Sky Blog
Responses to financial crises can have the unfortunate effect of creating “zombie” firms, companies whose operating profits are insufficient to cover their debt service. These companies would probably have gone bankrupt without the forbearance of banks or regulators or other …
Bankruptcy-remote structuring – structuring an entity to protect it from internal or external factors that might prevent it from paying its debts as they come due or make it the subject of a bankruptcy case – is crucial to a …
Among those who study corporate financial distress and reorganization, the notion that senior lenders are in control is deeply ingrained. Celebrated papers in the law and corporate finance literatures attribute lender influence during periods of distress to blue-sky contracting practices.…
In a new article, I discuss the impact of the currently turbulent global economic environment on the prospect for sovereign debt defaults and restructurings in emerging economies. I also review three types of emerging markets sovereigns that may be at …
One of the key unresolved questions surrounding crypto-custodian bankruptcy proceedings under the U.S. Bankruptcy Code is whether or not digital assets that are held by a crypto exchange on behalf of platform users could be viewed as the exchange’s corporate …
Distressed firms may avoid an otherwise beneficial Chapter 11 reorganization because they fear losing customers. In our recent paper, we use two experiments to estimate the effect of corporate bankruptcy on consumer demand for a bankrupt firm’s products. We …
July 31, 2020, was an ill-fated day for financier Dan Kamensky. It began on a bright note, as his billion-dollar hedge fund stood to profit from a possible settlement in Neiman Marcus’ bankruptcy.[1] Not only had the Official Committee …
Some countries have a compelling argument for why they should not be expected to join the planetary effort to fight climate change. These are countries facing the need to restructure their external debt. By definition, sovereigns that cannot pay what …
While the Covid‑19 pandemic continued into 2021, the sharp rise in corporate bankruptcies that we saw in 2020 did not. Due to unprecedented government assistance and the continued availability of credit at historically low interest rates, companies that survived 2020 …
Corporate creditors, perhaps like Americans generally, like to think of themselves as rugged individuals who also work within a communal system. The fundamental tension is clearest at the point of default: Too much individuality, and a small minority of creditors …
When should directors be held liable for their company’s distressed financial condition? In a recent article, we show that the answer varies widely across legal regimes. We focus on the zone of insolvency, a phase in the company’s life …
In a recent essay, Shocking Business Bankruptcy Law, I discuss how crisis is used strategically to push legal boundaries in large chapter 11 cases in ways that are not readily reversed. I focus primarily on two phenomena. The first …
The COVID pandemic prompted global economic problems that many predicted would lead to an unprecedented number of corporate bankruptcies. The predictions were wrong, largely because governments responded with extraordinary measures. Congress, for example, pumped trillions of dollars into the U.S. …
Sitting as courts of equity, bankruptcy judges have embraced an exceptionalist role whereby they exercise widespread discretion in deciding cases. The doctrine of equitable subordination epitomizes bankruptcy exceptionalism and its potential for market distortion.
The doctrine originated as a remedial …
Venezuela is facing not only a grave humanitarian crisis, but an acute financial and economic one as well–including a massive debt burden. Moreover, Venezuela is in the throes of an extended political stalemate between the forces aligned with the regime …
The United States Bankruptcy Code gives debtors wide discretion to reorganize in the venue of their choice. These lenient venue selection rules long have allowed bankruptcy courts in the District of Delaware and the Southern District of New York to …
In the spring of 2020, as the Covid-19 pandemic shut down economies around the world, pressure arose for governments to respond to the growing threat of pandemic-related market distress. In the United States, the initial proposals for government action varied …
The U.S. experienced an unprecedented number of home foreclosures during the Great Recession of 2007-2009. To limit defaults and deadweight losses, the government implemented various policies that reduced monthly payments by homeowners (i.e., Home Affordable Modification Program) and facilitated mortgage …
The COVID-19 pandemic has disrupted normal life and triggered massive economic slowdowns. In the United States, consumer spending has dropped dramatically and unemployment temporarily hit the highest levels since the Great Depression. As a result, many experts have projected a …
Priming transactions have been increasing in frequency during the current pandemic restructuring cycle. Priming usually involves the debtor shifting collateral and assets away from their core lending group to support new tranches of debt that are structurally or directly senior …