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January/February 2017

Bankruptcy
Vol. 15 No. 1
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COVER STORY

Sit Down, Shut Up and Mind Your Own Business: Controlling Subordinate Lenders in Bankruptcy - As the senior lender, your rights to recoup your funds should be top priority during bankruptcy proceedings. But those pesky subordinate lenders often get in the way. Rocco I. Debitetto explains the best way to craft an intercreditor agreement that forces subordinate lenders to “sit down, shut up and mind their own business” until you get paid.

FEATURES

The American Apparel Show: A Rollercoaster Ride Through Bankruptcy and Back Again - American Apparel isn’t the only youth-oriented retailer that sought Chapter 11 protection in 2016, but its story is the most dramatic. Its first bankruptcy proceedings included a failed battle by ousted Founder and CEO Dov Charney to regain control. Six months after exiting Chapter 11, the company was back in bankruptcy with $30 million DIP financing from Encina Business Capital and a $66 million stalking horse bid from Canadian underwear manufacturer, Gildan. Is this American Apparel’s last stand?
Retail Bankruptcy Cases: A Volatile Sector Faces More Turbulence - It’s no secret that brick-and-mortar retailers are struggling to stay in business. Stephen Selbst examines the factors that have created the current retail crisis. He explains why Chapter 11 does not effectively give retailers an opportunity to restructure and suggests avenues that lenders can take to protect themselves from exposure.
What’s Your Interest in Interest? Lenders’ Rights to Post-Confirmation Default Rate Interest - Lenders often set a default rate of interest in a loan agreement as protection if the borrower defaults. They expect the courts to honor the rate, but it doesn’t always happen. Attorneys Jeffrey Wurst and Suzanne Mourad explain how conflicting clauses in the bankruptcy code often allow the borrower to roll back the interest rate.
Bankruptcy Filings Decrease for Sixth Straight Year in 2016 - For the sixth straight year, fewer bankruptcy cases were filed. American Bankruptcy Institute Executive Director Sam Gerdano and Consultant Ed Flynn provide a more nuanced look at the patterns that emerged in 2016 and predicts a quiet year ahead.
Texas Capital Bank Dives into the ABL Pool: Capriotti and His Team from JPMorgan Have Moved to a New Neighborhood - Deep in the heart of Texas, the ABL world is heating up. Despite reports that the landscape is flat and banks have become reluctant bedfellows, Chris Capriotti and two members from the JPMorgan ABL team moved to Texas Capital Bank recently to ramp up its ABL division and transform a regional bank into a national player.

TURNAROUND CORNER

Workout Considerations to Make 2017 “A Happy New Year” - Even lenders who exercise the most thorough due diligence sometimes have to exit their loans. Turnaround specialist Ken Mann offers tips to help lenders make smart decisions in 2017.

SPECIALTY LENDING

Just Like McDonald’s: Factoring Franchises Offer Benefits to Entrepeneurs - Franchising offers financial service entrepreneurs the same benefits that food outlets, hotels and car repair shops currently enjoy. For an upfront investment, the franchisee receives support from the franchisor, association with a trusted brand and expanded business opportunities. David Banfield explains how factors and invoice discounters now use franchises, rather than branches, to provide clients with a local presence.

LEGAL LINES

Understanding Agreements Among Lenders: How the Unitranche Differs From an Intercreditor Agreement - Unitranche facilities are growing in popularity. They require less paperwork, so borrowers find them more economical and quicker to close. The unitranche is an agreement among lenders without the framework of the UCC or the Bankruptcy Code. Blank Rome’s Danielle Garcia and Alyssa Keon explain how unitranche facilities differ from intercreditor agreements and point out ways to create a more effective agreement among lenders.

FINAL CUT

Encina $30mm Dip Facility to American Apparel Approved By Court - Witness the roller coaster ride of the American Apparel bankruptcy through the lens of ABF Journal illustrator Jerry Gonzalez.

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