September 15, 2021

What We’re Reading This Week [September 13, 2021]

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Law360 reported that the U.S. Trustee’s Office filed a motion opposing a “death trap” provision contained in Avianca Holdings’ Chapter 11 plan of reorganization. In bankruptcy, so-called “death trap” provisions reward classes of creditors for voting in favor of plans of reorganization with higher payouts as an incentive for them to vote to accept a given plan of reorganization that would nevertheless pay out less than what a given class is arguably owed under other provisions of the Bankruptcy Code. Pursuant to Avianca’s plan disclosure statement, Avianca’s general unsecured creditors, which, as a class, are owed between $2.5 and $3.5 billion, would receive their choice of either $36 million in cash or 2.5% of the equity in the reorganized Avianca if the class votes in favor of the plan as opposed to $30 million in cash and 1.75% of the equity if the class votes against the plan. The U.S. Trustee’s Office argued that Avianca, the second-largest airline in Latin America, failed to justify its use of the death trap provision in the plan.  [Law 360; September 8, 2021]

Federal Reserve officials have indicated they could begin tapering their $120 billion in monthly purchases of Treasurys and mortgage-backed securities in November, according to the Wall Street Journal.  Plans taking shape could reduce such purchases at a rate that would conclude asset buying sometime in the middle of 2022.  [WSJ; September 10, 2021]

Reuters reported that luxury furniture retailer ABC Carpet & Home gained approval to access $2.25 million of a $5.7 million loan on an interim basis to fund its continued operations during bankruptcy. ABC, which filed for Chapter 11 bankruptcy last week, is reportedly seeking to sell its assets by the end of October and already has a $15.3 million lead bid from 888 Capital, an entity controlled by Regal Investments. [Reuters; September 10, 2021]

Energy prices are soaring in Europe, which the Wall Street Journal reported was spurred by a sudden slowdown in wind-driven electricity production off the coast of the United Kingdom in recent weeks. To make up for the wind shortfall, gas and coal plants emerged to fill in the gaps, raising prices. For electricity, prices in the U.K. more than doubled at their peak and were almost seven times higher than the same time last year. The European markets could see even greater price shocks this winter, when energy demand is significantly greater, presenting possible system-wide stability issues. [WSJ; September 13, 2021]

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