Sky Blog
Out-of-court corporate restructurings, or “corporate workouts,” involve high-stakes multi-party negotiations without a clear procedural framework, such as the one that Chapter 11 provides. This gives the parties the freedom to design workouts without the constraints imposed by a rigid legal …
Chapter 11 was widely seen as a failure in the first decade of the Bankruptcy Code’s operation, the 1980s. Large firms were mired in bankruptcy for years; the process was seen as expensive, inaccurate, and subject to abuse. While basic …
One of the primary challenges faced by the courts after a firm files for bankruptcy is estimating the continuation value of the reorganized firm. Often there are large errors in these estimates, which raise significant concerns about the efficiency of …
The proliferation of bankruptcy directors represents a controversial shift in the corporate governance landscape. Independent directors appointed when a company experiences financial distress (known colloquially as “bankruptcy directors”) bring restructuring expertise and experience to a high-stakes situation. Their appointment also …
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 …
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 …
Unsecured debt of distressed companies is a popular investment for certain hedge funds, not least because it often allows the funds to serve on a distressed company’s unsecured creditors’ committee (UCC) shortly after the firm files for Chapter 11 bankruptcy. …
Within a month, the U.S. Supreme Court will hear Harrington v. Purdue Pharma, L.P.,[1] a case that (i) could radically change the potential for bankruptcy to serve as the preferred mechanism for corporations seeking to resolve mass torts, …
The contraction of the market for special purpose acquisition companies (SPACs) and the recent challenges de-SPACed companies have encountered have attracted considerable press attention. The stocks of many de-SPACed businesses — companies formed by the merger of a SPAC with …
One of the primary attractions of cryptocurrency, for libertarians and blackmailers alike, is its relative freedom from the governmental oversight and involvement that comes with traditional currency. Yet this anti-government tilt is a problem where chapter 11, or bankruptcy generally, …
A key principle of Chapter 11 corporate reorganizations is the “absolute priority rule.” It requires that the claims of a dissenting class of creditors be paid in full before any stakeholders in a class junior to such dissenting …
In just three years, crypto conglomerate FTX Group went from start-up to a $40 billion global phenomenon to a company in “free-fall” Chapter 11. The debacle has been most brutal for millions of FTX customers, who are living through the …
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 …
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 …
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 …
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. …