In recent years, many countries have adopted some form of pre-packaged reorganizations (“pre-packs”), inspired largely by pre-packs popularized in the United Kingdom and the United States. By shortening insolvency proceedings, pre-packs can reduce the costs of financial distress and especially the loss of reputation, employees, suppliers, and goodwill. As a result, pre-packs can also help maximize the value of an insolvent firm for the benefit of debtors, creditors, and society. However, conflicts of interest, a lack of transparency, and various forms of opportunistic behavior in some pre-pack ..read more

In a memorandum opinion and order issued on March 27, 2024, in In re Yellow Corporation, et. al., Judge Craig T. Goldblatt denied motions filed by multiemployer pension funds to arbitrate debtors’ objections to pension withdrawal liability claims in the United States Bankruptcy Court for the District of Delaware.  Judge Goldblatt’s decision notably departs from courts’ longstanding tendency to enforce arbitration clauses, and rests on the court’s finding that the importance of the resolution of the claim to the larger case outcome and the value of the bankruptcy process counsel in favor o ..read more

From 2011 to 2019, the number of bank charters fell by nearly one-third, from 7,357 to 5,177, with community banks accounting for three-quarters of this decline (FDIC Community Bank Report, 2020) In a new paper, we presents compelling evidence that the decline stems largely from bank mergers driven in part by a desire to create economies of scale through technology investments. The need for technology investment has been  propelled by regulatory requirements, consumer preference for digital services, and the pursuit of operational efficiencies, such as streamlined loan processing. Nearly ..read more

Traditionally, senior lenders have wielded all the control in bankruptcy and out-of-court restructurings. They usually hold liens on all or substantially all the debtor’s assets and enjoy payment priority over virtually all other claimants. Meanwhile, modern debt instruments often contain covenants that give lenders control over the debtor’s business and financial decisions. But in recent years, large corporate debtors such as J.Crew and Serta Simmons have aligned with certain of their senior lenders to pursue highly aggressive bankruptcy and out-of-court private loan restructurings. These tra ..read more

In a new article, I observe that an accurate understanding of intersecting bodies of law can sometimes turn on the scale of observation. In particular, I examine how the intersection of commercial and bankruptcy law creates uncertainty whether a transfer of money may be avoided (that is, rescinded) as preferential. Bankruptcy law avoids transfers of an insolvent debtor’s property, made within 90 days prior to its bankruptcy, that prefers certain creditors over others. Most such transfers are monetary repayments of debt claims. Bankruptcy courts routinely assume that such monetary repayments in ..read more

In a recent paper, we make the case for a smart contract-based automated restructuring framework that can be used by any firm that issues equity and debt securities in tokenized form. The paper is the basis for an actual smart-contract suite that technically implements the proposal as a template that can be used and built on by any interested firm. Since it is now possible to administer capital structures on the blockchain, opening them up to smart contract automation has become a reality. The tokenisation of traditional debt and equity securities is an important growth area and promises enhan ..read more

In a recent article, we propose a new rule for determining the proper forum for insolvency proceedings. Currently, the Model Law on Cross-Border Insolvency, promulgated by the United Nations Commission on International Trade Law (“UNCITRAL”), looks to a debtor’s center of main interest (“COMI”) to determine the proper forum for a foreign main-insolvency proceeding. This rule is flawed. It is both inflexible and manipulable. It is also indeterminate and neither requires nor allows advance commitment by debtors. As a result, it leads to uncertainty, increases litigation costs, and opens the door ..read more

In recent years, Chapter 11 of the Bankruptcy Code has prompted critics to claim that, at least when it comes to large companies, it has become a lawless forum where bankruptcy judges have jettisoned fealty to the code in order to attract cases to their courts. The poster child for the criticism is the recent 16-hour Chapter 11 case of Belk department stores. In a recent article, we take issue with that characterization of the case. When viewed in context, Belk was a commonsense restructuring that, while innovative, adhered to the dictates of the Bankruptcy Code. Belk had its plan of reorganiz ..read more

The bankruptcy system has long been the last, best hope for firms seeking to resolve overwhelming mass-tort liabilities.  The seminal case, Manville, resolved legacy asbestos liabilities through debtor and third-party funding of a claimant trust and an order channeling all Manville asbestos liabilities, present and future, to that trust for administrative resolution and payment. Congress subsequently ratified and codified the Manville approach in section 524(g) of the Bankruptcy Code as a template for dealing with mass asbestos liabilities.  That elaborate template authorizes, condit ..read more

Loophole seeking has become a standard tool in the world of distressed debt restructuring. The highest-profile example was the J. Crew restructuring in 2016. In that transaction, the company stripped $250 million in trademark collateral from the reach of its secured term lenders, and made that collateral available to refinance lower-priority debt. J. Crew’s advisers did this by finding a loophole. They combed through the 87,000-word loan agreement and found a “carve-out” provision intended to give the company freedom to make investments overseas in a tax-efficient way. But J. Crew claimed the ..read more