Monthly Archives: March 2021

BEIJING (Reuters) - China will put financial institution bankruptcy laws on its legislative agenda for the first time, according to a report by the top legislative body released on Monday.

The absence of a legal bankruptcy framework for Chinese financial institutions has prevented technically insolvent firms from exiting the market effectively.

A slew of laws will be revised including the Enterprise Bankruptcy Law in the five-year legislative programme, said the report, signed off by Li Zhanshu, chairman of the standing committee of the National Peoples Congress, or parliament.

Among 506 proposals submitted by NPC delegates this year, 11 mentioned the revision of the Enterprise Bankruptcy Law to allow specific individual bankruptcy and financial institution bankruptcy laws, according to the report.

The revision is urgently needed, said Guo Xinming, head of the Nanjing branch of the Peoples Bank of China (PBOC) and also an NPC delegate.

Without such laws to deal with troubled banks or other financial institutions, bad apples will keep hindering market efficiency, Guo said in a written reply to Reuters questions.

Some institutions may have exited from the market on paper but, in fact, it is difficult for them to write off debts in a timely and effectively way, which creates hidden dangers that will ferment and become future risk events, he said.

In recent years, Chinas central bank as well as its financial regulators have taken over a number of financial institutions including brokerages, trusts and lenders due to poor governance and the credit risks they contained.

In a high-level takeover, the authorities seized control of troubled regional lender Baoshang Bank in 2019 and allowed it to declare bankruptcy a year later.

We have accumulated valuable experience in risk disposal and formed some good practices, but there is still a gap compared with the requirements of modern and orderly disposal mechanisms, said Guo.

The NPC Standing Committee also said individual bankruptcy laws would be added to the legislative agenda, without giving a definite timeline.

Reporting by Cheng Leng, Kevin Huang and Ryan Woo; editing by Mark Heinrich

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China to put financial institution bankruptcy laws on legislative agenda - Reuters

SAN FRANCISCO (KRON) A beloved Bay Area cafe and bakery is reopening after being forced to file for bankruptcy due to the COVID-19 pandemic.

Specialtys is back to serving up breakfast, lunch and desserts at its original location in Mountain View after closing in May 2020.

Not only did it reopen its first store, but the cafe is being run once again by the original founders, Craig and Dawn plus their grown kids.

If Mountain View is a bit too far, the owners have not completely shut down the possibility of opening other locations again, saying: We will open additional locations based on customer demand.

However, people who didnt get a chance to use up their gift cards and rewards before the bankruptcy are out of luck.

With the Chapter 7 Bankruptcy, all assets were liquidated, which, unfortunately, included all Specialtys Rewards and Gift Cards issued prior to 2021, Specialtys said.

They added: We will continue to offer the Specialtys Rewards program place 12 orders and receive a credit for the average value of those orders. New rewards status info can be found under My Account,Specialtys Reward Status.

And before you head to 645 Ellis St for a long-time favorite treat, Specialtys has said they returned with some new menu items to try as well!

Read this article:

Beloved Bay Area Specialtys returns from bankruptcy - KRON4

The vast arsenal of fiscal, monetary and legal measures used by Australian governments to offset the COVID-induced economic crisis have worked well. They did not prevent a recession (popularly defined as two quarters of negative GDP growth) but things could have been much worse.

What is particularly interesting is that the expected consequences have not shown up in the official statistics for financial distress insolvent companies entering administration and individuals declaring bankruptcy.

Indeed, a misleading impression of 2020 being one of economic good times could be gained from the statistics.

The big question is whether these statistics show government relief measures have averted economic pain or simply deferred it. As measures are wound down and withdrawn, will the private sector be willing and able to pick up the resulting slack?

There are, of course, lies, damn lies, and statistics. The figures hide what is likely to be actually happening in terms of financial distress.

Impacts on businesses and individuals have been quite varied. Some large corporations have come through in good shape, much better than might have been imagined. But the tourism, hospitality, entertainment and higher education sectors have taken significant hits and face an uncertain and drawn-out recovery.

The following graphic, using data from the Australian Securities and Investments Commission, shows the number of companies entering external administration (quarterly from 2010 to 2020).

Notable is the decline in business collapses in 2020 the opposite of what one would expect in a time of economic stress.

A number of policy actions contributed to this.

The most obvious contributors to keeping failing businesses alive were JobKeeper payments as well as changes increasing safe-harbour protections to reduce the risk of prosecution for trading while insolvent. These changes also reduced the ability of creditors to speedily force a debtor company into insolvency.

Read more: Government will reform insolvency system to improve distressed small businesses' survival chances

In many cases it is quite possible these simply put off that day to some time in 2021.

At the personal level, which includes owners of small unincorporated businesses, a similar pattern can be seen.

The next graph uses data from the Australian Financial Security Authority. It shows the number of individuals entering into insolvency (bankruptcy, debt agreements etc) on a quarterly basis. The latest data is for the September quarter of 2020. The number had fallen to about half of what it had been prior to 2020.

Notably, the number of personal insolvencies began falling in early 2018. There is no obvious single explanation for this trend, though good economic conditions and low interest rates are probably part of the story.

The further decline in 2020 (in contrast to expectations of an increase) is most likely due to legislative changes introduced in March 2020 and extended in September 2020. These include increasing the size of debt owed before a creditor can initiate action from A$5,000 to A$20,000, and allowing debtors six months (rather than 21 days) to respond to creditor demands. Mortgage repayment deferrals by banks also would have helped.

What to make of these unexpected declines in official indicators of financial distress when economic conditions have surely increased the reality?

The more optimistic interpretation is that various government support measures have prevented both business and individuals sliding into insolvency.

The less optimistic interpretation is the measures have simply deferred the final outcome with the statistics soon to show a bounce in business failures and personal insolvencies.

Read more: We're facing an insolvency tsunami. With luck, these changes will avert the worst of it

There is no point keeping zombie businesses alive, nor in dissuading heavily indebted individuals from taking action under insolvency arrangements that can give them a fresh start.

But finding the right balance of continuing support for recoverable cases while terminating it for others (and limiting the hardship caused by failure) is a difficult and challenging task for our economic masters.

Read this article:

Hard bump ahead? Drop in insolvencies and bankruptcies is a ticking time bomb - The Conversation AU

10 March 2021

Fisher Broyles

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Starting on October 14, 2020, NSC Wholesale Liquidating Trust("NSC Trust"), the liquidation trust appointed by the bythe United States Bankruptcy Court for the District of Delaware toprosecute claims on behalf of the NSC estate, filed approximately62 complaints seeking the avoidance and recovery of allegedlypreferential and/or fraudulent transfers under Sections 547, 548and and 550 of the Bankruptcy Code.

By way of background, on October 24, 2018, NSC WholesaleHoldings, LLC and various of its subsidiaries filed voluntarypetitions in the Delaware Bankruptcy Court. The Debtors continue tooperate their businesses and manage their properties asdebtors-in-possession. The NSC Trust was appointed toprosecute avoidance action claims on behalf of the estate.

According to the summons issued in these actions, a pre-trialconference has been scheduled for January 19, 2021 before theDelaware Bankruptcy Court.

For a primer on various defenses that can be raised in responseto a Section 547 demand, the following post is a recommended read:A Primer on Defenses toBankruptcy Preference Claims.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Re-structuring from United States

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Preference Actions Filed In NSC Wholesale Holdings In The Delaware Bankruptcy Court - Insolvency/Bankruptcy/Re-structuring - United States - Mondaq...

09 March 2021

Fisher Broyles

To print this article, all you need is to be registered or login on Mondaq.com.

On December 27, 2020, the much-anticipated ConsolidatedAppropriations Act, 2021 ("CAA") was signed into law. TheCAA contains several COVID-19-related amendments to the UnitedStates Bankruptcy Code, 11 U.S.C. 101, etseq. ("Bankruptcy Code"), which may impact manytypes of creditors. The "Bankruptcy Relief" amendmentsare set forth in Title X of the CAA.

The CAA contains several amendments of significance tocreditors, which will be discussed in subsequent posts. This postwill focus on the CAA's amendment to Section 547 of theBankruptcy Code, which governs the recovery of so-calledpreferential transfers made in the 90 day period proceeding abankruptcy filing for the benefit of a debtor's estate (orone-year period for an insider).

RELATED: A Primer to Defenses Raised in BankruptcyPreference Claims.

The CAA amends the preference statute of the Bankruptcy Code,Section 547, to prohibit a debtor or trustee from avoiding paymentsmade by a debtor during the preference period for "coveredrental arrearages" and "covered supplierarrearages." This amendment may apply to landlords ofnonresidential real property and suppliers of goods andservices.

In order to qualify: (i) the debtor and the counterparty musthave entered into a lease or executory contract before thebankruptcy filing; (ii) the parties must have amended the lease orcontract after March 13, 2020; and (iii) the amendment to the leasemust have deferred or postponed payments otherwise due under thelease or contract.

The bankruptcy preference statute exemption does not apply tothe following types of payments: fees, penalties, or interestimposed in the post-March 13, 2020 amendment.

This provision sunsets two years after the enactment of the CAA,but the provisions will continue to apply to bankruptcy cases filedbefore the sunset date.

Stay tuned for further updates on the CAA's amendments tothe United States Bankruptcy Code.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Re-structuring from United States

Originally posted here:

Amendments To The Bankruptcy Preference Statute In The Consolidated Appropriations Act, 2021 - Insolvency/Bankruptcy/Re-structuring - United States -...

COVID-19 ushered in a volatile economic climate that has made it difficult for many companies to meet their debt obligations. These companies may soon face a lender demanding repayment of debt that the company cannot pay. Refinancing with a replacement lender may be unavailable or cost prohibitive. Although a company may be experiencing financial difficulties, and unable to meet upcoming debt obligations, it may have a significant going concern value which would be lost if the company is liquidated.

In such cases, pursuing a Chapter 11 "reorganization" bankruptcy may be the best, and perhaps only, option to save the company. Under a Chapter 11 bankruptcy, a debtor remains operating while it "reorganizes" its business (eliminates and/or restructures its debt). Often times, a Chapter 11 bankruptcy can help a struggling business become a thriving business.

Due to Chapter 11's great flexibility, the range of restructuring alternatives is extremely broad. Below we discuss just a few of the possible debt restructuring alternatives available to a company in a Chapter 11 bankruptcy.

Restructure of existing debt with existing lender

One of the most powerful tools a company utilizes in Chapter 11 is restructuring its existing secured debt, which allows the company to emerge from bankruptcy with greater cash flow, improved profitability, and a strengthened balance sheet. The "cram down" provision, outlined in Section 1129(b) of the Bankruptcy Code, allows a bankruptcy court to deny the objections of a secured creditor and approve a debtor's reorganization plan as long as it is "fair and equitable."

Because of this "cram down" power, a debtor in a Chapter 11 has leverage over its lender that the debtor does not have outside of bankruptcy. Facing a potential "cram down" of its debt on unfavorable terms, an existing lender will often work cooperatively with the debtor to restructure the existing debt on terms the lender would not agree to outside of the bankruptcy. This often includes lowering interest rates, eliminating personal guarantees, extending the maturity date, eliminating financial covenants, and reducing reporting requirements.

Replace existing secured debt with new lender

In a Chapter 11 bankruptcy, the debtor has numerous tools to strengthen its balance sheet and increase profitability (e.g., by eliminating or greatly reducing its unsecured debt and rejecting unfavorable contracts). Given this improved position, a debtor often is in position to attract exit financers that were not available to the debtor pre-bankruptcy. The result is exiting the Chapter 11 with replacement (or "exit") financing that takes out the existing secured debt, on much improved terms, furthering the companys chance for long-term success.

Debt-to-equity swap

While loans remain the most common form of exit financing in a Chapter 11, another form of financing the company is issuing stock in the reorganized debtor in exchange for cancellation of existing debt. In a debt-to-equity swap, the company first cancels its existing stock shares. Next, the company issues new equity shares. It then swaps these new shares for the existing debt held by bondholders and other creditors.

This "debt-to-equity" swap can serve to eliminate the company's existing debt, greatly improving the company's balance sheet and cash flow. It also puts the company in a much improved position to obtain financing post-bankruptcy (like a line of credit) that the company could not obtain prior to bankruptcy.

Combination of the above

In many Chapter 11 plans, the debtor will often use a combination of the above (debt and equity) to finance its plan obligations and continuing operations.

Although no company is excited about the prospect of filing for bankruptcy, a Chapter 11 reorganization may be the most powerful tool a struggling company can use to ensure its survival and long-term success. Oregon bankruptcy courts can be efficient and cost-effective venues for struggling businesses to rebound.

More:

Chapter 11 Bankruptcy: The Ultimate Corporate Finance Tool | Tonkon Torp LLP - JDSupra - JD Supra