Insights Past Issues

On November 17, the Securities and Exchange Commission adopted amendments to Rule 302(b) of Regulation S-T, which will provide more flexibility in connection with SEC filings by allowing the use of electronic signatures in authentication documents.

Under the expanded Medicare Accelerated and Advance Payments Program, more than 22,000 Medicare Part A providers and 28,000 Medicare Part B suppliers requested and received accelerated or advance payments from the Centers for Medicare & Medicaid Services to help ease financial strain and uncertainty caused by the COVID-19 pandemic.

In June, the IRS issued several notices that provide more details on the SECURE Act, passed in late 2019, and the CARES Act, passed in late March. This Client Alert will cover two primary topics: Coronavirus-Related Distribution Rules and the 2020 RMD Waiver Rule.

As companies default under their credit agreements, lenders have to decide what course of action is appropriate to effectuate their goals. Should the lender give the borrower breathing room by entering into a forbearance agreement in exchange for certain milestones, or is more aggressive enforcement action required?

This is the third and final Client Alert of a three-part series relating to executing a Strict Foreclosure. As discussed in our previous Client Alerts, it is imperative to focus on who is going to run the business after consummating the Strict Foreclosure.

The CARES Act, which was designed to support individuals and businesses affected by the COVID-19 pandemic, was signed into law on March 27. This article summarizes various tax provisions in the CARES Act.

The CARES Act, which was enacted to support individuals and businesses affected by the COVID-19 pandemic, provides that borrowers experiencing financial hardship due to the national emergency declared by the President, may request and obtain forbearance on certain federally backed mortgage loans.

This is the second Client Alert of a three-part series relating to executing a Strict Foreclosure. 

This Client Alert is part of a three Alert series. This Alert focuses on when Strict Foreclosure can be a lender’s best option and the potential path to execute a Strict Foreclosure. 

The Federal Reserve has established the Main Street Loan Program to provide support to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.

On June 16, the Securities and Exchange Commission issued an order granting registered municipal advisors an emergency, temporary conditional exemption from broker registration under Section 15 of the Securities Exchange Act of 1934 in connection with certain direct placement activities.

The General Assembly passed Senate Bill 2135 on May 23 and the Governor signed the same on June 12. The Act provides greater flexibility for public bodies to conduct business remotely when in-person attendance is not feasible due to a disaster.

On June 11, the Federal Reserve Bank of New York issued an updated Notice of Interest for the Municipal Liquidity Facility to reflect the expansion of eligibility for the facility.

On June 5, the Paycheck Protection Program Flexibility Act of 2020 was signed into law and made key changes to the Paycheck Protection Program just a few weeks before the program’s official termination on June 30.

On June 3, the Federal Reserve announced expanded eligibility for its Municipal Liquidity Facility. Under the new terms, a State that does not have at least two total counties or cities that meet the minimum population requirements will be able to identify a city or county to be an Eligible Issuer.

This client alert will address questions about loan forgiveness under the Paycheck Protection Program for both borrowers and lenders as known at the current time, but we note that legislative efforts currently underway may change the terms of these loan forgiveness provisions.

On May 23, the General Assembly passed Senate Bill 2135, providing for amendments to Sections 2.01 and 7 of the Open Meetings Act of the State of Illinois. The changes provide greater flexibility for public bodies to conduct business remotely when in-person attendance is not feasible due to a disaster.

On May 4, the IRS issued Revenue Procedure 2020‑19, which provides temporary relief to publicly‑offered regulated investment companies and publicly‑offered real estate investment trusts, with respect to stock distributions that are intended to qualify for the dividends-paid deduction.

The Federal Reserve today issued an amended term sheet establishing pricing criteria for its Municipal Liquidity Facility last described in our April 29 Client Alert. The Federal Reserve Bank of New York also issued today a revised FAQs for the facility.

On May 4, the SEC Chairman and the Director of the Office of Municipal Securities issued a public statement encouraging issuers, conduit borrowers and other obligated persons of municipal securities to make disclosures describing the effects of the COVID‑19 pandemic on their finances and operations.

This alert explores the three loan facilities constituting the Main Street Lending Program: the newly announced Main Street Priority Loan Facility, the revised Main Street New Loan Facility, and the revised Main Street Expanded Loan Facility.

Treasury Department guidance issued on April 22 summarizes three requirements for the use of payments from the Coronavirus Relief Fund. On May 4, FAQs were issued that “supplements” the guidance by answering a long series of questions about Eligible Expenditures and a shorter list of questions about the Administration of Fund Payments. 

On May 5, federal banking regulators adopted an interim final rule that neutralizes the liquidity coverage ratio impact for banks participating in the Federal Reserve’s Money Market Mutual Fund Liquidity Facility and the Paycheck Protection Program Liquidity Facility.

On April 27, the Federal Reserve issued a press release announcing changes to the Municipal Lending Facility described in previous client alerts. At the same time, the Federal Reserve Bank of New York, as sole Reserve Bank lender for the facility, issued a FAQs for the facility.

The Paycheck Protection Program and Health Care Enhancement Act was signed into law today. This alert summarizes key portions of the Act and recently released information from the Department of Health and Human Services explaining its plans to allocate and distribute the Provider Relief Fund money.

On April 9, the Federal Reserve issued term sheets for six “new” funding facilities under the CARES Act. This client alert describes in detail the Municipal Liquidity Facility.

Chapman’s "Bankruptcy and Aircraft Finance" handbook details certain special rights afforded aircraft creditors and some of the strategies employed. With the airline industry suffering devastating losses as a result of the COVID-19 pandemic, we hope this will be a useful resource for creditors.

On April 13, the IRS released Revenue Procedure 2020-26, which provides that forbearances and related modifications of certain mortgage loans will not be treated as replacing the unmodified loan with a newly issued loan for purposes of the REMIC and grantor trust qualification tests (and related REMIC-related taxes).

On April 9 the Federal Reserve issued term sheets for six “new” funding facilities under the CARES Act. Three of those facilities provide for direct loans to companies. 

The Coronavirus Aid, Relief, and Economic Security Act to support individuals and businesses affected by COVID-19 pandemic was signed into law on March 27. This client alert summarizes the various tax provisions in the CARES Act.

On April 9, 2020, the Federal Reserve released a revised term sheet for TALF 2020 that, among other things, broadens the range of assets that qualify as eligible collateral under the program.

Earlier today the Federal Reserve announced it would establish six new funding facilities supported by Treasury funding authorized by Section 4003(b)(4) of the CARES Act.

On February 19, the Small Business Reorganization Act came into effect and Debtors with aggregate liabilities that do not exceed $2,566,050 were provided an opportunity to resolve their outstanding liabilities. But even before the SBRA could see its first successes (or failures), the Coronavirus Aid, Relieve and Economic Security Act of 2020 increased a small business’s debt threshold.

In these uncertain times, parties to bond documents (including documents such as continuing covenant agreements) may wish to waive, modify or renegotiate certain provisions, including the forbearance and deferral of debt service, the waiver of provisions or the exercise of certain options.

The Federal Reserve Bank of New York has posted FAQa for the Commercial Paper Funding Facility described in our March 19 client alert, and amended as described in our March 24 client alert.

The SEC has taken several actions to assist funds and advisers in light of the effects of COVID-19. Similarly, FINRA also has taken several actions to provide guidance and certain regulatory relief to its member firms.

The Federal Reserve has established a webpage that provides links to a FAQ and other documents for the Money Market Fund Liquidity Facility described in earlier Chapman client alerts.

Yesterday the Federal Reserve announced it was temporarily removing Treasury securities and deposits at Federal Reserve Banks from the supplementary leverage ratio applicable to Category I-III bank holding companies or US intermediate holding companies of foreign banks.  

In response to the COVID-19 pandemic, federal and state courts throughout the country are issuing general orders providing for important changes to procedures for pending and newly scheduled court hearings. This is a summary of such procedural changes for the federal courts located in Chicago and the state courts in Cook and the surrounding collar counties. 

This client alert has been updated from our March 31, 2020 client alert to reflect guidance from the U.S. Treasury Department and the Small Business Administration.

The $2 trillion stimulus bill is the largest stimulus bill in U.S. history and Congress’ third major piece of legislation to address the COVID-19 crisis. This client alert summarizes notable CARES Act provisions for Institutions of Higher Education.

The cornerstone of the CARES Act’s relief package for small businesses is the Paycheck Protection Program, under which the Small Business Administration will guarantee up to $349 billion in small business loans. 

The Coronavirus Aid, Relief, and Economic Security Act, a bill designed to provide financial support and resources to individuals and businesses affected by COVID-19 pandemic, was signed into law on March 27. This client alert summarizes notable CARES Act provisions for health care businesses, including hospitals and physician practices.

This Client Alert focuses on some major programs established by the Coronavirus Aid, Relief, and Economic Security Act to financially support, through loans or grants, (1) small businesses, (2) larger businesses, and (3) states and municipalities. 

While many questions and uncertainties exist with respect to the impact of COVID-19 on the economy, this is an overview of the prominent issues for lenders to consider regarding existing middle market credit agreements – particularly, as a spike in amendment and waiver activity is expected in coming months.

As Employers are facing unprecedented health and safety issues in connection with the COVID-19 pandemic and the rapidly changing nature of government mandates put in place to contain the spread of the virus, the United States Department of Labor, Occupational Safety and Health Administration has issued Guidance on Preparing Workplaces for COVID-19. 

H.R. 748 better known as the CARES Act or more informally as the $2 trillion stimulus bill signed by President Trump on March 27, 2020, contains one important provision for all consumer lenders and another two provisions related to federally-backed mortgage loans.

On March 23, the Federal Reserve announced the establishment of the Term Asset-Backed Securities Loan Facility to support the flow of credit to consumers and businesses. 

On March 23, the Federal Reserve issued further amendments to add negotiable certificates of deposit and all short-term municipal securities to the list of eligible collateral. 

On March 23, the Federal Reserve added municipal issuers and amended the pricing for the commercial paper funding facility announced on March 17 and issued other “program terms and conditions” posted on the website of the Federal Reserve Bank of New York.

This morning, the Board of Governors of the Federal Reserve System announced sweeping actions to help the economy.

On March 18, the Federal Reserve announced a Money Market Fund Liquidity Facility to make loans to banks and certain affiliates secured by certain assets acquired from “prime” money market funds. Earlier today, the Federal Reserve issued amendments to the program.

On March 17, the Federal Reserve Board announced the establishment of two emergency funding facilities that closely mirror facilities established in 2008 during the last financial crisis in providing liquidity to both short and long term funding markets.

In response to the COVID-19 pandemic, federal and state courts throughout the country are issuing general orders providing for important changes to procedures for pending and newly scheduled court hearings.

In a case of first impression, the Seventh Circuit recently held that a UCC financing statement that incorporates a description of collateral by reference to an unattached security agreement sufficiently “indicates” the collateral, such that a separate and additional description of the collateral is not required to properly perfect a lender’s security interest.

In a decision that upends the expectations of the municipal bond market, a three-judge panel of the U.S. Court of Appeals for the First Circuit has ruled that the “special revenue” provisions of the U.S. Bankruptcy Code do not compel the payment of debt service on certain municipal bonds during the pendency of a bankruptcy proceeding.

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that liquidated damages provisions calculating damages based upon stipulated loss value schedules designed to provide the lessor/owner participant with a return on investment of 4% (and not as a proxy for actual damages) violated New York public policy and were unenforceable as penalties.

The First Circuit recently found that a UCC filing amendment naming the debtor contained an appropriate name and that, when coupled with a corrected collateral description in the amendment, the bondholders’ lien was perfected and therefore unavoidable under the “strong-arm” provisions of the Bankruptcy Code.

A recent decision of the United States District Court for the District of Delaware has provided further support within the Third Circuit for so-called “gift” plans (i.e., plans in which a secured creditor class “gifts” a portion of its plan distribution to a junior class).

In two recent cases, the Court of Appeals for the Seventh Circuit held that the Illinois Department of Revenue could not collect delinquent retail and sales taxes from the proceeds of assets sold pursuant to section 363 of the Bankruptcy Code.

A decision by the Court overseeing Puerto Rico’s bankruptcy-like Title III proceeding has reiterated what every secured creditor understands — perfection matters. The Court found that bondholders holding $2.9 billion in debt issued by the Employees Retirement System of the Government of the Commonwealth of Puerto Rico were rendered unsecured due to inadequate financing statements.

The U.S. Court of Appeals for the Fifth Circuit recently affirmed decisions of a Bankruptcy Court and District Court recharacterizing an alleged lease to a disguised financing arrangement. The Court determined that the transaction was “per se” a financing, and therefore did not need to go on to analyze the economic realities of the transaction in detail.

On September 30, the Governor of California signed into law Senate Bill No. 1235, which amends the California Financing Law (previously known as the Finance Lenders Law) to impose new disclosure requirements on licensed commercial lenders and brokers including for online lending programs doing business in California.

This desk reference is intended to provide an in-depth analysis of the numerous issues affecting an equipment lessor when dealing with a lessee after it has filed for bankruptcy protection.

The United States Court of Appeals for the Ninth Circuit issued a decision reversing a lower court’s order that designated the vote of a secured bank creditor that had purchased claims from a subset of unsecured creditors for the admitted purpose of blocking confirmation of the debtor’s plan of reorganization.

Chapman’s "Defaulted Securities: The Guide for Trustees and Bondholders" advances understanding and consideration of issues related to trustees and bondholders in both corporate and municipal financings.

Czyzewski v. Jevic Holding Corporation made some court-watchers nervous that the decision would be applied broadly to disturb other bankruptcy-related distributions.

This article addresses the benefits to a senior secured lender of Representations and Warranties Insurance, and certain considerations financial institutions should make in documenting a middle market loan transaction when an acquisition financing utilizes RWI.

A debtor-in-possession is entitled to use cash collateral over the objections of PACA claimants so long as the debtor demonstrates that the interests of the PACA claimants are adequately protected, according to a recent ruling by Judge Dales of the United States Bankruptcy Court for the Western District of Michigan.

The U.S. Court of Appeals for the Second Circuit reversed both the district court and the bankruptcy court’s decisions in MPM Silicones, LLC, which had held that the “prime plus” formula was the appropriate method for determining the interest rate required in connection with new notes issued to secured creditors under a Chapter 11 cramdown plan of reorganization.

The United States Court of Appeals for the Second Circuit has affirmed the district court and the bankruptcy court’s determinations in MPM Silicones, LLC that Momentive’s senior noteholders are not entitled to recover any make-whole premium on account of the replacement of their notes.

Intercreditor agreements are commonly used to define the relative rights of senior and junior lenders, especially should the borrower become distressed or file bankruptcy. Properly defining priorities between lenders is particularly important when both parties possess security interests in the same collateral.

On August 3, 2017, the Delaware district court upheld the Delaware bankruptcy court’s confirmation of a so-called “gift” plan (i.e., a plan in which a secured creditor class “gifts” a portion of its plan distribution to a junior class).

On August 3, the Delaware district court in In re Nuverra Environmental Solutions, Inc. upheld the Delaware bankruptcy court’s confirmation of a so-called “gift” plan, notwithstanding the recent Supreme Court decision in Czyzewski v. Jevic Holding Corp. that had cast doubt on the viability of such plans.

11 U.S.C. § 1111(b)(1)(A) provides that a creditor holding a non-recourse lien on real property possesses a claim against a debtor’s bankruptcy estate upon the filing of the bankruptcy petition. But what happens to the secured creditor’s non-recourse claim when the property securing the loan has been sold via foreclosure?

The Uniform Commercial Code affects financial institutions in countless ways. From duties of care for customers to the banks’ inspection of checks, familiarity with the UCC is critical when examining legal disputes. This alert discusses recent developments in UCC law that provide insight into how courts examine these rules and financial institutions’ responsibilities under the UCC.

Before purchasing any debt, distressed investors need to be mindful of what unrestricted subsidiaries are and how they may impact the overall credit of a company or debt recoveries.

In a stark reminder to the bankruptcy community of the old adage that “you can run but you can’t hide,” the U.S. Bankruptcy Court for the Southern District of New York recently denied an Austrian bank’s motion to dismiss for lack of personal jurisdiction.

Investments in “unrestricted subsidiaries” are an exception to investment covenants, which have been used in an attempt to provide flexibility in restructuring a company’s capital structure.

Lenders and investors in companies often have assumed that claims related to the purchase and sale of securities are subordinated to the level of the underlying security in question. However, a recent decision has raised a serious question as to when claims for damages should be deemed “arising from” the purchase or sale of a security.

Lenders and investors in companies often have assumed that claims related to the purchase and sale of securities are subordinated to the level of the underlying security in question. However, a recent decision has raised a serious question as to when claims for damages should be deemed “arising from” the purchase or sale of a security.

In a decision that deals a potential blow to holdout noteholders in out-of-court restructurings, the United States Court of Appeals for the Second Circuit adopted a narrow interpretation of Section 316(b) of the Trust Indenture Act.

In a break from recent decisions, on November 17, the Third Circuit Court of Appeals reversed the District Court’s decision in the Energy Future case, finding that make-whole premiums were in fact payable upon a “redemption” even if such redemption occurred after a bankruptcy filing and the automatic acceleration of the underlying debt where the applicable indentures did not otherwise provide.

A recent bankruptcy court decision in the Aéropostale bankruptcy case pending in the bankruptcy court for the Southern District of New York may provide some comfort to secured creditors seeking to credit bid in a sale process commenced by a debtor pursuant to Section 363 of the U.S. Bankruptcy Code. 

The services agreements under which midstream oil and gas companies operate are routinely structured as long-term contracts requiring a large initial expenditure. In these cases, the midstream service providers’ investment is only recouped over the life of the agreement, and early termination or rejection of such agreements can be devastating.

Federal law creates an exemption from environmental liability for lenders under the federal Comprehensive Environmental Response, Compensation, and Liability Act, which provides that a party who owns or operates a facility can be held responsible for cleaning up hazardous waste at or from the facility regardless of whether that party caused or contributed to the contamination.

On June 3, 2016, the United States Bankruptcy Court for the District of Delaware ruled that the intercreditor agreement between first lien noteholders and junior noteholders in In re Energy Future Holdings Corp. did not require the junior noteholders to bear the cost of a previously disallowed make-whole payment to the first lien noteholders. 

It is a basic principle in bankruptcy that a secured lender is entitled to receive interest and other charges arising post-petition to the extent the lender is over-secured. A recent decision challenges this principle in cases where the value of a lender’s collateral diminishes during the course of the bankruptcy case.

A recent decision issued by a federal district court in North Carolina challenges the familiar principle that in a borrower’s bankruptcy, the lender, if it is oversecured as of the bankruptcy filing date, is entitled to receive post-petition interest, attorneys’ fees and other charges arising post-petition to the extent of the value of its collateral.

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

This article examines the current treatment of default interest by bankruptcy courts and analyzes how a creditor’s claim for default interest could be treated as part of a chapter 11 plan process. 

In a decision that may ease the resolution of future bankruptcy proceedings, the Third Circuit Court of Appeals affirmed a bankruptcy court’s approval of a sale of substantially all of a debtors’ assets based on a settlement in which the secured creditors gifted funds to general unsecured creditors.

On July 13, 2015, the United States Court of Appeals for the Eleventh Circuit reversed lower court orders that had precluded a lender from collecting accrued default interest from a debtor as a condition for reinstatement of the loan under a confirmed plan of reorganization. 

Law360 republished a Chapman Client Alert.

Recently, before awarding bondholders any amounts on account of a make-whole provision upon a debt prepayment, courts have repeatedly insisted on clear language in the credit documents requiring such payment notwithstanding a bankruptcy filling and a related automatic acceleration.

Pratt's Journal of Bankruptcy Law published an article written by Chapman attorneys. 

Under current law, affiliated creditors holding debt arising from the same loan transaction will not likely be lumped together when determining the number of creditors that have voted to approve or reject a plan, particularly where such affiliates held such debt prior to a bankruptcy filing and assert their claims through separate proofs of claim.

On December 8, 2014, the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 released its Final Report and Recommendations for amendment to the current Bankruptcy Code. The proposals are significant, and on the whole, largely harmful to the rights of secured creditors.

The United States District Court for the Southern District of New York recently affirmed the Bankruptcy Court’s decision in In MPM Silicones, LLC, establishing Judge Drain’s “prime plus” formula as the appropriate interest rate required in connection with new notes issued to secured creditors under a cramdown plan of reorganization in the Southern District of New York.

This is the fifth installment of Chapman and Cutler LLP’s discussion of the proposals contained in the Final Report and Recommendations of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11.

In order to avoid future intercreditor disputes, investors can learn from past mistakes and draft or revise their intercreditor agreements accordingly. In this Client Alert, we attempt to highlight a number of specific considerations that may improve intercreditor agreements, to better achieve their intended purpose of delineating the respective priorities and rights of senior and junior secured creditors while avoiding intercreditor conflict.

The Banking Law Journal published an article based on a recent Chapman Client Alert.

As discussed in our previous client alert on this subject, litigation over whether $1.5 billion in prepetition loans to GM were secured or unsecured has been pending before the Second Circuit Court of Appeals. The Second Circuit recently issued a decision upholding the termination. 

This is the fourth installment of Chapman’s discussion of the proposals contained in the American Bankruptcy Institute’s Final Report and Recommendations to amend the Bankruptcy Code. 

As discussed in our first two installments, the American Bankruptcy Institute released its Final Report and Recommendations containing proposals to modify the Bankruptcy Code, many of which will have significant and negative implications for secured creditors. 

As discussed in our first installment, the American Bankruptcy Institute released its Final Report and Recommendations containing proposals to modify the Bankruptcy Code, many of which will have significant and negative implications for secured creditors.

Pratt's Journal of Bankruptcy Law published an article based on a recent Chapman Sidebar.

Last week, the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 released its Final Report and Recommendations for amendment to the current Bankruptcy Code.

The Delaware Supreme Court ruled recently that a secured party’s security interest in collateral can be terminated upon the filing of a UCC termination statement even though there was a mistake in the document.

Chapman and Cutler attorneys have been monitoring decisions and developments with respect to creditors' rights and have compiled the client alerts published to date that provide important insight regarding the implications of these decisions for holders of secured debt and highlight what every creditor should know in order to effect rights under its credit agreement.

“Acquisition Financing,” or the funding of capital for the purpose of acquiring a target company, is a growing specialty area among bank lending attorneys.

In an important bench ruling in the MPM Silicones case, Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York has provided debtors with a potentially coercive tool to use as leverage against their secured creditors.

As prices for distressed loans have risen, holders of secured claims are focusing not only on the recovery of principal but also on repayment of interest, fees and pre-payment-premiums or “make whole” payments.

The Harvard Law School Forum on Corporate Governance and Financial Regulation posted an article based on a recent Chapman Sidebar. 

Given today’s low interest rate environment, the enforceability of make-whole provisions has been the subject of intense litigation as debtors seek to redeem and refinance debt entered into during periods of higher interest rates, and investors seek to maintain their contractual rates of return. This trend has come to the forefront most recently in two separate cases, one filed in Delaware and the other in New York.

Two recent bankruptcy court decisions from the District of Delaware and Eastern District of Virginia raise serious concerns for secured lenders and purchasers of secured loans in the secondary market.

The right of a secured creditor to “credit bid” (i.e., to bid the amount of debt owed rather than cash) in a debtor’s sale of assets, once thought to be rock solid, is again under attack.

The United States Supreme Court issued its decision in the RadLAX Gateway Hotel v. Amalgamated Bank case on May 29, 2012, closing the door on a debtorʼs end-around a secured creditorʼs right to credit bid.1 In a unanimous decision delivered by Justice Scalia, the Supreme Court found its answer to be “an easy case,” rejecting recent decisions allowing a debtor to sell secured property free and clear of all liens without providing for the secured partyʼs credit bid rights when the sale was pursuant to a plan of reorganization.2 The decision provides secured creditors with predictability and consistency whether its collateral is being sold pursuant to a proposed plan or a sale during the bankruptcy case.