U.S. Reps. Jerrold Nadler (D-N.Y.) and Carolyn B. Maloney (D-N.Y.), and Sens. Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.) and Richard Blumenthal (D-Conn.), announced legislation yesterday to prohibit the use of nonconsensual nondebtor releases in chapter 11, according to a press release. Nadler announced the legislation at yesterday's House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law's hearing titled, "Oversight of the Bankruptcy Code, Part 1: Confronting Abuses of the Chapter 11 System.” The “Nondebtor Release Prohibition Act of 2021” aims to eliminate the use of nonconsensual nondebtor releases in private claims and those brought by the government, according to the press release. In addition to spotlighting the Sackler family's actions in the Purdue Pharma bankruptcy case, the issue of nonconsensual nondebtor releases in the USA Gymnastics and Boy Scouts of America bankruptcies were also highlighted. According to the press release, the "Nondebtor Release Prohibition Act of 2021" would prevent individuals who have not filed for bankruptcy from obtaining releases from lawsuits brought by private parties, states, tribes, municipalities or the U.S. government in bankruptcy by:
• Prohibiting the court from discharging, releasing, terminating or modifying the liability of and claim or cause of action against any entity other than the debtor or estate.
• Prohibiting the court from permanently enjoining the commencement or continuation of any action with respect to an entity other than the debtor or estate.
Commentary: Will the White House Extend the Eviction Moratorium Again?*
With the federal eviction moratorium set to expire on July 31, the White House is bracing for a possible flood of evictions, according to a Bloomberg News commentary. Millions of renters who still owe rent could be subject to court action in as little as a week’s time. While Congress has authorized nearly $47 billion in emergency rent relief, only $3 billion had actually reached renters by the end of June due to complications in the program’s rollout. The Centers for Disease Control and Prevention first authorized the eviction ban in September, and the agency has extended its deadline several times since then. But when the CDC pushed the date for another 30 days in June, director Rochelle Walensky said this would be the last time. Yet the CDC hasn’t moved to extend the moratorium so far. What action the White House can or will take now as the clock ticks down to a potential deluge of displacement is unclear — and a cause for concern for people facing housing uncertainty in August or beyond. The delta variant, meanwhile, has grown from a distant worry to an emergent threat across the U.S. The CDC is once again urging people to wear masks indoors in certain circumstances, reversing its May guidance even for those who received the vaccine. Facts on the ground have changed over the last month. Stubbornly low vaccination rates and a highly transmissible variant have cast a pall over the recovery. Disappointing figures on the distribution of rental assistance dollars preceded emergency summits convened by the White House for local leaders and judges on programs to avert eviction such as diversion.
*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. Jobless Claims Down 24,000 to 400,000 as Economy Recovers
The Labor Department reported today that the number of Americans filing jobless claims dropped by 24,000 to 400,000 last week, the Associated Press reported. The weekly applications have fallen more or less steadily this year — from a peak of 904,000 in early January. But they remain high by historical standards: Before COVID struck the U.S. in March 2020, claims were coming in at about 220,000 a week. Responding to complaints of a labor shortage, 22 states have decided to end $300-a-week federal employment benefits meant to cushion the economic fallout from the pandemic. Twenty states have dropped out of two other federal programs — one of which provides benefits to the self-employed and gig workers, and another that serves those who have been out of work for six months or longer. The expanded programs are scheduled to expire nationwide Sept. 6. Overall, 13.2 million people were receiving some type of jobless aid the week of July 10, down from 31.9 million a year ago.
Hot Housing Market Lets Banks Sell Mortgage Risk
A red-hot housing market is enabling banks to sell a new kind of bond that shares the risk of mortgage and loan defaults with institutional investors, the Wall Street Journal reported. Texas Capital Bank recently sold $275 million of securities to investors looking to cash in on the pandemic-fueled boom in home prices. The transfers are a product of the effort to shield Fannie Mae and Freddie Mac from the risk of a mortgage-market reversal. Banks are now using them to raise capital and otherwise shore up their balance sheets, a process that ultimately adds to their lending capacity, analysts said. Banks including JPMorgan Chase & Co. and Citigroup Inc. have recently increased sales of risk-transfer securities tied to mortgages, auto loans and corporate debt. However, the entry of regional banks marks a new phase in the market’s expansion, said Simon Boughey, an analyst at Structured Credit Investor. While the risk transfers revive memories of the financial products that boomed before the financial crisis, investors said they remain a niche product, supported by a surging housing market and a recovery that has improved borrowers’ credit quality. (Subscription required.)
First Came the Ransomware Attacks, Now Come the Lawsuits
Cybersecurity lapses at major companies have led to class-action lawsuits and settlements in the hundreds of millions of dollars, the Washington Post reported. Retailer Target paid $10 million to consumers and $39 million to banks after hackers broke into its systems and stole personal information in 2013. Home Depot brokered a similar settlement with shoppers who had their credit card information stolen from the home improvement store’s computers. But ransomware attacks have the potential to affect people in ways that go far beyond having their personal information stolen and sold online. Ransomware hackers deploy software that locks the owner of the targeted computer system out of their machines and demands a cryptocurrency payment in return for handing back control.
The Cruise Industry Stages a Comeback
Nothing quite demonstrated the horrors of the coronavirus contagion in the early stages of the pandemic like the major outbreaks onboard cruise ships, when vacation selfies and videos abruptly turned into grim journals of endless days spent confined to cabins as the virus raged through the behemoth vessels, eventually infecting thousands of people and killing more than 100, the New York Times reported. At the time, it was difficult to imagine how the ships, which carry millions of passengers around the world each year, would be able to sail safely again. Even after the vaccination rollout gained momentum in the United States in April, allowing most travel sectors to restart operations, cruise ships remained docked in ports, costing the industry billions of dollars in losses each month. Together, Carnival, the world’s largest cruise company, and the two other biggest cruise operators, Royal Caribbean and Norwegian Cruise Line, lost nearly $900 million each month during the pandemic, according to Moody’s, the credit rating agency. The industry carried 80 percent fewer passengers last year compared to 2019, according to the Cruise Lines International Association, a trade group. Third-quarter revenues for Carnival showed a year-to-year decline of 99.5 percent — to $31 million in 2020, down from $6.5 billion in 2019. And yet in June, Richard D. Fain, chairman and chief executive of Royal Caribbean Cruises, was beaming with excitement as he sat sipping his morning coffee onboard Celebrity Edge, which became the first major cruise ship to restart U.S. operations, with a sailing out of Fort Lauderdale, Fla. “At the beginning we didn’t have testing capabilities, treatments, vaccines or a real understanding of how the virus spread, so we were forced to shut down because we didn’t know how to prevent it,” he said. Several epidemiologists questioned whether cruise ships, with their high capacities, close quarters and forced physical proximity, could restart during the pandemic, or whether they would be able to win back the trust of travelers traumatized from the initial outbreaks. Now, said Mr. Fain, the opposite has proved true. “The ship environment is no longer a disadvantage, it’s an advantage because unlike anywhere else, we are able to control our environment, which eliminates the risks of a big outbreak.” Cruise companies restarted operations in Europe and Asia late last year, and, after months of preparations to meet stringent health and safety guidelines set by the Centers for Disease Control and Prevention, cruise lines have started to welcome back passengers for U.S. sailings, where demand is outweighing supply, with many itineraries fully booked throughout the summer.
Next Week at ABI's Mid-Atlantic Virtual Bankruptcy Workshop: Emerging SPAC Trends, Impact of the Pandemic on Brick-and-Mortar, Increasing Use of Ch. 11 to Resolve Sexual Abuse Scandals and More!
Don't miss next week's Mid-Atlantic Virtual Bankruptcy Workshop, presented on an innovative virtual platform, bringing together the region’s top insolvency professionals for two days of flexible learning and networking. Attendees will have the opportunity to earn 6 hours of CLE credit, including 1 hour of ethics, and will have access to program recordings until September 6. Sessions at the Mid-Atlantic Bankruptcy Workshop include:
• The Impact of the Pandemic on Brick-and-Mortar: A New Paradigm, or the Next Stage in the Evolution of Retail?
• What’s a Creditor to Do? The Standing Doctrine in Bankruptcy Court
• Emerging SPAC Trends and Other Creative Financing Structures
• Subchapter V Recent Case Law Updates and Issues: Navigating the New Small Business Roadmap to Reorganization
• The Increasing Use of Chapter 11 to Resolve Sexual Abuse Scandals
• Workout and Insolvency Issues Involving the SBA’s Paycheck Protection Program
• Ethics: Know Before You Go
• Judicial Round & Round
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New on ABI’s Bankruptcy Blog Exchange: Latest Milestone in LIBOR Replacement Passed
This past Monday, July 26, marked passage of the most recent major milestone in the replacement of LIBOR as the benchmark USD interest rate, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
