Successful restructurings require a legal team that not only has deep knowledge and experience but that is also strategic and forward thinking.
When it comes to restructuring, Chapman is known for thinking out of the box—working closely with our clients to assess the desired outcome and the strengths, weaknesses, exposures and obstacles in achieving the desired outcome and advising on courses of action to maximize recovery.
Out of Court Restructurings
Chapman helps clients think ahead and develop alternative strategies when deals show signs of distress. We analyze alternatives, map out strategies, and structure solutions to enhance recovery values. Many cases do not need a bankruptcy or court proceeding and, if an out of court resolution can be achieved, our legal team devises the game plan and structures the solution.
Documentation and Perfection Review/Analysis
When a transaction is in trouble or distressed, we review a client’s documentation and perfection of its collateral to identify issues and take any necessary action to reduce or prevent problems that could arise in connection with an exercise of remedies or should a bankruptcy filing or other court proceeding be initiated later. We also utilize our extensive experience in the negotiation and application of subordination and intercreditor agreements to help clients strategically evaluate the options available to address intercreditor issues.
We counsel creditors in their negotiations and dealings with junior, subordinated, or second-lien lenders, equity holders, swap counterparties, and other interested parties and stakeholders. We negotiate and document forbearance agreements to address various issues, including foreclosure, default, amounts due, counterclaims, taxes, assignment of rents, interim payments, and business restructuring. We help stabilize a company’s capital structure through rebalancing its debt and equity mixture, typically by the refinancing of loans and other debt and/or new investments or the recapitalization of equity in the company. We also provide our clients with bankruptcy law analyses for opinion letters, proposed deal structures, and evaluation of parties’ leverage during workout negotiations.
UCC Foreclosures/Exercise of Voting Rights Under Pledges/Real Property Foreclosures
We help secured creditors enforce their rights arising under the Uniform Commercial Code (UCC), including matters pertaining to the public or private disposition or strict foreclosure of personal property collateral under Article 9 of the UCC. In addition, we help creditors enforce their voting and other rights under pledge agreements, including the exercise of such rights to replace existing board members of governing boards with independent director members. We also assist clients with the disposition of real property collateral through foreclosure proceedings or deed-in-lieu transactions.
Independent Board and Special Committee Representation
We represent members of governing boards with their appointments to such board of directors of corporations and limited liability companies. Our counsel covers a wide range of issues, including engagement letters, director and officer insurance, and fulfilling fiduciary duties. In addition, we represent board members in connection with the creation of special committees and advise the special committee to satisfy their mandate and fulfill their fiduciary duties.
We help clients determine whether a debt-for-equity solution is the best approach for resolving a troubled financial situation. If the preemptive measure is the only alternative, we advise on the proper structure to preserve a client’s priority position while allowing the distressed organization to continue operations.
Out of Court Representative Matters
- Counsel to a private equity sponsor in the purchase of senior debt followed by a section UCC 9-620 replacement of the board with independent directors and a consensual foreclosure of the equity by the borrower.
- Counsel to court appointed trustees of Starwood West Limited in connection with the restructuring of approximately $254 million of bonds issued by Starwood West Limited including:
- the out-of-court loan workout and restructuring of $500 million of defaulted CMBS loans backed by a portfolio of five shopping malls and
- the out-of-court loan workout and restructuring of $100 million of defaulted CMBS loans backed by a shopping mall.
- Counsel to indenture trustee in connection with the out-of-court workout of approximately $50 million of bonds issued by Brookland Upreal Limited, a British Virgin Islands issuer of, whose US subsidiaries were engaged in the acquisition and development of real estate projects located in Brooklyn, New York.
- Counsel to senior secured bondholders in connection with out-of-court workout and restructuring of bonds issued by conduit issuer on behalf of private not-for-profit educational institution; representation included the preparation for an action to foreclose on certain mortgages and UCC Article 9 collateral and the negotiation of a deed-in-lieu from the borrower to the secured lender.
- Counsel to the agent bank and syndicate of lenders in connection with exercising rights under a pledge agreement to appoint independent directors and a subsequent article 9-620 foreclosure sale and acquisition of an after-market auto parts supplier.
- Counsel to a private fund in its acquisition in the secondary market of senior secured loans and executed strict foreclosure resulting in the client owning a portfolio company.
- Counsel to a lender in connection with two strict foreclosures under article 9-620 of a pharmaceutical trials facilitatory company and a pharmaceutical advertising company.
- Represented private fund in the acquisition by UCC-9 foreclosure sale of a company, which provided publishing and information services to the financial services industry, and in the subsequent sale of the company to an industry purchaser.
- Counsel to secured lender and treasury management bank in workout and ultimate refinancing of loans to money services business borrower.
- Counsel to administrative agent for lender to manager of fertility clinics in workout and ultimate sale of loans.
- Counsel to administrative agent for lenders to out-of-home advertising company in workout and ultimate sale of loans.
- Counsel to administrative agent for lenders to marketing business regarding workout and ultimate sale of loans.
- Counsel to administrative agent in workout of loan to MSO serving pain management clinics.
- Counsel to the administrative agent for secured lenders in workout and ultimate refinancing of loans made to unclaimed property business.
- Counsel to life sciences hedge fund in connection with a workout of a secured debt investment.
Bankruptcy and Insolvency Proceedings
At times, a bankruptcy or insolvency proceeding is not merely a remedy of last resort, but part of a necessary and powerful strategy that can be deployed to maximize recovery. While negotiation and transactional acuity are key in restructuring matters, so is readiness for bankruptcy or other litigation. Chapman’s Special Situations and Restructuring team helps clients prepare for and take action in court to achieve an optimal recovery outcome.
Chapman has appeared or participated in chapter 11 (reorganization) bankruptcy proceedings of all sizes on behalf of administrative and collateral agents, indenture trustees, secured and unsecured lenders, bondholders, credit and investment funds. Chapman helps clients enforce their rights through the remedies available, including cash collateral and debtor-in-possession (DIP) financing agreements and orders, section 363 asset sales, prepackaged chapter 11 filings, plan negotiations and confirmation, claim treatment and defending against claim objections or cram-down, discovery matters, adversary proceedings, and appeals of bankruptcy proceedings.
When client interests extend overseas, we provide cross-border insolvency advice in connection with chapter 15 matters related to foreign main and non-main insolvency proceedings, as well as cross-border or multi-jurisdictional bankruptcies where a debtor’s primary case is commenced under chapter 11. We have experience working cooperatively and efficiently with foreign co-counsel to navigate multi-jurisdictional insolvency proceedings.
Municipal and Nonprofit Organization Bankruptcy
Chapman represents issuers, underwriters, bondholders, lenders, credit enhancement providers, and trustees—structuring transactions to manage municipal insolvency risks and advising on workout, receivership, and chapter 9 matters should they arise. Over the years, Chapman lawyers have helped shape the evolution of bankruptcy protections, from testifying before Congress and contributing to the drafting of the 1988 Municipal Bankruptcy Amendments, to writing industry treatises. Chapman publications, Municipalities in Distress? How States and Investors Deal with Local Government Financial Emergencies and Defaulted Securities: The Guide for Trustees and Bondholders are valuable industry resources and are available on amazon.com.
Receiverships/Assignments for the Benefit of Creditors (“ABC”)
We represent creditors in liquidation and receivership proceedings as well as with assignments for the benefit of creditors. In addition, we assist corporate and indenture trustees with the wind-down of trusts and liquidation of trust assets upon trust termination.
Bankruptcy and Insolvency Representative Matters
- Counsel to Mishmeret Trust Company Ltd., an Israel-based trustee, in connection with the restructuring of $750 million of bonds issued by All Year Holdings Ltd. including:
- the sale of a 911-unit residential apartment building complex located in Brooklyn, New York part of which served as collateral for $250 million of bonds;
- the multi-jurisdictional bankruptcy proceedings of All year Holdings in the Southern District of New York, the British Virgin Islands and Israel; and
- the restructuring of $180 million of bonds secured by the William Vale Hotel located in Brooklyn, New York.
- Bankruptcy co-counsel to Avadim Health, Inc., a health care and wellness company, in the sale of substantially all of its assets to a European-based private credit alternative asset management firm in a section 363 sale. Prior to entering bankruptcy, Chapman represented the Restructuring Committee of Avadim Health’s Board of Directors.
- Counsel to senior secured bondholders in connection with the bankruptcy proceeding of ERP Iron Ore, LLC
- Counsel to a senior secured lender in the specialty grocer Dean & DeLuca chapter 11 bankruptcy proceeding.
- Counsel to a private equity fund in connection with adversary proceeding commenced by liquidating trustee in chapter 11 bankruptcy case and securing a full dismissal of the action with prejudice.
- Counsel to a senior secured lender in connection with default and bankruptcy proceeding commenced by operator of nursing homes and assisted living facilities.
- Counsel to the Ad Hoc Bondholder Group in connection with a chapter 15 bankruptcy petition commenced by a Canadian Trust with energy and petroleum assets in the US.
- Counsel to administrative agent for secured lenders through workout and chapter 11 case, including section 363 sales (and associated PACA/PASA issues) regarding Earth Fare grocery store chain.
- Counsel for lender to Orion Healthcorp, Constellation Healthcare Technologies and affiliated companies in liquidating chapter 11 case following allegations of fraud.
- Counsel to lessor of railcars in Covia chapter 11 case.
- Counsel to the independent manager of Wardman Hotel Operator, LLC, the owner of a 1,100 room hotel and conference center in Washington, DC, through the company’s bankruptcy filing, section 363 sale, and liquidation under a plan of reorganization.
- Counsel to a securitization trustee in the Lehman Brothers bankruptcy proceedings in connection with (i) multi-billion dollar RMBS put-back claims litigation and (ii) termination and settlement of derivative transactions and financial contracts.
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Restructuring and Bankruptcy Updates
Chapman partners Michael Friedman and Eric Silvestri, and associate Helena Honig discuss a recent decision of the US Bankruptcy Court for the Southern District of New York in an article published in the June 2023 issue of Israel Desks Magazine.