Bankruptcy Law Commons^™

Financing Failure: Bankruptcy Lending, Credit Market Conditions, And The Financial Crisis, Frederick Tung

Faculty Scholarship

When contemplating Chapter 11, firms often need to seek financing for their continuing operations in bankruptcy. Because such financing would otherwise be hard to find, the Bankruptcy Code authorizes debtors to offer sweeteners to debtor-in-possession (DIP) lenders. These inducements can be effective in attracting financing, but because they are thought to come at the expense of other stakeholders, the Code permits these inducements only if no less generous a package would have been sufficient to obtain the loan.

Anecdotal evidence suggests that the use of certain controversial inducements — I focus on roll-ups and milestones — skyrocketed in recent years, …

Municipalities In Distress: A Preventive View, Tamar Frankel

Faculty Scholarship

The recent rising failure of municipalities has not produced the avalanche that some expected.¹ Yet concerns have been raised that the future will spawn more failures.² New York City and other municipalities face soaring pension, Medicaid, and retiree health care costs.³ New York City’s neighboring counties face similar challenges; Yonkers, Suffolk, and Nassau Counties each face their own set of fiscal problems.⁴

Municipalities that have failed, or are likely to fail, have raised a number of legal issues implicated by their inability to pay their debts. Some questions seem new. For example, are employees’ pension benefits …

Leverage In The Board Room: The Unsung Influence Of Private Lenders In Corporate Governance, Frederick Tung

Faculty Scholarship

The influence of banks and other private lenders pervades public companies. From the first day of a lending arrangement, loan covenants and built-in contingency provisions affect managerial decision making. Conventional corporate governance analysis has been slow to notice or account for this lender influence. Corporate governance discourse has traditionally focused only on corporate law arrangements. The few existing accounts of creditors' influence over firm managers emphasize the drastic actions creditors take in extreme cases - when a firm is in serious trouble - but in fact, private lender influence is a routine feature of corporate governance even absent financial distress. …

Taking Future Claims Seriously: Future Claims And Successor Liability In Bankruptcy, Frederick Tung

Faculty Scholarship

Treatment of contingent tort liabilities when a business is sold presents a particular challenge for corporate and bankruptcy law. In this article, I focus on the precarious position of future tort claimants-those who may be harmed by a manufacturer's defective product after the manufacturer has sold its business and disappeared. By the time the future claimant's injury occurs, she may be left with no means of recovery. While the article focuses primarily on the bankruptcy sale context, a discussion of the nonbankruptcy context provides important background.

In the article, I make two claims. First, I address recent proposals suggesting that …

What Can Be Done About Stock Market Volatility, Tamar Frankel

Faculty Scholarship

Volatility is as old as the financial markets. The bull market of 1986 and the crash that followed in 1987 were but the latest of periodic market gyrations that started with the South Sea Bubble and the Lombard Street run on commercial paper and have continued ever since.' Volatility in the financial markets would not be very important if market activity simply mirrored economic activity. Volatility would be much less important if the markets moved independently of the economy. But if we believe, as I do, that the markets and the economy are interdependent, and that their volatility is generally …