What We’re Reading This Week [May 26, 2022]
Reuters reports that an April 12, 2022, decision by Judge Ernest Robles of the Bankruptcy Court for the Central District of California, “highlights what appears to be a substantial drafting error” in Subchapter V of the Bankruptcy Code. Subchapter V is a relatively new Bankruptcy Code intended solely for small businesses. The drafting error identified by Judge Robles, however, could significantly limit the number of small businesses eligible for relief under that subchapter, a result that Congress does not appear to have intended. Specifically, under section 1182(1)(B)(iii) of the Bankruptcy Code, affiliates of “issuers” may not be debtors under Subchapter V with the term “issuers” defined by cross-reference to the Securities Exchange Act of 1934 implying that what was intended was issuers of publicly issued stock. The definition in the Exchange Act, however, is not expressly limited to publicly issued stock. And so, on its face, Judge Robes held that an affiliate of any entity that issues any stock – even in a private issuance – is not eligible for Subchapter V treatment. Judge Robles encouraged Congress to further amend Subchapter V to make clear that the only “issuers” ineligible for Subchapter V treatment are publicly-listed issuers and their affiliates. [Reuters; May 24, 2022]
Law 360 reports that a non-profit Dallas-area nursing home operator, Christian Care Centers Inc., filed for Chapter 11 protection in a Texas bankruptcy court, emphasizing its weakened financial position, in the wake of the COVID-19 pandemic, and indicating that the debtors would pursue a sale process in an attempt to address $64.5 million in outstanding debt. Court papers indicate that the debtors have a $44.2 million stalking horse bid lined up for their facilities, and plan to turn over operations to Georgia-based Bonecrest Resource Group. [Law360; May 23, 2022]
According to CNN Business, discount retailer Century 21 is reopening in spring 2023 in its former location in downtown Manhattan, marking a return following the retailer’s bankruptcy in 2020. The family owners of the original store (the Gindi family) bought back the intellectual property for $9 million during Century 21’s bankruptcy proceedings in 2020 and plan to redevelop the 60-year old brand. [CNN Business; May 17, 2022]
