Below is our initial take on some of the major bankruptcy-related developments from the past week:
Following years of negotiations, the confirmation hearings of Puerto Rico’s bankruptcy debt restructuring plan finally began this week before U.S. District Court Judge Laura Taylor Swain. Under the financial oversight board’s proposed plan, the island would reduce $33 billion in bonds and other debt to $7.4 billion and defined benefit plans for current teachers and judges would be shifted to defined contribution pension plans—for perspective, when the case began more than four years ago, Puerto Rico had more than $70 billion in debt and $55 billion in pension liabilities.
S&K Take: The Puerto Rico cases have been a long and winding road, with scores of professionals putting in years of work to get to a restructuring. The headline number is staggering – although it usually is in mega cases, particularly those that take years (think Lehman). Certain constituencies will not be happy but sharing the pain in a case like this is never easy.
Please note that Law360 membership is required to access the full summary of this article.
In a letter written Tuesday to congressional and judiciary committee leadership, more than 40 attorneys general across the country showed support for H.R. 4193 and S.B. 2827, the bill that would restrict “forum shopping” in U.S. bankruptcy courts.
S&K Take: State AGs threw their support behind proposed venue reform legislation, although it’s unclear what impact this might have on the bill’s chances of success. Certain arguments seem off-base, but that is par for the course on this issue.
The Covid-19 pandemic spurred many bankruptcies, including three of the country’s largest mall landlords, which each took different bankruptcy and restructuring routes and resulted in different outcomes.
S&K Take: A brief overview of three mall landlord restructurings. The key question is what lies ahead. Did they just kick the can or will their restructurings be sufficient?
Car rental company Hertz Global had a blockbuster bankruptcy recovery, and the company received a $20 billion valuation in its stock deal post-bankruptcy.
S&K Take: The incredible Hertz story continues, with post-bankruptcy Hertz worth more than pre-bankruptcy, pre-COVID Hertz.
Following Johnson & Johnson’s use of the Texas Two-Step legal maneuver to resolve its talc-related liability, U.S. Bankruptcy Judge Craig Whitley ordered a temporary halt on talc claims pending against J&J and transferred the bankruptcy case of its subsidiary to in the District of New Jersey. A yet to be appointed bankruptcy judge in New Jersey will now be responsible resolving thorny issues, including whether to allow claims against J&J to proceed during the pendency of the bankruptcy cases.
S&K Take: The J&J case continues to be a treasure trove of activity. Just this week the case was booted to the great state of New Jersey, calling into question the Texas Two-Step maneuver’s link to North Carolina Bankruptcy Court (several prior Texas Two-Step cases found their home in the district) and a non-debtor stay was granted.
A report published by the Administrative Office of the U.S. Courts on Monday revealed that bankruptcies in the country continue on a four-year decline even through the Covid-19 pandemic, largely due to economic relief.
S&K Take: Ask a restructuring professional and they will likely tell you that it has been a slow year…