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Rochelle: Recent Decisions Show Why the Third and Ninth Circuits Are the Most and Least Favored Venues

ABI Bankruptcy Brief


ABI Bankruptcy Brief
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December 17, 2015

ABI Bankruptcy Brief


Rochelle: Recent Decisions Show Why the Third and Ninth Circuits Are the Most and Least Favored Venues

The following excerpt is taken from Rochelle's Daily Wire: Circuit Court Edition. Read the analysis and commentary on significant circuit court decisions from the past three months by ABI's Editor at Large Bill Rochelle.

The Third and Ninth Circuits, as usual, were responsible for the most interesting and influential bankruptcy opinions handed down since Sept. 1. The decisions this fall solidified the two circuits as the most and least favorable venues for corporate reorganization. The Third Circuit understandably makes significant pronouncements because the Philadelphia appeals court covers Delaware, where the bulk of the country's largest bankruptcies congregate, thanks to generous venue rules. Although the Ninth Circuit is inhospitable for large corporate reorganizations, the San Francisco-based appeals court is nonetheless the source of noteworthy decisions simply given California's large population.

Continue reading this and more than 20 other summaries from Rochelle's Daily Wire: Circuit Court Edition! Click here to download a FREE compendium of significant circuit court decisions from the past three months, and a complimentary month-long subscription to Rochelle's Daily Wire when it launches Jan. 4!

House Turns Attention to Puerto Rico Debt Crisis

The White House and congressional Democrats fell short in their bid to include a debt relief mechanism for Puerto Rico in the $1.1 trillion federal spending bill that Congress will vote on this week, but their effort produced the most concrete sign yet that lawmakers will eventually take up legislation addressing the island's debt crisis, the Wall Street Journal reported today. House Speaker Paul Ryan (R-Wis.) said yesterday that he had instructed the relevant House committees to work with Puerto Rico's government to "come up with a responsible solution" by the end of March. "Puerto Rico's fiscal crisis is a problem that is not going away any time soon," he said. Democrats were upset the Puerto Rico issue wasn't addressed in the spending bill following talks between Republican and Democratic lawmakers and the Treasury Department over creating a restructuring mechanism for the island's $72 billion in debt. Puerto Rico is unable to borrow in the capital markets and Gov. Alejandro Garcia Padilla has said he will allow the island to default on payments before enforcing deep cuts in public services. The island has debt payments totaling around $950 million due Jan. 1. Read more. (Subscription required.)

Rep. Pedro Pierluisi recently spoke for an exclusive ABI video outlining why congressional action is needed to help reverse Puerto Rico's debt crisis. Watch the video here.

The December episode of "Eye on Bankruptcy" today was devoted to Puerto Rico, featuring remarks by Rep. Pedro Pierluisi, Judge Steven Rhodes and an analysis of the coming Supreme Court argument on whether the Recovery Act was pre-empted by the Bankruptcy Code. (Link to program available next week at

Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium Feb. 4-6, 2016. Click here to register!

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.


Commentary: The Mutual Fund Equivalent of Bankruptcy

The recent decision by the managers of a fund invested mainly in high-yield, or junk, bonds to put their fund into the mutual fund equivalent of bankruptcy reminds us that mutual funds are like banks in an important way: Both banks and mutual funds invest in long-term assets, yet promise short-term liquidity, according to a commentary by Prof. Stephen Lubben yesterday in the New York Times DealBook blog. That basic mismatch makes runs on mutual funds a real possibility, particularly if the fund's assets are not particularly liquid, according to Lubben. Last week, Third Avenue Management said that it was halting redemptions from its Focused Credit Fund and would instead liquidate the fund through a trust mechanism. It is as if the fund is in bankruptcy, without the transparency associated with the normal bankruptcy process, according to Lubben. Read the full commentary.

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Analysis: $10 Trillion Later, Corporations Wake Up to a New Debt Era

Corporations have reveled in seven years of near-zero interest rates to make record-breaking acquisitions, refinance debt and even buy back their own shares with borrowed money, according to a Bloomberg News analysis today. In the U.S. bond market alone, companies raised almost $10 trillion since the Fed first cut its benchmark target to zero in December 2008. That era of almost-free money is now coming to an end, a transformation that will put pressure on companies to find new ways to grow and juice earnings as rates rise. The potential impacts are wide-ranging: An increase in borrowing costs could spell trouble for the riskiest companies that were propped up by low rates, and strain otherwise creditworthy firms that have loaded up on debt. Stock buybacks will likely decline, possibly crimping share prices. And the dollar could add to its recent gains, stinging exporters. Companies in the housing and auto industries that depend on low-cost financing could also be squeezed. "We may have seen some of the best financing opportunities in a generation for a lot of corporations around the world," said Jonathan Fine, who runs the investment-grade syndicate group for the Americas at Goldman Sachs Group Inc.

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Banks Bet on Energy Comeback

Even after a steady drop in energy prices through the second half of the year, banks in the U.S. are being lenient with cash-strapped companies rather than set tougher lending constraints that could make survival more difficult, the Wall Street Journal reported yesterday. The strategy is helping energy borrowers, but could result in higher losses for lenders if prices don't rebound. The twice-yearly process in which lenders assess certain energy exposures was unusually intense this fall. In the end, most lenders were relatively generous in setting credit lines, while also insisting on more protections, including holding more collateral against the loans, according to bankers and others familiar with the process. Many energy executives expected banks would harshly cut credit lines after the fall redetermination process or -- more severely -- declare borrowers in breach of their debt terms, or covenants. But little of that has come to pass. (Subscription required.)

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USTP Announces Notice of Public Hearing and Reopened Comment Period for Proposed Procedures for Completing Uniform Periodic Reports in Non-Small Business Cases Filed Under Chapter 11 of Title 11

The U.S. Trustee Program (USTP) on Nov. 10 published in the Federal Register a notice of proposed rulemaking (NPRM) seeking public comment on the proposed rules requiring uniform periodic reports by debtors-in-possession or trustees in non-small business cases under chapter 11 and the proposed periodic report forms. After analyzing the comments to the NPRM and proposed forms, and because certain public commenters asked to meet with representatives of the USTP to discuss the NPRM and proposed forms, the USTP decided to hold a public hearing on Feb. 17, 2016, from 10:00 a.m. to 1:00 p.m. ET in the Executive Conference Center in the Executive Office for U.S. Trustees in Washington, DC. The hearing on the NPRM will provide an opportunity for interested parties to express their views directly to USTP officials. The USTP has also reopened the comment period and will accept new and supplemental comments from the public on or before Feb. 22, 2016, via Those who register to attend and make a presentation at the public hearing must have either a written comment or statement on file by the registration deadline of Jan. 6, 2016. For more information, please click here.


New on ABI's Bankruptcy Blog Exchange: The Politics of Indirect Auto Lending and the CFPB

A recent blog post explores how rising interest rates can fuel distress, but finds that restructuring professionals don't expect an immediate uptick from the newly announced rate increase.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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