Coronavirus Impact on Restructuring and Bankruptcy: Client Alert Digest

This client alert discusses the impact of the novel coronavirus (COVID-19) on companies that may now need to restructure or file for bankruptcy. COVID-19 has already led to bankruptcy and insolvency filings in different industries, including the drug, retail, airline, and cruise industries. These and other industries (such as the oil and gas industry) are experiencing severe financial distress during this turbulent time.

Companies should begin considering, among other things, their current financial situation, impending loan obligations, cash flow and other financial projections, and economic and industry forecasts (which are continuing to evolve during this crisis). Companies should also evaluate their loan agreements to determine whether the company is currently in default on certain of its obligations or anticipates a default in the near future. Companies should engage their lenders in discussions regarding whether the company is able to cure any existing default, and/or whether the company believes a waiver, forbearance, or amendment is appropriate. For its part, lenders must review their legal position in relation to their borrowers. If the lender believes that, under the circumstances, it is not in its best interest to declare an event of default, the parties may then begin negotiating the terms of a waiver, forbearance, or amendment, as appropriate. In evaluating its options, companies may want to also consider, among other things, whether a sale of some or all of the company’s assets should be pursued or whether to file a Chapter 11 bankruptcy. Companies that are impacted or anticipate being impacted by the COVID-19 pandemic, and the resulting and likely economic downturn, should quickly begin this process of assessing their financial condition and planning, or creating contingency plans, to address the company’s current or anticipated financial distress. The client alerts and content below discuss these and related issues in detail.

• •Coronavirus Pandemic Portends Heightened Risk of Financial Distress, Potential Changes in Restructuring Market (Paul, Weiss, Rifkind, Wharton & Garrison – March 17, 2020)
• •Restructuring Protections In A Time Of Coronavirus (Squire Patton Boggs – March 17, 2020)
• •COVID-19 Update: Courts Provide Procedural Guidance to Bankruptcy Bar (Hunton Andrews Kurth – March 17, 2020)
• •Turbulent Times Ahead—Remember the Real Estate Workout? (Shearman & Sterling – March 16, 2020)
• •Five Things to Think About – Navigating Counterparty Insolvency (Shearman & Sterling – March 13, 2020)
• •International Considerations – Buying Assets from Distressed U.S. Companies (Shearman & Sterling – March 13, 2020)
• •Coronavirus and cracks in your armor: Recognizing impending financial stressors spawned by a health pandemic (Hogan Lovells – March 12, 2020)
• •Prepare for Bankruptcies Sparked by Oil Price Battle (Womble Bond Dickinson– March 11, 2020)
• •Dealing with the Financial Impact of the Coronavirus (Sheppard, Mullin, Richter & Hampton – March 6, 2020)

• •Del. Bankruptcy Court Halts All Non-'Time-Sensitive' Hearings (Law360 – March 17, 2020)
• •UK Retailer Laura Ashley Succumbs To Coronavirus Downturn (Law360 – March 16, 2020)
• •Modell's Liquidation Gets OK Despite Coronavirus Worries (Law360 – March 13, 2020)
• •Oil Price Drop May Deliver Knockout To Shaky Energy Cos. (Law360 – March 11, 2020)
• •Coronavirus Tips UK Airline Flybe Into Insolvency (Law360 – March 5, 2020)
• •Coronavirus Puts Japanese Cruise Co. Into Insolvency (Law360 – March 2, 2020)
• •Coronavirus Woes Tip Drug Co. Into Del. Ch. 11 (Law360 – February 10, 2020)

For more information or to download the complete Coronavirus Resource Kit, click here.