The US North District Bankruptcy Court in Dallas wants update its policies to attract large, complex and costly bankruptcy cases.
Northern District bankruptcy judges have appointed more than 20 restructuring lawyers from Dallas-Fort Worth and beyond to a committee that will assess and recommend changes to complex case rules.
Large companies can usually file for bankruptcy with any court they choose. Making a court more attractive with up-to-date procedures and rules could attract big cases and encourage struggling local businesses to file in their hometowns where judges know their cases well. The depot closer to you also saves on travel costs.
The rule revisions are expected to be presented to the five judges in the Northern District Bankruptcy Court by the end of the year, said Ian Peck, a committee member and lawyer in the Dallas office of Haynes and Boone.
“The committee’s goal is to ensure the North Texas District remains at the forefront of problem solving in the largest and most complex Chapter 11 cases,” he said.
As courtrooms begin to reopen, most courts allow certain cases to be pursued virtually, and this is just one of the most visible changes the committee is considering.
Other rules relate to financing, such as emergency relief in the early stages of complex cases and the implementation of new standards for prepackaged or pre-negotiated plans.
“Each jurisdiction wishes to offer participants in the bankruptcy process accessibility; predictability and, perhaps most importantly for large and complex cases, a sophisticated legal system capable of dealing with thorny and unique issues, ”said Peck. “The Northern District is no exception.
The northern district already has an experienced bench, and the five judges have handled complex Chapter 11 cases as lawyers. The tribunal received praise from independent sources for its handling of cases last year. The bankruptcy of non-price retailer Tuesday Morning Corp., which was handled by Peck, received several awards, including one from the Turnaround Management Association.
CiCi’s Pizza went from deposit to confirmation in less than 40 days. Gold’s Gym closed its sale 110 days after filing, and Studio Movie Grill only took six months from filing to the release of Chapter 11.
“Cases are moving faster in the process than they were five, 10 or 20 years ago,” Peck said.
Business is shorter in part due to the costs of bankruptcy and the business trauma of filing, he said. “Businesses, lawyers, judges all realize that it is best for everyone to go through the process as quickly as possible. “
That’s why the courts want to make important Chapter 11 cases simpler and more predictable. Most of the rules for complex cases are 20 years old.
In recent years, the South District of Houston US Bankruptcy Court has strengthened its capacity to handle the most important cases. Last year, a few large local retail bankruptcies – Dallas-based Neiman Marcus and Plano-based JC Penney – filed for Chapter 11 in Houston, instead of Dallas. Other major recent bankruptcy cases from the Houston court included Chesapeake Energy and Diamond Offshore Drilling.
During the pandemic, many companies have been supported by lender abstention or recent bailouts such as the Congress-approved paycheck protection program and the Federal Reserve’s Main Street Lending program. Business bankruptcies could increase over the next few months if businesses do not address their issues as the economy reopens.
There are also record levels of private money available for mergers and acquisitions, private equity buyouts and debt refinancing, “a kick-start in the future” for some companies, said Clark Ansel, chief executive officer. senior general of the Dallas-based restructuring consultancy FTI Consulting. .
“Capital has been welcoming and active in high yield debt markets,” even in sectors still struggling to recover, such as the hospitality industry, he said. “Despite not sailing, the cruise lines were able to borrow billions.”
Retail and energy companies continue to lead bankruptcies in the first half of this year, followed by business services, health care and real estate, he said, and some will eventually file a second application in a few years. Basic Energy Services, based in Fort Worth, for example, filed a case again in August.
“Distressed companies are able to find additional capital in this market,” said Ansel. “This provides them with the liquidity to weather what may or may not be a short-term storm.”
Looking for more business coverage? Click here to read all retail news and updates. Click here to subscribe to D-FW Retail and more newsletters from The morning news from Dallas.