2019 New York City Bankruptcy Conference

The panel will discuss the state of distressed and bankruptcy related investing, including where they currently see opportunities, their thoughts on the credit cycle, what may drive the next wave of bankruptcies, the potential effects and repercussions of the leveraged loan market, the role of CDS and the “empty creditor” dynamic, and the impact of BDC’s, CLO’s and direct lending firms.

Join in this discussion on a plethora of current ethical issues, including when it is necessary to obtain a conflict waiver (current vs. recent vs. former clients); directly adverse vs. positionally adverse; relatedness to a prior matter; use of confidential information; review of disinterestedness standards under BC § 101(14) and related disclosure requirements; the ABI Report on Standards of Professional Courtesy and Conduct; Caesars litigation over disinterestedness of debtor’s counsel; professionals retentions and disclosure requirements (disclosing conflicts and the Jay Alix/McKinsey litigation); and litigation financing in the liquidating trust context.

This session will examine three issues: (1) the role of management in § 363 sales (how to make sure that management plays the role of neutral stakeholder throughout the plan and/or § 363 process; what actions management might tend to take when it favors a particular bidder in the process; what happens when management wants to participate in the § 363 process); (2) managing management’s interests, including participation in the bankruptcy process (how to address management’s sometimes parochial concerns and keep them from adversely impacting the bankruptcy; the interplay between management’s desires and the desires of the fulcrum class as new owners post-restructuring; issues around management compensation (e.g., employment contracts, incentive plans, severance policies), including the assumption or rejection of existing contracts, plans or policies and/or the implementation of new ones and U.S. Trustee objections; who represents management and when management should look to cut its own deal); and (3) labor issues (issues around benefit plans; whether § 1113 is the only way to eliminate a successor clause (A&P); whether § 1113 is an option if the collective bargaining agreement expires or is expired (Hostess, Trump, Journal Register); whether the union has a claim for damages if rejection relief under § 1113 is granted).

This panel will discuss what strategies sponsors are using to retain control (or at least a stake) through the bankruptcy process, as well as the risks to sponsors, such as fiduciary duties; use of special committees as sword and shield; related-party transactions; sponsor affiliates purchasing debt in the portfolio company’s capital structure, as well as 10b-5 compliance; and selling or spinning off assets/business units (Caesars, Cengage, Nine West, PetSmart, Sears, Toys).

There are two common scenarios in which the valuation of a company’s debt securities might need to be assessed. If the consideration under a bankruptcy plan includes debt, how do we determine whether that debt will trade at par, and what disclosure is required? If a buyer in a § 363 sale proposes to issue debt as payment, how should this be valued? Are the considerations the same in these two scenarios?

Get up to date on recent confirmation developments, including cram-ups/reinstatements since Momentive, including the Momentive remand trial; excising third-party releases from a confirmed plan (In re Thru Inc.); nonconsensual releases (Seaside Engineering); vote-designation (Fagerdala (in which a secured lender purchased sufficient unsecured claims to block plan confirmation (9th Cir.)), LightSquared); classification (Novinda (in which litigation claims against a creditor justified separate classification from other unsecureds (10th Cir. BAP))); per plan vs. per debtor (Transvest, Charter, Tribune); and whether all similarly situated creditors should have the right to participate in rights offerings, financings, etc. (PacDrilling).

The panelists will tackle the domestic reach of a foreign stay (Sanjel); non-U.S. companies filing for chapter 11 and the consequences thereof (Ocean Fisheries); recognition of foreign judgments more generally; and recent cases filed in Canada (Concordia and the CBCA).

Dive into § 363 sales issues, including whether there are limits to “free and clear”; the GM conflict between §§ 365(h) and 363(f) (“lease-stripping”); sales free and clear of leasehold interests, restrictive covenants and override royalties; being free and clear of successorships in CBAs; selling free and clear of environmental liabilities (La Paloma, Exide); and loan-to-own strategies.

Recent high-profile cases have been impacted by credit derivatives (e.g., Hovnanian, Sears, Caesars, iHeart). The panelists will discuss how these situations have unfolded and their effects. What pre-filing diligence should a debtor perform in order to be prepared?