Bankruptcies Set to Increase as Debt Maturities Loom

Serving as a partner at Squire Patton Boggs (US) LLP, Norman Kinel is a New York based partner and member of the firm’s Restructuring & Insolvency Practice Group and heads the Firm’s Creditors’ Committee Practice as national chair. In late 2019, Norman Kinel was a participant in Corporate LiveWire’s Bankruptcy and Restructuring Virtual Roundtable.

The first topic discussed was the bankruptcy and restructuring landscapes presently existing in each panelist’s jurisdiction. As Mr. Kinel described it, there has been a slight increase in business bankruptcy filings, which he felt may presage a wave of filings in sectors that are particularly vulnerable.

In addition, with debt maturities approaching for a diversity of over-leveraged companies, lenders are less likely to extend deadlines when reaching their natural limits. At the same time, political uncertainties abound domestically and worldwide, and a recession is “long overdue” when going by historical standards.

A fellow panelist noted that, with bankruptcy filings having last reached a peak in September of 2010, followed by years of decline, non-business bankruptcies continued to decline, but only marginally. At the same time, the first half of 2019 witnessed a significant increase in business bankruptcies, led by major national retailers.

LBI Media, Inc., Chapter 11 Disclosure Statement Approved

Norman Kinel

Norman Kinel

Norman Kinel is a New York-based attorney at Squire Patton Boggs, LLP, who serves as head of its Creditors’ Committee practice and as partner in the Restructuring & Insolvency Practice Group. As reported by Law360 in January, 2019, Norman Kinel represented the official committee of unsecured creditors in a case in which a Delaware U.S. bankruptcy judge approved a disclosure statement in connection with a proposed plan proposed by Debtor LBI Media, Inc.

The disclosure statement was approved after objections by junior noteholders, who requested that more details be provided before its approval. Their specific concerns centered on undisclosed details regarding LBI’s plans to sell the company, top officer compensation provisions, and inadequate review time. The noteholders alleged that with the additional information it sought the chances of having a “contested hearing on the disclosure statement itself” would be minimized.

Mr. Kinel noted that this did not affect the committee’s ongoing investigation of whether any valid claims against California-based LBI or others existed. The committee he represented had yet to decide on whether it would support the Chapter 11 plan presented by LBI.

Unsecured Creditors Represented in Constellation Enterprises Case


Norman Kinel

Norman Kinel

An attorney with Squire Patton Boggs, Norman Kinel has extensive experience in complex business bankruptcy cases involving chapter 11 filings.

In August 2017, Norman Kinel represented a committee of Constellation Enterprises LLC’s unsecured creditors in urging a federal appeals court judge to overturn a Bankruptcy Court decision denying approval of a settlement agreement negotiated by the creditors’ committee for the benefit of unsecured creditors.

The settlement was denied on the basis that it ran afoul of the U.S. Supreme Court’s recent decision in Czyzewski v. Jevic Holding Corp. The Committee argued, however, that the holding in Jevic did not apply to the facts presented in the Constellation case and thus should not have been relied upon as a basis for the decision. In particular, the Committee argued that there is no priority scheme within the Bankruptcy Code that governs the distribution of non-estate assets. In addition, unlike the Constellation case, Jevic had nothing to do with a third-party purchaser’s rights to contribute its own property or funds to other creditors.

The Committee further argued that the Bankruptcy Court had failed to apply the ruling in In re ICL Holding, a Third Circuit precedent that permitted a third-party to contribute non-estate property in connection with a settlement, even if the distributions to be made were not in strict accordance with the absolute priority rule.

Unfortunately, when the Constellation chapter 11 cases was converted to chapter 7, the Committee’s appeal was dismissed and certain noteholder parties to the settlement agreement, who were to have contributed substantial cash and other consideration to a trust to be established for the benefit of unsecured creditors, instead received a multi-million-dollar windfall, with unsecured creditors receiving no distribution.

Duration of Chapter 11 Cases Slowing, but some are Bucking the Trend


Chapter 11 pic

Chapter 11

A bankruptcy and restructuring attorney, Norman Kinel is a partner at the international law firm Squire Patton Boggs. Over the course of more than 30 years, he has handled complex bankruptcy cases as a partner in several prominent law firms based in New York City and earned industry accolades that include several Turnaround Atlas Awards and multiple recognitions as a “Super Lawyer.” A graduate of the American University Washington College of Law, Norman Kinel frequently writes articles for industry publications about developments in the bankruptcy field.

Writing on eSquire Global Crossings, Mr. Kinel analyzed the findings of a recent Fitch Ratings report that suggests the average duration of Chapter 11 bankruptcy cases has grown significantly shorter over the last few years. According to Mr. Kinel, who has been involved in many dozens of these cases throughout his career, these findings are not entirely surprising, as an increased reliance on prepackaged reorganization plans in Chapter 11 cases has made for a simpler confirmation process.

However, not all Chapter 11 cases have followed this trend. For example, while the average Chapter 11 bankruptcy proceeding in 2017 lasted only four months, and the average of all cases from 2003 to 2018 was seven months, the Energy Future Holdings bankruptcy case lasted a full four years. Other notable cases that took much longer than average include the Interstate Bakeries Corp. proceedings, which lasted 51 months, and the two-year Calpine Corporation case.

When analyzing these lengthier cases, several commonalities emerge. Among other factors, these longer cases often involve legacy liabilities such as underfunded pension plans or complex transactions such as leveraged buyouts. In other cases, longer proceedings can simply be attributed to bad timing, with the specific economic environment of the companies’ respective industries slowing the process.