August 2024: Recent Developments in the Realm of Bankruptcy and Restructuring

In an effort to keep you apprised of what’s happening in the realm of bankruptcy and restructuring, here are four recent developments to be aware of.

1. Bipartisan legislation introduced in both houses of Congress aims to curb the two-step bankruptcy process used in Texas. If passed, the “Ending Corporate Bankruptcy Abuse Act of 2024” would prevent corporations in Texas from splitting their business into two separate entities–one company that maintains assets while a new shell company inherits liabilities, including lawsuits. Under current law, the shell company can then file bankruptcy to shield the organization from allegations of corporate misconduct.

2. According to data from Epiq, Chapter 11 bankruptcy filings increased by 40% in July 2024 (510 filings) compared to 364 filings in July 2023. Commercial filings of all varieties also rose, increasing by 17% to 2,335 filings in July 2024 from 2,004 in June 2023.

3. AMC Entertainment’s recent restructuring deal with its creditors to overhaul nearly $1.6 billion in debt is the latest example of how liability management strategies continue to be leveraged post-pandemic. Companies increasingly turn to these transactions to provide the cash and time needed to fix underlying problems and avoid the time, expense and complexity of bankruptcy.

4. One increasingly popular out-of-court restructuring alternative is a distressed exchange, where debt is swapped for new securities or assets under less favorable terms. This exchange enables companies to restructure debts and creditors to cut their losses—often taking less of a “haircut” than they would in bankruptcy. According to S&P Global, there have been 45 distressed exchanges in the first months of 2024—the highest level since the Financial Crisis in 2009.