Pelosi Vows Quick House Passage Tomorrow of Senate Stimulus

Speaker Nancy Pelosi (D-Calif.) said today that the House will move quickly on Friday to approve the Senate's massive, $2 trillion coronavirus relief package through the lower chamber and on to President Trump, who has vowed to sign it immediately, The Hill reported. Pelosi had initially pushed to pass the bill by unanimous consent, a procedure precluding the need to call lawmakers back to the Capitol to lodge their votes amid rising concerns over travel and crowding. But some lawmakers have objected to the notion of passing such an enormous spending bill — the largest in the nation's history — without the opportunity to debate it on the floor and register their complaints. With that in mind, Democratic leaders will move to have the bill passed by voice vote, allowing for that debate without requiring a full House to pass the legislation. Among the major provisions, the bill provides cash payments up to $1,200 for individual Americans (more for families); expands unemployment insurance by $250 billion for those who lost their jobs during the crisis; offers more than $350 billion in low-cost loans to affected small businesses; and bails out the hardest-hit industries — including airline and hotel companies — to the tune of $500 billion. Key bankruptcy provisions included within Sect. 1113 of the CARES Act include:

• Amending the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under new subchapter V of chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7,500,000. The eligibility threshold will return to $2,725,625 after one year. The increased debt limit for struggling small businesses to access subchapter V reflects recommendations of ABI’s Commission to Study the Reform of Chapter 11.

• Amending the definition of “income” in the Bankruptcy Code for chapters 7 and 13 to exclude coronavirus-related payments from the federal government from being treated as “income” for purposes of filing bankruptcy.

• Clarifying that the calculation of disposable income for purposes of confirming a chapter 13 plan shall not include coronavirus-related payments.

• Explicitly permitting individuals and families currently in chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the coronavirus pandemic, including extending their payments for up to seven years after their initial plan payment was due.

The bankruptcy provisions of the CARES Act listed above sunset within a year of the legislation being enacted.

Additionally, Sect. 3513 of the legislative package provides temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payments, principal, and interest for 6 months, through September 30, 2020, without penalty to the borrower for all federally owned loans. This provides relief for over 95 percent of student loan borrowers.

Click here to read the full ABI press release.

Click here for the language of the CARES Act.

Jobless Claims Soar Past 3 Million to Record High

Americans displaced by the coronavirus crisis filed unemployment claims in record numbers last week, with the Labor Department reporting today a surge to 3.28 million, CNBC.com reported. The number shatters the Great Recession peak of 665,000 in March 2009 and the all-time mark of 695,000 in October 1982. The previous week, which reflected the period before the worst of the coronavirus hit, was 282,000, which was higher than expected at the time. The surge comes amid a crippling slowdown brought on by the coronavirus crisis. The four-week moving average, which smooths out weekly distortions, was 1,731,000, an increase of 27,500 from the previous week’s revised average. Pennsylvania increased twentyfold, from 15,439 to 378,908, according to non-seasonally adjusted numbers. New York saw its number more than quintuple, rising from 14,272 to 80,334, while California’s tripled to 186,809. Louisiana, where coronavirus infections have risen at a dangerous pace, went from 2,255 a week earlier to 72,620.

Today's ABI’s Chart of the Day has more.

Investors Managing $4.7 Trillion Urge Firms to Resist Layoffs Amid Pandemic

Investors managing more than $4.7 trillion are urging public companies to retain workers whenever possible and protect them through policies including paid sick leave for the companies' own business benefit over the long-term and to protect society amid the coronavirus pandemic, Roll Call reported. New York City Comptroller Scott Stringer is among 195 investors that signed the open message to companies on Thursday after a week in which a record number of Americans filed for unemployment benefits. "Workers must be protected during the COVID-19 pandemic and its aftermath," Stringer said in a statement. "As shareholders, we expect companies to protect the health, safety, and economic stability of their workers. The long-term success of companies depends on the long-term success of employees, and this call to action is not just the right thing to do, but the smart thing to do." The investors are asking companies to take five steps amid the coronavirus pandemic: that companies (1) make emergency paid leave available to all employees, including temporary, part-time or subcontracted workers; (2) take measures to limit workers' exposure to COVID-19 as much as possible including through remote work, rotating shifts, cleaning or location closures; (3) retain workers as much as possible and be mindful of potential discrimination-related issues when considering layoffs; (4) maintain timely and prompt supplier payments and work with customers facing challenges; and (5) practice ethical financial management including by suspending stock buybacks and limiting executive pay throughout the crisis.

Distressed Debt Balloons to Almost $1 Trillion, Nears 2008 Peak

The amount of distressed debt in the U.S. has quadrupled in less than a week to nearly $1 trillion, reaching levels not seen since 2008 as the collapse of oil prices and fallout from the coronavirus shutters entire industries across the globe, Bloomberg News reported. In total, the tally has ballooned to $934 billion of U.S. corporate bonds that yield at least 10 percentage points above Treasuries and loans that trade for less than 80 cents on the dollar, according to data compiled by Bloomberg. That’s nearly double the amount from less than a week ago. The total is probably even higher, because the calculation excludes debt of small- to medium-sized companies whose loans trade rarely, if at all. The coronavirus pandemic has caused the worst sell-off since the global financial crisis and deepened stress in credit markets. Driven by some of the lowest oil prices since the early 2000s, the amount of distressed bonds has surged to the highest level since April 2009. Most of the distressed debt outstanding stems from U.S. energy companies battered by less travel demand and an all-out price war between Saudi Arabia and Russia. The capital-intensive industry, which financed its shale production largely through debt, suddenly faces the prospect of deeper losses after oil plunged below $20 a barrel. Last month, it traded above $50.

U.S. Trustee Program to Temporarily Suspend Debtor Audits

The As authorized in section 603(a) of Public Law 109-8, the U.S. Trustee Program established procedures for independent audit firms to audit petitions, schedules and other information in consumer bankruptcy cases. Pursuant to 28 U.S.C. § 586(f), the USTP contracted with independent accounting firms to perform audits in cases designated by the USTP.

Due to ongoing public health concerns associated with COVID-19, effective immediately the USTP is suspending its designation of new individual chapter 7 and chapter 13 cases subject to audit for an indefinite period.For more information, please click here.

Tomorrow: Learn About How Recent Supreme Court Cases Will Affect Your Practice

The Don't miss tomorrow's FREE abiLIVE webinar at 11 a.m. EDT featuring ABI Editor-at-Large Bill Rochelle, Hon. Kevin Carey (ret.) of Hogan Lovells and Prof. Charles Tabb of the University of Illinois College of Law discussing recent SCOTUS cases and offering insights on the rulings. Register here.

Pick Up Your Copy of Pre-Bankruptcy Planning for the Commercial Reorganization
 
Thomas J. Salerno, along with a team of writers from Stinson LLP, has updated Pre-Bankruptcy Planning for the Commercial Reorganization. As the authors note in this third edition of the popular title, “Pre-bankruptcy planning for the commercial chapter 11 reorganization can be broken down conceptually into four distinct (although interrelated) categories, which are set forth in no particular order of priority: (1) preparation of management, key employees and exit strategy; (2) business preparation; (3) legal preparation; and (4) tax preparation.” This update is an invaluable guide for CFOs, General Counsel, and tax advisors, as well as, of course, for practitioners who represent them in going through a reorganization. Pre-Bankruptcy Planning is available at store.abi.org (remember to log in with your ABI credentials to secure member pricing).

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