NRA Bankruptcy

posted by Adam Levitin

The National Rifle Association filed for bankruptcy in the Northern District of Texas (Dallas). The NRA's press release says that the purpose of the bankruptcy is to enable the NRA to change from being a New York corporation to a Texas corporation. This is critical to the NRA because the NY Attorney General, who regulates NY non-profits, is seeking to have the NRA dissolved for financial malfeasance. Notably, the NRA states that it "will propose a plan that provides for payment in full of all valid creditors’ claims. The Association expects to uphold commitments to employees, vendors, members, and other community stakeholders." In other words, the NRA's petition is not driven by financial exigencies, but to avoid the reach of the New York Attorney General. As the press release boasts, the NRA is "dumping New York."

This is going to be one heck of an interesting case. There are already so many glaring issues (or should I say "targets"?): venue, good faith filing, disclosures, the automatic stay the trustee question, fiduciary duties to pursue claims against insiders, executory employment contracts, the fate of Wayne LaPierre, and the generally overlooked governance provisions of the Bankruptcy Code. I'll take quick aim at these all below. 

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Dissecting the Increase in Chapter 11 Filings

posted by Pamela Foohey

Ch 11 2019 2020 ComparisonI just finished teaching an intensive one-week course at Cardozo School of Law designed to introduce students broadly to bankruptcy and reorganization. The course covered debt collection, consumer bankruptcy, large public-company reorganization, small business reorganization (including the SBRA), municipal bankruptcy, cannabis and bankruptcy, third-party releases, and even a bit on chapter 15.  A theme throughout the week was changes in filings during the pandemic. To impress upon students that chapter 11 filings indeed are up, but that doesn't mean they are up everywhere across the country, I created this map. It details year-over-year increases or decreases in chapter 11 filings  based on jurisdiction.

I relied on data from the American Bankruptcy Institute / Epiq detailing total chapter 11 filings in 2019 and 2020. The map thus includes non-commercial chapter 11 filings. Historically, based on data from the Administrative Office of the United States Courts, a very small percentage of chapter 11 filings are non-business-debt filings--historically, about 6%. The more important caveat is that the map counts each filing as a case, even if the case is that of a "child" company filing with a "parent." See Slipster Bob Lawless's prior post about how parent/child filings can make it seem like commercial filings are rising much more than they actually are. Regardless, across the country, in 2020, chapter 11 filings generally are down. And where chapter 11 filings have increased, they seemingly have increased a lot.

The Argentine 2020 Restructuring Drama: An Insider's Perspective

posted by Mitu Gulati

There has been much discussion of the recent (2020) Argentine restructuring on creditslips, including by Anna Gelpern (here) and Mark Weidemaier (here), two people who know more about these matters than pretty much anyone else anywhere.  And significant portions of that discussion have been critical (or at least questioning) of the wisdom of two of the strategies that Argentina attempted to utilize during its recent restructuring: Pac Man and Re-designation.  These criticisms also showed up in the financial press, in articles by Anna Szymanski (here) and Colby Smith (here), among others.

Yesterday, two of the key players on the Argentine restructuring team, Andres de la Cruz and Ignacio Lagos (both of Cleary Gottlieb) put out on ssrn a spirited defense of the Pac Man and Re-designation strategies.  The article, “CACs at Work: What Next?” is available here (and should be forthcoming in the Capital Markets Law Journal soon).  To cut to the chase, Andres and Ignacio argue that their strategies were misunderstood by commentators and, in the end, were actually embraced by investors.

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CBRA Op-Ed

posted by Adam Levitin

I have an op-ed about the Consumer Bankruptcy Reform Act running on CNBC's site. Given that both collection moratoria and benefit extensions keep getting dribbled out in one to three month bites, we will definitely see an expiration of both as the pandemic wanes, and neither is sufficient for many households to address their arrearages.

Consider this (not in the op-ed): there's now 4.78% of mortgages that are 90+ delinquent. That's the third-highest level since 1978. Part of that is that there are virtually no foreclosures happening, but a lot of it is that the delinquencies aren't being cured. Once a household runs 90+ delinquent, cure gets very difficult—the arrearage is just too big. We are going to be looking at a lot of foreclosures down the road. Add to that a rental delinquency rate somewhere between 18% (Census numbers) and 23% (Nat'l Multifamily Housing Council numbers), and we've got a real mess looming. Unfortunately, it won't just be an economic problem or a personal tragedy for many families. It will be a political problem that will have long-term ramifications, just like the 2008 foreclosure crisis.  

Mick Mulvaney for Hypocrite Laureate?

posted by Adam Levitin

Remember Mick Mulvaney?  He was a Tea Party Congressman who became head of OMB for Trump and was then named acting CFPB Director and ultimately acting Chief of Staff for Trump before being appointed special envoy to Northern Ireland.  Well he’s resigned in protest over the sacking of the Capitol. 

I'm glad to hear that Mick is opposed to mob violence. But Mick has always been a virutoso of hypocrisy, but here he’s outdone himself. Let's not forget that Mick Mulvaney personally did far worse damage to our country than all of the Trumpist rioters.

Get your copy today!

posted by Stephen Lubben

The third edition of my Corporate Finance textbook is out and available for use in the Spring Semester. Among other new features, the new edition has a new case study (iHeart) and extensive coverage of CLOs, which are important players in finance before and after the onimage from images-na.ssl-images-amazon.comset of financial distress. Professors can contact me directly for access to a Dropbox folder that is chock full of class materials and background readings.

The Kraninger Discount

posted by Adam Levitin

The CFPB has been chugging out enforcement actions and settlements at a fairly fast clip the last several months. Part of that might be businesses deciding to settle because they think they're going to get a better deal with Director Kraninger than under any Director appointed by President Biden. And here's the thing:  they might well be right because there is a clearly observable "Kraninger Discount" in CFPB enforcement statistics. Director Kraninger has suspended nearly 18% of civil monetary penalties and 11% of consumer redress. That's nearly 7x and 3x the rate penalty and redress suspensions under Director Cordray.

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"Madden-Fix" Amicus

posted by Adam Levitin

I filed an amicus brief today in Becerra v. Brooks, the challenge brought by the California, Illinois, and New York attorneys general against the OCC's "Madden-fix" rule. Consider it a stocking stuffer for the Acting Comptroller, Brian Brooks, and a bit of goodwill toward mankind. 

Many thanks to my able counsel, Ted Mermin and Eliza Duggan from the Berkeley Center for Consumer Law & Economic Justice! 

The OCC Is a Problem Agency

posted by Adam Levitin

It's time to say it loud and clear: the OCC is a problem agency.

Here's a list of only some of the issues from the past year: the fair access rule, toleration of rent-a-banks, the valid-when-made rule, the true lender rule (that the FDIC notably didn't copy), the fintech charter, Figure's bank charter application, failure to deal with BoA's fair housing issues; failure to take JPM's unauthorized overdrafts seriously, even a ridiculous interpretation of preemption standards that came out today. (Does this laundry list of problems remind anyone of the FHLBB or OTS?)  

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Regulatory Comments to the OCC on the Fair Access to Financial Services Rule

posted by Adam Levitin

I submitted comments to the OCC about its proposed rulemaking regarding Fair Access to Financial Services. I previously blogged on the topic here and here. There are a LOT of problems in this poorly thought-through rulemaking, starting with whether there is even statutory authority, continuing to its myriad inconsistencies with safety-and-soundness (and thank goodness for President Trump, who provides many helpful examples), going on to First Amendment problems, and then wrapping up with an antitrust analysis that would flunk any antitrust course—it doesn't even define a relevant product market! Sigh. 

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