Bankruptcy Law Commons^™

The Myth Of Debtor-Friendly Or Creditor-Friendly Insolvency Systems: Evidence From A New Global Insolvency Index, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

This article seeks to test the validity of the traditional classification of insolvency systems as debtor-friendly or creditor-friendly jurisdictions. For that purpose, the article develops a novel Global Insolvency Index (“GII”) that seeks to measure the attractiveness of reorganization procedures from the perspective of debtors, secured creditors and general unsecured creditors. After assessing the attractiveness and evolution of reorganization procedures in 53 jurisdictions around the world, it will be shown that insolvency systems can be pro-debtor and pro-creditor, anti-debtor and anti-creditor, or somewhere in the middle. Hence, the GII developed in this article shows that the traditional classification of insolvency …

Restructuring Support Agreements: An Empirical Analysis, Anthony J. Casey, Frederick Tung, Katherine Waldock

Faculty Scholarship

Restructuring support agreements (RSAs), or contracts that commit bankruptcy parties to supporting a plan of reorganization that will conform to certain requirements, are now a common feature of Chapter 11. Parties utilize these agreements in nearly half of all large cases. While prior literature has debated the normative value of RSAs, we take an empirical approach to look at what provisions the parties include in these agreements and how those provisions have changed over time.

Our analysis looks at all RSAs associated with large bankruptcies through the end of 2020. We characterize the types of firms with RSAs, the parties …

An Innovative Framework: Evaluating The New German Business Stabilization And Restructuring Law (Starug), Andreas Rauch

Northwestern Journal of International Law & Business

This comment examines the restructuring framework, restrukturierungsgesetz (“StaRUG”), and argues that this new law represents an effective—albeit radical—departure from Germany’s previous, conservative insolvency regime. Passed in response to a 2019 EU Directive aimed at modernizing restructuring law Union-wide, and integrated into the German legal system against the backdrop of the COVID-19 pandemic, StaRUG and its ancillary reforms in other areas of German law create a restructuring proceeding that places a premium on a debtor’s continued business operations. Thus, in a striking shift from the traditional German approach to business distress, which strongly emphasized creditor rights, the new StaRUG focuses on …

Implementing An Insolvency Framework For Micro And Small Firms, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

Micro-, small-, and medium-sized enterprises (MSMEs) represent the vast majority of businesses in most countries around the world. Despite the economic relevance of these firms, most insolvency jurisdictions do not provide adequate responses to MSMEs. Moreover, with a few exceptions, the academic literature on insolvency law has not traditionally focused on the treatment of MSMEs in insolvency. This article seeks to contribute to the debate by exploring the primary features and problems of MSMEs in insolvency as well as the weaknesses of the ordinary insolvency framework to deal with MSMEs. It also provides a general overview of the primary reforms …

Enterprise Group Restructuring: Dutch Options And United States Enforcement, G. Ray Warner, Michael Veder

Faculty Publications

On 1 January 2021 the Dutch Wet Homologatie Onderhands Akoord, also referred to as the Dutch scheme, entered into force. The Dutch scheme represents a robust restructuring framework that incorporates many of the main restructuring concepts from both the English scheme of arrangement and US chapter 11. It also adds a few new restructuring tools that will make it easier to restructure enterprise group debt by expressly providing that a restructuring plan may include the release of group guarantees and by adopting liberal jurisdictional rules that should permit proceedings to be opened in the Netherlands for all members of …

Insolvency Law In Times Of Covid-19, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

The international spread of the coronavirus is not only generating dramatic consequences from a social perspective but it is also heavily affecting the global economy. For this reason, governments, financial regulators and international organizations are responding to the coronavirus with a package of legal, economic and financial measures. Among the legal responses included in these packages, many countries, such as Australia, Belgium, Colombia, Czech Republic, France, Germany, Luxembourg, India, Italy, New Zealand, Peru, Poland, Portugal, Russia, Singapore, Spain, the United Kingdom, and the United States, have proposed or implemented temporary changes to their insolvency frameworks. This paper starts by discussing …

Restructuring Vs. Bankruptcy, Jason Roderick Donaldson, Edward R. Morrison, Giorgia Piacentino, Xiaobo Yu

Faculty Scholarship

We develop a model of a firm in financial distress. Distress can be mitigated by filing for bankruptcy, which is costly, or preempted by restructuring, which is impeded by a collective action problem. We find that bankruptcy and restructuring are complements, not substitutes: Reducing bankruptcy costs facilitates restructuring, rather than crowding it out. And so does making bankruptcy more debtor-friendly, under a condition that seems likely to hold now in the United States. The model gives new perspectives on current relief policies (e.g., subsidized loans to firms in bankruptcy) and on long-standing legal debates (e.g., the efficiency of the absolute …

Hedge Funds In The Periphery: An Analysis Of Structures Influencing Fund Behavior In The Icelandic And Cypriot Financial Crises, Jameson K. Mah

Undergraduate Economic Review

Hedge funds are often viewed from a positive or negative lens in the public and academic forum. However, both of these perspectives neglect structuralist factors. This paper analyzes the effect of these antecedent economic, political, and legal structures. I argue that these structures are at the root of hedge fund behavior, particularly during financial crises. The financial crises of two peripheral countries, Iceland and Cyprus, are used as case studies to illustrate how hedge fund involvement diverges as a result of structural factors.

Flotsam, Financing And Flotation: Is Canada “Resolution Ready” For Insurance Company Insolvency?, Janis P. Sarra

All Faculty Publications

Insurance represents almost 2 per cent of Canada’s gross domestic product (GDP), yet there is little public policy discussion regarding the viability of the companies that insure Canadians or about the policyholder protection and resolution regime that underpins the provision of these services. As new products and technology develop, and as the complexity of multinational insurance enterprises increases, new risks pose challenges for Canada’s oversight and policyholder protection regimes. This article provides an overview of the insolvency regime for insurers in Canada, focusing primarily on the federal regime as the exemplar of how Canadian regulators and the insurance industry have …

Infinite Jest: The Otiose Quest For Completeness In Validating Insolvency Judgments, Bruce A. Markell

Chicago-Kent Law Review

Universalism in cross-border bankruptcies strives to reduce waste, and harmonize restructuring and recoveries. Universalism’s avatar is UNCITRAL’s 1997 Model Law on Cross-Border Insolvencies (Model Law). Underlying the Model Law, however, is an implicit assumption that court orders entered in the proceeding where the debtor’s center of main interests is located will be respected in all other states in which the debtor has assets or operations. That assumption may have been incorrect, as shown by cases such as the United Kingdom’s Rubin v. Eurofinance, S.A.

This Article looks at UNCITRAL’s reaction to Rubin: its new Model Law on Recognition …

Do Economic Conditions Drive Dip Lending?: Evidence From The Financial Crisis, Frederick Tung

Faculty Scholarship

When contemplating Chapter 11, the first step for many firms is 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 highly effective in attracting financing. But because these sweeteners are thought to come at the expense of other stakeholders, the Code permits these inducements only if the judge determines that 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 …

Effect Of Air Carrier Restructuring Strategies On Post-Bankruptcy Performance, Harold Dale Townsend

Doctoral Dissertations and Master's Theses

Air carrier bankruptcy is a common occurrence in the aviation industry. However, there is a paucity of research on the topic of air carrier restructuring during the post-bankruptcy period. General restructuring literature has identified four types of actions: operational, financial, managerial, and portfolio. The purpose of this study was to partially fill the large literature gap in the area of air carrier post-bankruptcy performance through theoretical and practical contributions.

A multilevel exploratory factor analysis was conducted to explore whether the same restructuring areas were found in air carrier specific metrics. All four restructuring areas were found in the factor analysis. …

Activist Investors, Distressed Companies, And Value Uncertainty, Michelle M. Harner, Jamie Marincic Griffin, Jennifer Ivey-Crickenberger

Faculty Scholarship

Hedge funds, private equity firms, and other alternative investment funds are frequently key players in corporate restructurings. Most commentators agree that the presence of a fund can change the dynamics of a chapter 11 case. They cannot agree, however, on the impact of this change—i.e., do funds create or destroy enterprise value? This essay contributes to the dialogue by analyzing data from chapter 11 cases in which funds are in a position to influence the debtor’s exit strategy. The data shed light on what such funds might achieve in chapter 11 cases and the potential implications for debtors and their …

Breaking Bankruptcy Priority: How Rent-Seeking Upends The Creditors' Bargain, Mark J. Roe, Fred Tung

Faculty Scholarship

Bankruptcy reallocates value in a faltering firm. The bankruptcy apparatus eliminates some claims and alters others, leaving a reduced set of claims to match the firm’s diminished capacity to pay. This restructuring is done according to statutory and agreed-to contractual priorities, so that lower-ranking claims are eliminated first and higher ranking ones are preserved to the extent possible. Bankruptcy scholarship has long conceptualized this reallocation as a hypothetical bargain among creditors: creditors agree in advance that if the firm falters, value will be reallocated according to a fixed set of predetermined rules and contracts. In any given reorganization case, creditors …

The New Value Exception To The Absolute Priority Rule In Chapter 11 Reorganizations: What Should The Rule Be? , Linda J. Rusch

Pepperdine Law Review

No abstract provided.

Mandatory Class Action Lawsuits As A Restructuring Technique, Bryant B. Edwards, Jeffrey A. Herbst, Selina K. Hewitt

Pepperdine Law Review

No abstract provided.

Mesa Airlines, Brittany Brent, Lindy Harris

Chapter 11 Bankruptcy Case Studies

No abstract provided.

The Bankruptcy Of Golfers' Warehouse, Inc.: A Lesson In How To Sell A Business In Chapter 11, Briton Collins, Will Smith, David Choi

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Independence Air, Kara West, Patrick Woodside

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Lambuth, Jennifer Crake, Zackarij Gradner, Scott Mcleod

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Movie Gallery, Cornell Kennedy, Phylinda Ramsey, Kevin Rayburn

Chapter 11 Bankruptcy Case Studies

No abstract provided.

In Re Jazz Photo Corp., Archie Carden, Cory Swainston

Chapter 11 Bankruptcy Case Studies

No abstract provided.

In Re Adelphia Communications Corp., Hilari Sheffield, Adam Smith

Chapter 11 Bankruptcy Case Studies

No abstract provided.

New Era Bankruptcy, Holly N. Mancl

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Reader's Digest, Walter Machnicki

Chapter 11 Bankruptcy Case Studies

No abstract provided.

The Bankruptcy Of D & K Aviation, T J. Hatter, Maurice Echols, Michael Mason

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Solyndra, Brandon Brewer, Matthew Kinsey, Anthony Mendenhall

Chapter 11 Bankruptcy Case Studies

No abstract provided.

The Story Of Kmart's Reorganization, John Fisher, Justin Wolbert

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Drug Fair Group, Inc., Robby Lockett, Scott Lochridge, Jessica Manning

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Tragedy On The Descent: The Ascent And Fall Of Eddie Bauer, Austin Fleming, Bryan C. Hathorn

Chapter 11 Bankruptcy Case Studies

For many entrepreneurs, bankruptcy is the unfortunate end of what began as a business dream. The birth of a business is an exciting time for the entrepreneur, but its death is often a painful process—both for the company's owners and its creditors. Those businesses that choose not to reorganize close their doors forever. However, reorganization can often salvage a business enterprise that is a good one but is impaired by debt, crisis, or simple bad luck.

The goals of the reorganization process are clear—the idea is to produce a viable business enterprise but one not necessarily owned by the original …