Top Bankruptcy Stories of 2021 According to WSJ Pro Bankruptcy​​​​​​

Corporate bankruptcies as a whole receded from the U.S. economic landscape in 2021 as financial markets and government stimulus kept many borrowers out of chapter 11. But it was still an active year for bankruptcies, driven by mass litigation, as well as some big borrowers who were hit hard by the lingering effects of the COVID-19 pandemic. As WSJ Pro Bankruptcy selected its top 10 bankruptcy stories of 2021, below are a few of the highlights:

- Bankruptcies Fall as Pandemic Continues
The rate of corporate bankruptcies hovered near its lowest level in decades, thanks to free-flowing federal assistance and buoyant financial markets. Troubled companies found investors eager to refinance debt and even buy stock to fix balance-sheet problems — or at least delay possible defaults.

- Hertz Leaves Shareholders in the Money
Hertz Global Holdings Inc. was the rare bankruptcy case to leave stockholders in the money, vindicating the bullish retail traders that bet on its stock. An intense bidding war to sponsor the rental car company’s exit from chapter 11 drove up its price enough to clear its debts in full and dispense some $1.5 billion in value to equity. (For further analysis, be sure to watch a replay of ABI’s Strategies and Perspectives webinar, “The Anatomy of the Hertz Chapter 11.”)

- Purdue’s Chapter 11 Plan at Risk
OxyContin maker Purdue Pharma LP won approval of a landmark settlement of opioid lawsuits, then had it snatched away. Purdue, besieged by litigation over addiction to its opioids, secured a $4.5 billion settlement with members of the Sackler family, the company’s wealthy owners. However, a group of state attorneys general persuaded an appellate judge that legal releases for the Sacklers aren’t authorized under U.S. bankruptcy law, throwing the company’s future into doubt and freezing billions of dollars earmarked for opioid abatement.

- NRA’s Bankruptcy Falters
The National Rifle Association showed the dangers of filing for chapter 11 without a clear path to exiting. The judge overseeing the bankruptcy case dismissed it in May, leaving the gun group to face New York’s allegations of spending abuse. More admissions of financial impropriety have followed since the case was thrown out.

- Congress Takes Renewed Interest in Bankruptcy
Spurred by the legal tactics employed by Purdue, the Boy Scouts and others, Congress took a renewed interest in chapter 11 to address what critics allege are opportunities for abuse. The proposed legal releases for Purdue’s family owners galvanized some congressional Democrats, who want to rein in the ability of bankruptcy courts to sign away creditors’ legal claims against third parties to a chapter 11 case without full agreement from the affected parties.

Click here to read the WSJ Pro Bankruptcy compendium.​​​

Survey: 1 in 3 Americans Racked Up More than $1,200 in Holiday Debt​​​​​​

More than a third of American shoppers (36%) incurred holiday debt this year, and they owe $1,249 on average after putting purchases on their credit cards, taking out personal loans or using “buy now, pay later” financing, MarketWatch.com reported. That’s according to LendingTree, which surveyed more than 2,000 U.S. consumers between Dec. 14-20, 2021, for its annual holiday debt report. The results: More people took on holiday debt this year compared to 2020, when 31% were in the red heading into the new year. There’s one silver lining: The average debt amount for 2021 is down 10% from $1,381 last season — possibly because those hurt financially by the COVID-19 pandemic might not have felt comfortable borrowing as much as they would have in the past. People were bracing for big holiday bills, according to a previous LendingTree survey, which found that about half of surveyed consumers (48%) were “dreading” the holidays due to the costs of decking the halls, buying gifts and hosting family feasts. And 41% of those surveyed expected to go into shopping debt, especially since 13% of respondents were still paying off last year’s holiday tab.

Commentary: $2,000 an Hour for a Bankruptcy Lawyer? 2022 Could Be the Year*​​​​​​

Will 2022 be the year of the $2,000-an-hour bankruptcy lawyer? A recent Reuters legal commentary looked into the possibility. While new corporate bankruptcy filings slowed down slightly this year after a pandemic surge in 2020, there were still enough big 2021 cases to keep leading practitioners busy — with some billing over $1,800 an hour. Kirkland & Ellis’s highest hourly partner rates hit $1,895 in the bankruptcies of offshore driller Seadrill Ltd., mall operator Washington Prime Group and construction startup Katerra Inc. Even the most junior associates at the firm billed $625 per hour in those cases, while other Kirkland associates billed as high as $1,195 — more than some partners at the firm, according to fee information filed with bankruptcy courts. Rates at some other firms weren’t far behind. Simpson Thacher & Bartlett partners charged up to $1,850 per hour in the bankruptcy of Chilean bank holding company Corp Group Banking SA. Its most junior associates topped those at Kirkland, charging $655 per hour in the Corp Group case.



*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

U.S. Weekly Unemployment Claims Drop to 198,000​​​​​​

The number of Americans applying for unemployment benefits fell below 200,000, more evidence that the job market remains strong in the aftermath of last year’s coronavirus recession, the Associated Press reported. Jobless claims dropped by 8,000 to 198,000, the Labor Department reported Thursday. The four-week average, which smooths out week-to-week volatility, fell to just above 199,000, the lowest level since October 1969. Altogether, 1.7 million Americans were collecting traditional unemployment aid the week that ended Dec. 18. That was the lowest since March 2020, just as the pandemic was starting to slam the U.S. economy, and down by 140,000 from the week before. The weekly claims numbers, a proxy for layoffs, have fallen steadily most of the year. Employers are reluctant to let workers go at a time when it’s so tough to find replacements. The U.S. had a near-record 11 million job openings in October, and 4.2 million Americans quit their jobs — just off September’s record 4.4 million — because there are so many opportunities.

Small Business Owners Express Confusion over the CDC’s Changed Guidelines on Isolation​​​​​​

Some small business owners are perplexed by the Centers for Disease Control and Prevention’s shifting messaging on how long people should isolate after testing positive for the coronavirus, the New York Times reported. On Monday, the CDC halved to five days the recommended isolation period for those without symptoms and those without fevers whose other symptoms are resolving. Those leaving isolation should wear masks around others for an additional five days under the new guidelines. Business owners are concerned for their workers as the Omicron variant rips through the country, driving a surge in COVID-19 cases. They’re also struggling to keep their businesses staffed, with the new spate of cases adding to a worker shortage that they have been reckoning with for months. While a briefer isolation could help people get back on the job more quickly, some owners also worry about how to determine when someone is healthy enough to return. “It does feel like a short amount of time given most people that I know still test positive at five days,” said Diana Mora, who owns Friends and Lovers, a bar in Brooklyn that is temporarily closed because of the Omicron surge in New York City but will reopen for New Year’s Eve. But some hospitality workers said they were cautiously optimistic about the changing guidelines, having seen the new variant’s relatively mild effects in some cases. The Main Street Alliance, a nonprofit business education group, is hopeful that the CDC’s new guidelines can “provide confidence” and support for businesses in rapidly bringing their employees back to work without risking their health and safety. Still, with isolation guidelines evolving — and often left to individual discretion — employers said they remained focused on preventing workplace outbreaks. “By maintaining vaccination and sanitization, we can hopefully keep it at bay,” said Marcia St. Hilaire-Finn, 55, who runs Bright Start Early Care in Washington, D.C., which requires its 30 staff members to get COVID-19 vaccines.

Spreading Knowledge in the New Year: abiLIVE Webinars in January to Cover Commercial Real Estate, Fraud in Bankruptcy, Cybersecurity and Distressed Higher Ed!​​​​​​

To kick off 2022, ABI has lined up four thought-provoking abiLIVE webinars for January looking at key issues for your practice, featuring top subject-matter experts and complimentary registration. Be sure to sign up for the following:

- “2022 CRE Economic Outlook” on Jan. 5, sponsored by ABI's Real Estate Committee: Don't miss a dynamic 2022 economic outlook presentation featuring a real estate economist and professionals. Register here.

- “Fraud in Bankruptcy: Avoiding Pitfalls at the Pre-Plan Stage” on Jan. 12, sponsored by Reid Collins & Tsai LLP: The first of a three-part webinar series focusing on recurring issues that arise in post-bankruptcy litigation. Discussion includes issues that may arise or be addressed before confirmation of a bankruptcy plan. Register here.

- “Chapter 11 and Cybersecurity: The Inevitable Collision” on Jan. 19, sponsored by ABI’s Commercial and Regulatory Law Committee: Join in on this expert discussion on the implications for and obligations of attorneys representing companies in chapter 11 when a security incident/data-privacy event happens. Register here.

- “Distressed Higher Education: How to Restructure Colleges and Universities” on Jan. 26, sponsored by ABI’s Financial Advisors and Investment Banking Committee: Learn first-hand from experts in the field how colleges and universities can best be restructured. Register here.

Volunteer Today to Become a Grader or Judge for the Duberstein National Bankruptcy Moot Court Competition!
The Duberstein National Bankruptcy Moot Court Competition will be held in New York Feb. 26-28. The Duberstein Competition, now in its 30th year, is a result of a longstanding partnership between the American Bankruptcy Institute and St. John’s University School of Law. It is widely recognized as one of the nation’s preeminent moot court competitions. After moving to a virtual platform in 2021 due to the COVID-19 pandemic, the Duberstein Competition will return to being an in-person competition in 2022. Forty-six teams from law schools across the country will compete through written briefings and oral arguments. This year’s problem, which was once again developed by Hon. John T. Gregg (U.S. Bankruptcy Court W.D. Mich.; Grand Rapids, Mich.) and Paul R. Hage (Jaffe Raitt Heuer & Weiss; Southfield, Mich.), presents two hotly contested issues for argument: (1) whether a seller of goods is entitled to reduce its preference exposure pursuant to 11 U.S.C. § 547(c)(4) by the value of goods sold, even though the debtor in possession paid for such goods in full pursuant to 11 U.S.C. § 503(b)(9); and (2) whether a trustee must timely perform the obligations of a debtor under 11 U.S.C. § 365(d)(3) by paying rent due prior to the rejection of an unexpired nonresidential real property lease but allocable to the period after the effective date of rejection.

The competition fact pattern is available here.

The Duberstein Competition is looking for volunteer brief-graders and judges for the preliminary rounds on Saturday, Feb. 26, and Sunday, Feb. 27. To volunteer to serve as a brief-grader, please register here. To volunteer to serve as a preliminary-round judge, please register here. For inquiries regarding serving as a brief-grader or a preliminary-round judge, please contact Paul R. Hage.

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