What we read this week [September 13, 2021] – Insolvency / Bankruptcy / Restructuring

Law360 reported that the United States Office of the Trustee filed a motion opposing a “death trap” provision contained in Avianca Holdings’ Chapter 11 reorganization plan. In the event of bankruptcy, the so-called “death trap” provisions reward categories of creditors who voted in favor of reorganization plans with higher payments in order to encourage them to vote to accept a given reorganization plan which would nevertheless pay off. less than what is arguably owed under other provisions of the Bankruptcy Code. As per Avianca’s plan disclosure statement, Avianca’s general unsecured creditors, who as a class are owed between $ 2.5 billion and $ 3.5 billion, would receive an option of $ 36 million in cash or 2.5% of equity of reorganized Avianca if the class votes in favor of the plan as opposed to $ 30 million in cash and 1.75% of equity if the class votes against the plan. The U.S. trustee’s office argued that Avianca, Latin America’s second-largest airline, had 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 start cutting their $ 120 billion in monthly treasury bill and mortgage-backed securities purchases in November, according to the the Wall Street newspaper. The plans that are taking shape could curtail these purchases at a rate that concludes asset purchases by mid-2022. [WSJ; September 10,
2021]

Reuters reported that luxury furniture retailer ABC Carpet & Home has been granted permission to provisionally access $ 2.25 million on a $ 5.7 million loan to finance its continued operations during the bankruptcy. ABC, which filed for Chapter 11 bankruptcy last week, is said to be looking to sell its assets by the end of October and already has a main offer of $ 15.3 million from 888 Capital, an entity controlled by Regal Investments. [Reuters; September 10,
2021]

Energy prices are skyrocketing in Europe, what the Wall Street Journal reported was spurred by a sudden slowdown in wind power generation off the UK coast in recent weeks. To fill the wind deficit, gas and coal-fired power stations have emerged to fill the gaps, raising prices. For electricity, UK prices more than doubled at their peak and were almost seven times higher than the same time last year. European markets could experience even larger price shocks this winter, when energy demand is significantly higher, which could present system-wide stability issues. [WSJ; September 13, 2021]

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