February 9, 2018 - The LSTA recently completed two full years of hosting quarterly bankruptcy review webinars when Richard Levin of Jenner Block presented for the eighth time. Unlike in previous webinars, where the focus was exclusively on bankruptcy cases, this time Mr. Levin began by focusing on two pieces of legislation that could profoundly impact bankruptcy and restructuring in the United States. The first, the Bankruptcy Venue Reform Act of 2018, a bill proposed by Senators Warren and Cornyn, would require a company to file for bankruptcy protection where its principal place of business or principal assets are located. It would strictly limit “forum shopping” to places like Delaware or New York where the overwhelming majority of large bankruptcy cases are currently filed. Is this a good thing? As Mr. Levin noted, “where you stand depends on where you sit”. If you live or practice primarily in New York or Delaware and are comfortable with the experience and sophistication of the courts in those jurisdictions (and the work cases in those jurisdictions generate), you probably view the bill as a bad idea. If you live and practice almost anywhere else, you may think the bill would keep cases closer to their stakeholders and allow other courts around the country to develop bankruptcy expertise (and provide local lawyers some legal work). Mr. Levin and LSTA General Counsel Elliot Ganz (riding shotgun at the webinar) agreed that, according to sources on Capitol Hill, the likelihood the bill gets passed in this session are remote. As reported in the WSJ, the second bill, already passed into law as part of the recent tax overhaul, eliminates the ability of companies to use current net operating losses (NOL) to offset taxable gains from previous years (while retaining and actually extending the ability to offset NOLs against future gains). Notwithstanding that it is a tax bill and does not amend the Bankruptcy Code itself, the change could have a significant impact on many bankruptcy cases where companies rely on the NOL “carryback” as an important source of cash during the bankruptcy process. The National Bankruptcy Conference, an independent organization made up of prominent bankruptcy judges and practitioners (including Mr. Levin) which advises Congress on the operation of bankruptcy and related laws, took a strong position against this bill (to no avail), asserting that it would “seriously impair the ability of financially troubled companies to restructure, jeopardizing ongoing operations and employment”. Whether that turns out to be the case remains will certainly be tested. Mr. Levin spent the remainder of the webinar reviewing a number of important cases that raised critical issues.
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