What We’re Reading This Week [March 18, 2022]
Bloomberg reports that Puerto Rico ended its five-year bankruptcy this week by restructuring $22 billion of debt. This was accomplished through a bond transaction in which certain investors exchanged their prepetition debt securities for new general obligations. The exchange reduced Puerto Rico’s funded debt to approximately $7 billion and dedicated $1.4 billion for public employees’ pensions. But the Commonwealth’s debt held by Puerto Rico’s Electric Power Company, which is in its own bankruptcy proceeding, remains unresolved. [Bloomberg; March 15, 2022].
Per Reuters, Chilean-based Latam Airlines obtained court approval of a so-called backstop agreement under which certain creditors will guarantee the debtor’s exit financing if it is not able to obtain sufficient interest from third party investors. The deal provides that 15 backstop creditors would receive $734 million in fees to ensure that $5.4 billion in stock and debt offerings are financed in full. The decision furthers Latam’s plan to exit bankruptcy. [Reuters; March 16, 2022].
According to Law360, the Second Circuit overturned a bankruptcy court’s decision that denial of a Paycheck Protection Act (“PPP”) loan to a bankrupt hospital violated section 525(a) of the Bankruptcy Code (which prohibits the government from denying grants based on bankruptcy status). Instead, the Second Circuit found that the PPP loan was a loan, even if the government could waive repayment. As a result, the government’s denial of the hospital’s PPP loan application did not violate section 525(a) of the Code. The PPP loan program was established to allow businesses to continue to make payroll during COVID-19 shutdowns. [Law360; March 16, 2022].
