (ii) the agreement or arrangement was made or entered into on or before March 13, 2020, and (iii) the amount deferred or postponed does not, (A) exceed the rent and other charges that were owed under the lease prior to March 13, 2020, and (B) include fees, penalties, or interest in an amount that is greater than what would be owed under the lease, or include any fees, penalties, or interest that would be greater than what would be charged if the debtor had paid all amounts due under the lease timely and in full before March 13, 2020.

For suppliers of goods and services, the protection given is similar to that provided for landlords. Specifically, any covered payment of supplier arrearages will be protected from avoidance as a preference if: (i) the payment is made pursuant to an agreement or arrangement to defer or postpone the payment of amounts due under a contract for goods or services, (ii) the agreement or arrangement is made on or before March 13, 2020, (iii) the amount deferred or postponed does not, (A) exceed the amount that was due under the contract prior to March 13, 2020, and (B) include fees, penalties, or interest in an amount that is greater than what would be owed under the contract, or include any fees, penalties, or interest that would be greater than what would be charged if the debtor had paid all amounts due under the contract timely and in full before March 13, 2020.

There is a sunset provision for the foregoing amendments that is two years after the date of enactment of the Act.

The ability of a Subchapter V debtor to obtain a PPP loan while in bankruptcy is certainly a welcome addition to the bankruptcy landscape, but left in lurch are larger companies that do not seem less deserving of the same relief. Subchapter V debtors that are materially affected by the pandemic will also benefit from an additional form of rent relief based on the new authority given to bankruptcy courts to extend the debtors time for paying rent and other charges under a lease of commercial real estate for an additional 60 days, on top of the 60-day deferral period that already existed in the law. And all Chapter 11 debtors will now be given at least 210 days to decide whether to assume or reject such leases, subject to an additional 90 days with the courts permission.

The new provisions protecting landlords and suppliers from having to disgorge payments that might otherwise be considered preferences if they are made pursuant to a deferral or forbearance agreement reflect a sensible recognition that such arrangements were designed to provide financial assistance to a struggling business and are deserving of protection.

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New Bankruptcy Relief Provisions Brought to You by the 2021 Federal Appropriations Act - JD Supra

The energy sector rang in 2020 with a wave of bankruptcies, setting the tone for a year that would only get worse. Indeed, the record-setting number of bankruptcies in Texas and by companies with Texas ties was probably only good for bankruptcy lawyers kept busy by wave after wave of filings.

Through the first 11 months of the year, 1,656 companies filed for bankruptcy protection in Texas, a tally from the Texas Lawbook shows. That compares with 610 in the year-ago period. The Lawbook highlighted 76 complex Chapter 11 filings of $250 million or more by companies based in or filing in Texas. Energy companies accounted for the vast majority of those filings.

Retailers, already battered by the increase in e-commerce, were dealt another blow when the pandemic hit and brick-and-mortar shopping for a while came to a complete standstill. Ten major Texas retailers sought protection from the bankruptcy courts, and not all will reorganize.

Among the largest companies to file in 2020 was Arena Energy, an offshore oil and gas business operating in the Gulf of Mexico. It sought bankruptcy protection in August, with more than $1 billion of debt and just $35 million of cash on hand.

Oil field services company McDermott International filed for bankruptcy in January before the pandemic took hold and was able to emerge in June, shedding $4.6 billion of debt and with more than $2.9 billion in fresh credit and loans.

Fewer large Texas retailers sought protection, but there was no doubt the sector was dealt a body blow in 2020. Houston-based womens fashion chain Francescas filed for protection in December and has begun to sell assets to pay off creditors. Tailored Brands, the Houston-based owner of the Mens Wearhouse chain, filed for bankruptcy protection in August and later emerged as a private company. Several big-box retailers such as Texas-based J.C. Penney, Neiman Marcus and Tuesday Morning also sought protection.

rebecca.carballo@chron.com

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Energy sector leads record wave of bankruptcies in 2020 - Houston Chronicle

Signage is displayed outside a JC Penney Co. store in Chicago, Illinois.

Christopher Dilts | Bloomberg | Getty Images

J.C. Penney CEO Jill Soltau, who was tapped to turn around the struggling department store, will leave the company Thursday.

The company's new owners, Simon Property Group and Brookfield Asset Management, said Wednesday that they're looking for a new leader "who is focused on modern retail, the consumer experience, and the goal of creating a sustainable and enduring JCPenney."

The Plano, Texas-based retailer filed for bankruptcy in May. It was bought by the two U.S. mall owners in the fall and emerged earlier this month. It joined a growing list of retailers' pushed to the brink by the coronavirus pandemic. Yet the legacy retailer's troubles began before the global health crisis. Its sales have fallen annually since 2016. At the time when it filed for bankruptcy, its roughly 860-store footprint was less than a quarter of its store base in 2001.

About two years ago, the company hired Soltau to spearhead its turnaround effort after its former CEO Marvin Ellison left to lead Lowe's. She previously served as CEO of fabric and craft retailer, Joann Stores. She also worked for Sears, Kohl's and Shopko Stores. At the time, news of her hire sent shares soaring as investors had hope she would bring fresh ideas and drive growth at the department store.

This year, however, the company's efforts were set back as its stores temporarily shuttered during the pandemic and battered its already stretched finances.

Simon and Brookfield have chosen Simon's Chief Investment Officer Stanley Shashoua to serve as interim CEO, according to a news release. They have launched an executive search with strategic partner Authentic Brands Group. The licensing firm owns stakes of other retailers that have emerged from bankruptcy, including Brooks Brothers and Forever 21.

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JC Penney CEO Jill Soltau to leave retailer after it emerged from bankruptcy with new owners - CNBC

President Trump signed the Consolidated Appropriations Act, 2021 yesterday, December 27, 2020. Although not widely reported, the legislation makes several amendments to the Bankruptcy Code based upon the severe financial hardships created by the COVID-19 pandemic.

The amendments relate to Section 365(d)(3) (the deferral of rent by small business debtors), Section 365(d)(4) (the period of time to assume, assume and assign, or reject a nonresidential real property lease), and Section 547 (preferential transfers). All of the amendments will sunset on December 27, 2022.

Preferential Transfer Protection

Perhaps most significantly, landlords which entered into lease amendments with tenants on or after March 13, 2020, to defer the payment of rent as a result of the pandemic are protected from claims of preferential transfers. Normally, payments made by a debtor within 90 days of a bankruptcy filing and outside the ordinary course of business are potentially preferential and subject to a clawback by the debtor. The amendments to Section 547 create a temporary exemption from preference liability to facilitate and encourage rent deferral and vendor repayment agreements. Prior to the amendment, the deferred rent payments could be subject to preference liability as payments that would otherwise be past due. By insulating these payments from preference exposure, landlords (and vendors) are encouraged to reach deferred payment arrangements with struggling businesses without fear that in a later bankruptcy case the deferred payments would have to be disgorged back to the debtor. Put another way, the amendment helps avoid invocation of the age-old adage that no good deed goes unpunished.

Rent Deferrals for Small Business Debtors

The amendment to Section 365(d)(3) provides a small business debtor under the Small Business Reorganization Act provisions of the Bankruptcy Code (i.e., commercial debtors having non-contingent, liquidated debts under $7.5 million) the opportunity to defer rent coming due in the first 120 days of the bankruptcy case. However, causation and materiality elements must be satisfiedthe debtor must demonstrate that it is experiencing, or has experienced, material financial hardship due, directly or indirectly, to the COVID-19 pandemic.

More Time to Assume or Reject Leases

The amendment to Section 365(d)(4) allows additional time for a Chapter 11 debtor to assume, assume and assign, or reject its nonresidential real property leases. Prior to the amendment, a debtor had an initial 120-day period, plus one additional 90-day extension to assume or reject, for a maximum of 210 days. Additional extensions beyond the 210th day of the case require the landlords prior written consent. The amendment increases the initial period from 120 days to 210 days, but maintains the single 90-day extension provision and the landlord written consent requirement. As a result, a debtor is given more breathing room to make critical reorganization decisions relating to its real estate, but must nonetheless timely perform all of its obligations under the lease during that time. To the extent the debtor does not perform, landlords retain the ability to either compel the debtors performance in bankruptcy court or seek relief from the automatic stay to exercise state law remedies.

Read our comprehensive alert about the new stimulus legislation here.

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New Stimulus Deal: Amendments to the Bankruptcy Code - JD Supra