Cycling associations – Company Of Cyclists http://companyofcyclists.com/ Thu, 02 Dec 2021 07:26:23 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://companyofcyclists.com/wp-content/uploads/2021/10/icon-7-120x120.png Cycling associations – Company Of Cyclists http://companyofcyclists.com/ 32 32 As US Cannabis Industry Grows, Produces Distress, Bankruptcy Relief Remains Limited – Insolvency/Bankruptcy/Re-structuring https://companyofcyclists.com/as-us-cannabis-industry-grows-produces-distress-bankruptcy-relief-remains-limited-insolvency-bankruptcy-re-structuring/ Thu, 02 Dec 2021 07:12:13 +0000 https://companyofcyclists.com/?p=544 The U.S. Bankruptcy Code provides relief to debtors to maximize value for the benefit of their creditors and other stakeholders. Such relief is extremely limited when debtors are state-legalized marijuana businesses, as they are denied access to Bankruptcy Courts because the manufacture, distribution, and dispensing of marijuana remain federal crimes under the Controlled Substances Act […]]]>

The U.S. Bankruptcy Code provides relief to debtors to maximize
value for the benefit of their creditors and other stakeholders.
Such relief is extremely limited when debtors are state-legalized
marijuana businesses, as they are denied access to Bankruptcy
Courts because the manufacture, distribution, and dispensing of
marijuana remain federal crimes under the Controlled Substances Act
(CSA), 21 U.S.C Sections 801-971.1

Although the manufacture, distribution, and dispensing of
marijuana is currently legal in many U.S. states on the state
level, the federal government’s designation of marijuana as a
controlled substance supersedes contrary state law through
application of the commerce clause.2

The Drug Enforcement Agency (DEA), a department of the
Department of Justice (DOJ), is the primary federal agency that
enforces the CSA and related federal laws. In the last decade a
series of memorandums were issued to provide specific guidance and
recommendations relating to CSA enforcement, which included, among
other things:

    1. Prioritizing the investigation and prosecution of significant
      drug traffickers
    1. Clarifying that the use of federal funds to enforce the CSA
      against cancer patients or their caregivers may not be
      efficient
    1. Clarifying specific enforcement priorities involving the
      possession, production, and sale of marijuana relating to
      noncompliance of other state laws and threats to public safety and
      health
    1. Providing guidelines to financial institutions
    1. Rescinding previous guidelines on enforcement and directing
      federal prosecutors to use discretion and weigh all relevant
      factors in their investigations and prosecutions3

The Office of the United States Trustee, also a department of
the DOJ, has taken the position that a marijuana-related business
cannot seek relief under the Bankruptcy Code because the business
itself violates the CSA, regardless of whether such business
operations are legal under applicable state law.

The direct consequence to these limitations is that U.S.
businesses and individuals involved in the cannabis industry and
facing financial distress may not seek on how to file bankruptcy relief under the
Bankruptcy Code, and if they try, they will face a prompt exit.
Yet, as more states continue to legalize/decriminalize marijuana,
it is likely that more marijuana-related businesses will enter this
industry, where some will face distress but with few avenues to
restructure, reorganize, and/or liquidate.

The tension between state laws that legalize or decriminalize
marijuana on the one hand, and the CSA’s enforcement of
marijuana as a controlled substance on the other, can be understood
by reviewing decisions made by U.S. Bankruptcy Courts when they
have been faced with marijuana-related businesses or individuals
who sought relief under Chapter 7, 11, or 13 of the Bankruptcy
Code. Bankruptcy Courts generally find that because marijuana
violates the CSA, businesses or individuals may not seek relief
under the Bankruptcy Code, regardless of whether the state in which
the business operates or the individual resides and regardless of
whether the particular debtor is directly (such as
cultivators and dispensaries) or indirectly (such as landlords)
engaged in marijuana.

Decisions in the Plan Context

A number of courts have addressed this issue in the context of
the plan process, where the courts found the plan filed by the
applicable debtor, while statelicensed to grow/dispense marijuana,
did not comply with the two Bankruptcy Code sections that required
that the plan (i) be proposed in good faith and not by means
forbidden by law, and (ii) be feasible.4 The courts
found that because the applicable debtors were engaging in conduct
that violated federal law and the funding of the plan would come
from income generated from such illegal conduct, the requirements
of Sections 1129(a)(3) and (11) would not be met. Both courts
dismissed these cases.

Similarly, in In re Arm Ventures, 564 B.R. 77, 84
(Bankr. S.D. Fla. 2017), where the debtor was a commercial landlord
with a tenant that had sought (but not yet obtained) federal and
state approval to grow and sell marijuana, the Bankrupt Court found
the plan was not feasible and was not filed in good faith, as the
plan was based on funds that included future rents from this
tenant.

Decisions Involving ‘Unclean Hands’

Related to the good faith argument, some courts have concluded
that a debtor that engages in an illegal business is not eligible
for relief, as it enters the court with “unclean hands.”
For example, in In re Rent-Rite Super Kegs W. Ltd, the
court found that the debtor’s lease of warehouse space to
tenants who were state-licensed to cultivate marijuana
(representing one quarter of its rental income) was an ongoing
criminal violation of the CSA and also put the debtor’s secured
creditor’s collateral at risk, justifying the application of
the unclean hands doctrine. 484 B.R. 799, 807 (Bankr. D. Colo.
2012).

These facts, coupled with the debtor’s inability to satisfy
Section 1129(a)(3) of the Bankruptcy Code—as any plan would
rely on revenue from illegal activity—warranted
“cause” for dismissal of the case, even though (i) the
debtor’s business was legal under its state law (Colorado) and
(ii) the court recognized that federal prosecutors may exercise
their prosecutorial discretion to decline to seek indictments under
the CSA where the federal illegal activity is legal under
applicable state law. Id. at 802-05.

Similarly, in In re Basrah Custom Design Inc., the
court found that the debtor’s lease of space to a statelicensed
medical marijuana dispensary violated the CSA and thus triggered
the application of the unclean hands doctrine that warranted
“cause” for dismissal of the case. 600 B.R. 368, 382
(Bankr. E.D. Mich. 2019).

Decisions Regarding Estate Administration

Another basis for the dismissal of cases where the debtors were
state-licensed to grow/dispense marijuana is the inability of a
Chapter 7 or Chapter 13 trustee to administer the estate case or
plan with assets that relate to illegal activity. See Arenas, 535
B.R. at 848. In contrast, the court in In re Write, (Not
Located) rejected the U.S. Trustee’s argument that Chapter 7
was unavailable to the debtors (state-licensed growers for sale to
medical clinics), finding that the ability to liquidate an estate
is not a prerequisite to a discharge.

Decisions Over ‘Direct’ vs. ‘Indirect’
Connections

While it is clear that the majority of courts do not allow
individuals or businesses directly engaged in marijuana activities
to seek relief under the Bankruptcy Code, some courts have
recognized the distinction between direct and indirect marijuana
activities. Direct engagement cases include (i) In re Arenas, where
the debtor grew and sold marijuana and leased its property to a
marijuana dispensary and (ii) Rent-Rite Super Kegs W.
Ltd
., where the debtor was a landlord that derived about 25%
of its rental income from a marijuana grower.

Although the court in In re Way to Grow, Inc., 597 B.R.
111, 123 (Bankr. D. Col. 2018) dismissed the case as the debtors
sought to expand their supply business in the cannabis industry in
states where such operations were legal, it did find that the
debtors were indirectly violating the CSA, as most of its
current customers were not in the cannabis industry.

As some refer to as the “outlier case,” the court in
Garvin v. Cook Investments NW, SPNWY, LLC, 922 F.3d 1031
(9th Cir. 2019) interpreted Section 1129(a)(3) to mean a plan must
not be proposed in an unlawful manner. The court found that such
provision did not preclude confirmation of the plan that contained
substantive provisions that are premised upon illegality, such that
a court only is required to look at the plan proposal and not the
terms of the plan for purposes of plan confirmation. In
Garvin, the court confirmed a plan that included a
continuing lease to an entity growing marijuana. It is worth noting
that the debtor was not engaged in the cultivation, production, or
distribution of marijuana.

Decisions Advocating Flexibility

Despite the few bright-line rules that have emerged from
decisions published to date, some courts have favored the need for
flexible latitude to deal with variations, as opposed to
bright-line rules. As advocated by the court in In re
Burton
, 610 B.R. 633, 638 (B.A.P. 9th Cir. 2020), a Bankruptcy
Court should “be explicit in articulating its legal and
factual bases for dismissal in cases involving
marijuana”5 and not take the approach that the mere
presence of marijuana automatically prohibits a debtor from
bankruptcy relief.6

As explained in In re Olson, this articulation should include an
evaluation as to whether and how the debtor was actually violating
the CSA and/or why dismissal of the case was necessary. 2018 WL
989263 at *6 (Tighe, J., Concurring). The court in Olson also
recognized the increasing need for courts to address the needs of
litigants who are in compliance with state law while not excusing
activity that violates federal law. Id. at *6.

Similarly, the court in In re Malul recognized the
evolution of case law and that potential CSA violations will be
highly factual and specific. 614 B.R. 699, 714 (Bankr. D. Col.
2020). Similarly, although it ultimately dismissed the Chapter 11
case, the court in In re CWNevada LLC recognized the
possibility that Chapter 11 relief could be appropriate for an
individual or entity directly involved with marijuana-related
businesses. 602 B.R. 717, 747 (Bankr. D. Nev. 2019).

Bankruptcy Courts Are Sympathetic

While a majority of courts have dismissed cases where the debtor
was involved in marijuana-related businesses, many have expressed
empathy for debtors that are in need of bankruptcy relief but face
little to no practical alternatives. Way to Grow, 597 B.R.
at 132.

In In re Arenas, the court was sensitive to the fact
that the joint debtors, licensed in Colorado to grow and dispense
marijuana, “have not engaged in intrinsically evil
conduct” but could not seek bankruptcy relief “because
their marijuana business activities are federal crimes.” 535
B.R. at 849, 850.

The court in Way to Grow, 597 B.R. at 132, acknowledged
that the debtor did not seek bankruptcy in bad faith and
“[b]ut for the marijuana issue, this would be a relatively
run-of-the-mill Chapter 11 proceeding.” 597 B.R. at 133. The
court stated further that “if the result in this case is
unjust, Congress alone has power to legislate a solution.”
Id.

The court in In re CWNevada LLC went further to state until
Congress does so, “all parties engaged in or having a
significant connection with the marijuana industry face a creeping
absurdity” as they can rely on state law to expand businesses
and investments, yet such businesses “expose all of them to
possible federal criminal prosecution,” as well as create
uncertainty for states and local governments that receive taxes
from such businesses. 602 B.R. at 739-40.

One court aptly summarized the dilemma as follows:

If the uncertainty of outcomes in marijuana-related bankruptcy
cases were an opera, Congress, not the judiciary, would be the fat
lady. Whether, and under what circumstances, a federal bankruptcy
case may proceed despite connections to the locally
“legal” marijuana industry remains on the cutting-edge of
federal bankruptcy law. Despite the extensive development of case
law, significant gray areas remain. Unfortunately, the courts find
themselves in a game of whack-amole; each time a case is published,
another will arise with a novel issue dressed in a new shade of
gray. In re Mulul, 614 B.R. at 701.

What’s a Marijuana-Related Debtor to Do?

While there may be creative ways for a debtor involved with
state-legalized marijuana activities to be eligible for bankruptcy
relief,7 on a practical level, alternatives to
bankruptcy protection remain dismal. These limitations also harm
creditors, as they, too, are denied their benefits of bankruptcy
relief, including the maximization of asset value, equality, and
transparency.

Many in the turnaround and restructuring industry appreciate how
the Bankruptcy Code provides unique and powerful tools that are not
otherwise available outside of the official bankruptcy process.
Unless or until changes are made to federal law, distressed
companies and individuals in the cannabis industry will continue to
face uncertainty and limited bankruptcy relief.

Footnotes

1. The CSA governs the the manufacture,
distribution, and dispensing of controlled substances in the U.S.,
defined as a “drug or other substance, or immediate precursor,
included in schedule I, II, III, IV or V [of the CSA].” 21
U.S.C. Section 802(6). The CSA was amended by the Agriculture
Improvement Act of 2018, Public Law 115- 334, to exclude hemp and
THC found in hemp from the definition of marijuana.

2. See Gonzales v. Raich, 545
U.S. 1, 29 (2005).

3. See generally, Memorandum from David
W. Ogden, Deputy General, to Selected United States Attorneys on
Investigations and Prosecutions in States Authorizing the Medical
Use of Marijuana (October 19, 2009), available at justice.gov/archives/opa/blog/memorandum-selected-united-state-attorneys-investigations-and-prosecutions-states;
Memorandum from James M. Cole, Deputy General, for United States
Attorneys on Guidance Regarding the Ogden Memo in Jurisdictions
Seeking to Authorize Marijuana for Medical Use (June 29, 2011),
available at justice.gov/sites/default/files/oip/legacy/2014/07/23/dag-guidance-2011-for-medical-marijuana-use.pdf;
Memorandum from James M. Cole, Deputy General, to All United States
Attorneys on Guidance Regarding Marijuana Enforcement (Aug. 29,
2013), available at justice.gov/iso/opa/resources/3052013829132756857467.pdf;
Memorandum from James M. Cole,Deputy General, to All United States
Attorneys on Guidance Regarding Marijuana Related Financial Crimes
(Feb. 14, 2014) (available at justice.gov/sites/default/files/usao-wdwa/legacy/2014/02/14/DAG%20Memo%20-%20Guidance%20Regarding%20Marijuana%20Related%20Financial%20Crimes%202%2014%2014%20%282%29.pdf;
Department of the Treasury Financial Crimes Enforcement Network,
Guidance FIN-2014-G001 (Feb. 14, 2014), available at fincen.gov/sites/default/files/shared/FIN-2014-G001.pdf;
Memorandum from Jefferson B. Sessions III, Attorney General, to All
United States Attorneys on Marijuana Enforcement (Jan. 4, 2018),
available at justice.gov/opa/pr/justice-department-issues-memo-marijuana-enforcement.

4. See Sections 1129(a)(3) and (11) of
the Bankruptcy Code; In re Mother Earth’s Alt. Healing
Coop., Inc
., Case No. 12- 10223-LT11 (Bankr. S.D. Cal)
(Chapter 11 plan); In re Arenas, 535 B.R. 845, 847 (B.A.P. 10th
Cir. 2015) (Chapter 13 plan).

5. The court in Burton concluded
the Bankruptcy Court did in fact sufficiently articulate the legal
and factual bases for dismissing the debtor’s case because the
continuation of the case would likely require the trustee or court
to become involved with administering assets related to an
ownership interest in an entity involved in litigation related to
growing and selling marijuana.

6. Id. at 610 B.R. at 637-38
(citing In re Olson, 2018 WL 989263, at *6 (B.A.P. 9th
Cir. Feb. 5, 2018) (remanding for the bankruptcy court to
“articulate the findings that led it to determine that Debtor
was violating the CSA and what legal standard it relied upon in
dismissing the case”); In re Johnson, 532 B.R. 53, 59 (Bankr.
W.D. Mich. 2015) (rejecting the notion that dismissal was a
foregone conclusion and giving the debtor option to remain in
bankruptcy by ceasing illegal activities); Northbay Wellness Grp.,
Inc. v. Beyries, 789 F.3d 956, 960-61 (9th Cir. 2015) (affirming
bankruptcy court’s confirmation of a Chapter 11 plan where the
plan derived indirect support from rental income from a lessor
engaged in a marijuana growing business).

7. For example, it has been suggested
that a debtor could agree to discontinue involvement with
marijuana-related activities business (see In re Johnson, 532 B.R.
at 58 or the debtor proposes a plan that meets the requirements of
the Bankruptcy Code where the funding of the plan comes from a
source unrelated to marijuana activities. See In re
McGinnis
, 453 B.R. 770, 773 -74 (Bankr. D. Or. 2011).

Originally published by Journal of Corporate
Renewal
.

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The collapse that ruined lives revealed the dark side of business https://companyofcyclists.com/the-collapse-that-ruined-lives-revealed-the-dark-side-of-business/ Thu, 02 Dec 2021 05:55:24 +0000 https://companyofcyclists.com/the-collapse-that-ruined-lives-revealed-the-dark-side-of-business/ The fall of Enron, then ranked seventh in the United States, affected thousands of employees and rocked Wall Street. File photo of the entrance to the head office of Houston-based energy trader Enron at 1400 Smith in downtown Houston, Texas. AFP On December 2, 2001, 20 years ago, energy giant Enron – then the seventh […]]]>

The fall of Enron, then ranked seventh in the United States, affected thousands of employees and rocked Wall Street.

File photo of the entrance to the head office of Houston-based energy trader Enron at 1400 Smith in downtown Houston, Texas. AFP

On December 2, 2001, 20 years ago, energy giant Enron – then the seventh largest company in the United States – filed for bankruptcy, sending shock waves through the investor world, leading to historic layoffs and ravaging retirement savings accounts.

The collapse of Enron, which held more than $ 60 billion in assets, continues to generate interest and spark much debate about improving accounting standards and practices.

So what was all the hubbub about and why is it still being talked about today?

The Rise of Enron

In 1985, Enron was formed by the merger of Houston Natural Gas Company and Omaha-based InterNorth Incorporated. Kenneth Lay, who had previously been CEO of Houston Natural Gas, became CEO and chairman of Enron and quickly rebranded the company as an energy trader and supplier.

With the help of Jeffrey Skilling, Enron quickly dominated the natural gas contract market and the company began to generate huge profits on its transactions.

The skills have also changed the culture of the company and put more emphasis on aggressive trading. One of his brightest recruits was Andrew Fastow, who quickly rose through the ranks to become the chief financial officer of Enron. Fastow oversaw the financing of the company through investments in increasingly complex instruments.

The fall of Enron

However, as they say, what goes up must come down and the same happened to Enron. In the fall of 2000, Enron was starting to crumble under its own weight. Faced with increased competition in the energy business, the company’s profits began to decline rapidly.

In an attempt to hide the losses, the company created an array of related business entities and used accounting tricks to cover up massive business losses and large debts. They adopted the dubious tactic of “mark-to-market accounting”, in which the company recorded future unrealized gains from certain trading contracts in the current income statements, giving the illusion of higher current profits. .

These tactics eventually stopped working, and in October 2001, Enron revealed a huge quarterly loss of $ 638 million. Soon after, the Securities and Exchange Commission (SEC) began investigating the company’s transactions and deals.

Investigations revealed a horrific story of accounting fraud in which Arthur Andersen, then one of the world’s largest accounting firms, ultimately revealed that his employees destroyed Enron documents that could have been used to prosecute the business.

Enron went into a deep dive; The company’s shares, which had peaked at $ 90 per share in mid-2000, fell below $ 12 in early November 2001.

On November 7, 2001, his rival Dynegy voted to acquire the company at a very low price of around $ 8 billion in shares. However, days later, Dynegy ended his merger talks, dropping Enron shares to less than $ 1 a share. Finally, without an option, Enron filed how to file bankruptcy on December 2, 2001.

On the day they filed for bankruptcy, thousands of employees were ordered to pack their belongings and were given 30 minutes to leave the building.

Lawsuits and legislation

Arthur Andersen was one of the first victims of Enron’s notorious disappearance. In June 2002, the company was convicted of obstructing justice for shredding Enron’s financial documents in order to conceal them from the SEC. The conviction was later overturned on appeal; however, the company has been deeply dishonored by the scandal.

Enron founder and former CEO Kenneth has been convicted of six counts of fraud and conspiracy and four counts of bank fraud. Prior to conviction, he died of a heart attack in Colorado.

Former Enron star CFO Andrew Fastow has pleaded guilty to two counts of wire fraud and securities fraud for facilitating Enron’s corrupt business practices. He eventually made an agreement to cooperate with federal authorities and served more than five years in prison. He was released from prison in 2011.

Former Enron CEO Jeffrey Skilling was convicted of 19 of 28 counts of securities fraud and wire fraud and acquitted of nine others, including insider trading charges. He was sentenced to 24 years and 4 months in prison. In 2013, the United States Department of Justice struck a deal with Skilling, which saw him reduce his sentence by 10 years.

Lessons from Enron

The Enron collapse was a financial disaster for thousands of people, and its indirect impact injured millions more.

However, this also led to the passage of the Sarbanes-Oxley Act in 2002. This legislation imposed severe penalties for destroying, altering or fabricating financial records. The law also prohibited audit firms from carrying out concurrent consulting activities for the same clients.

With contributions from agencies

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How to make a good impression in bankruptcy court https://companyofcyclists.com/how-to-make-a-good-impression-in-bankruptcy-court/ Wed, 01 Dec 2021 23:10:16 +0000 https://companyofcyclists.com/how-to-make-a-good-impression-in-bankruptcy-court/ Chapter 11 debtor’s financial information What is the best way to present an Chapter 11 debtor’s financial information be presented to bankruptcy courts to give the best impression? In order to provide the court with an accurate representation of the effects of operations in Chapter 11 and to ensure that the debtor has enough time to […]]]>

Chapter 11 debtor’s financial information

What is the best way to present an Chapter 11 debtor’s financial information be presented to bankruptcy courts to give the best impression? In order to provide the court with an accurate representation of the effects of operations in Chapter 11 and to ensure that the debtor has enough time to meet his objectives?

The pandemic has led to severe revenue reductions for many companies. The returning to normal has begun however, in many industries the business environment has not reached pre-pandemic levels.

For certain companies this was the tipping point which is why filing bankruptcy guide on Chapter 11 may now be needed to facilitate an orderly liquidation process of the assets of the debtor. For other companies with solid foundations, the debtor might require Chapter 11 relief. Why? Even though they’re run well or producing products that continue to be sought-after or investing enough in their business (or the three) certain companies do not have the capital to stand up. Long to the storm.

In the end, when rates of interest increase for over-leveraged businesses especially those that have survived solely by relying on Paycheck Protection Program funds, will have to think about the possibility of restructuring debt, whether in or out of the courtroom.

Bankruptcy cases

In the beginning of bankruptcy proceedings everyone involved particularly the bankruptcy judge to know the reason for this bankruptcy case. Did the debtor submit his petition because he produces a defunct product such as Polaroid cameras and his business has been declining steadily? Did the debtor file for bankruptcy after he was hit with an unfavorable ruling? Was the bank’s deposit a result of excessive leverage that was incurred in an earlier acquisition? Perhaps it is because the business is operating in an industry which has grown to be too big?

The responses to these questions will affect the judge’s initial impressions of the matter and maybe, as follows: (1) whether he or she approves urgent assistance requests (such as the sale in bulk of debtor’s assets) (2) the length of time the debtor is required to issue an reorganization plan, and (3) whether or not the judge allows a secured lender to exercise the authority to take possession of collateral.

In some instances Rome may appear to be in flames unless you dig deeper. Judges don’t want to delay liquidation of a debtor and cause job loss when they believe that the odds are in favor of the reorganization to be successful. However when the reorganization seems difficult and the debtor has a substantial cash loss that the judge will not want to delay liquidation.

Cash flows

In the case that fall under Chapter 11, this is generally cash flow. The cash flows must be reported every month in accordance with the United States Trustee, the administrator of bankruptcy within the Department of Justice. In general, an income statement will not be required (but as explained below, the best option is to file a 3 column income statement regardless). The lenders are more concerned with whether the borrower is burning funds. If they’re burning money the lenders are worried that they might need to pump more capital, something they prefer not to do. A depletion of liquidity can also be an indication that the borrower’s main business has not stabilized.

Although the court might need the submission of a monthly cash flow report it is best to provide to the judge a cash flow report that includes and does not include (1) those items that are related to Chapter 11 (such as professional fees and one-off financing expenses) which would not be incurred in any other context than Chapter 11 and (2) non-recurring items that aren’t related in ongoing activities (such like lease payment getting rejected or the severance payment that is included in the reduction of personnel). This is due to Chapter 11 expenses and non-recurring items may either overestimate negative cash flows or limit positive cash flows.

Chapter 11 case

In the beginning of the Chapter 11 case, the major question is whether current financial performance of the debtor can be an accurate reflection of how the debtor is likely to conduct themselves when they enter Chapter 11. Everyone wants to sort out their finances and reduce their expenses, and negotiate with creditors, and show that it’s a viable option. It is unfortunate that very only a few people file bankruptcy and immediately see the pendulum shift towards profit.

They often recognize what must be done, but they need time to put in place the solutions. It will take time before the solutions are visible in the financial statements of the debtor. The debtor might require some more time “burn off” the cost of certain expenses that aren’t recurring, but can result in a negative effect on financial results. In the end, the debtor requires time for a shaky market to resume normal in certain situations.

The financial report to the court should be presented in three columns. The financial results on their own could present a false image before an bankruptcy judge. Instead the judge should be presented with three columns of information. The first column is a representation of real results. The second column contains the list of adjustments that are required to restore actual financial results in order to remove the impact of unusual items. The third column contains the financial results after being restated which show what the actual results would have been without the extraneous items.

Every item in column 2 should be explained to allow the court to decide if it is appropriate to change the part of column 3. This process must also be used for the cash flow statements as well as the statement of income (although the income statement is typically not a part of the US trustee’s reporting obligations for the month of each month). The goal is to allow the court to determine how the principal business of the debtor is operating in the absence of the issues that led him to bankruptcy.

Failure to allow the bankruptcy judge the opportunity to examine (1) the debtor’s conduct in ongoing transactions prior to the bankruptcy would have been in absence of any extraordinary events, as well as (2) what the “normalized” results of the bankruptcy. The bankruptcy process can decrease the likelihood that you will have Chapter 11 success. It is essential that the financial advisor of the debtor clearly explains the fundamentals of the adjustments. Without these the court will see an inaccurate image.

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Colombian airline Avianca says it has completed bankruptcy proceedings https://companyofcyclists.com/colombian-airline-avianca-says-it-has-completed-bankruptcy-proceedings/ Wed, 01 Dec 2021 23:02:00 +0000 https://companyofcyclists.com/colombian-airline-avianca-says-it-has-completed-bankruptcy-proceedings/ A logo of the aviation company Avianca is pictured in the headquarters building in Bogota, Colombia on August 29, 2019. REUTERS / Luisa Gonzalez Register now for FREE and unlimited access to reuters.com Register BOGOTA, December 1 (Reuters) – Colombian airline Avianca (AVT_p.CN) on Wednesday announced that it had completed its Chapter 11 bankruptcy proceedings, […]]]>

A logo of the aviation company Avianca is pictured in the headquarters building in Bogota, Colombia on August 29, 2019. REUTERS / Luisa Gonzalez

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BOGOTA, December 1 (Reuters) – Colombian airline Avianca (AVT_p.CN) on Wednesday announced that it had completed its Chapter 11 bankruptcy proceedings, a month after a U.S. court approved its reorganization process.

“Today the preconditions have been met,” the airline said in a statement from Bogota. Avianca “has successfully emerged from this process”.

Avianca, along with Chilean rival LATAM Airlines (LTM.SN), were the region’s two largest carriers before the coronavirus pandemic, but both were bankrupt when the virus disrupted air travel, amid restrictions particularly strict in Latin America.

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Avianca had already suffered several years of losses before the start of the pandemic, started on  and suffered a coup in 2019 led by United Airlines (UAL.O).

The Southern District of New York City approved the company’s reorganization plan in early November, a day before Avianca announced that it would be moving its home to Britain and that its shares will no longer be traded on the Colombian Stock Exchange. Read more

Once its main domicile is established in Great Britain, the company will be known as Avianca Group International Ltd. Its current shareholders will not receive any payment or be included as shareholders of Avianca Group, the airline said.

(This story is passed on to go from “airline” to “airliner” everywhere)

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Reporting by Julia Symmes Cobb Editing by Marguerita Choy

Our standards: Thomson Reuters Trust Principles.

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A day before the bankruptcy leak, Musk quietly hinted at making SpaceX public https://companyofcyclists.com/a-day-before-the-bankruptcy-leak-musk-quietly-hinted-at-making-spacex-public/ Wed, 01 Dec 2021 20:51:12 +0000 https://companyofcyclists.com/a-day-before-the-bankruptcy-leak-musk-quietly-hinted-at-making-spacex-public/ So we’re doing this all over again, huh? About two months ago a Twitter user published screenshots from a 2013 email that SpaceX CEO Elon Musk sent to employees, in which he explained why he wanted to keep SpaceX private. Then, the day before yesterday, Musk suddenly responded to the months-old tweet, cryptically saying that […]]]>

So we’re doing this all over again, huh?

About two months ago a Twitter user published screenshots from a 2013 email that SpaceX CEO Elon Musk sent to employees, in which he explained why he wanted to keep SpaceX private.

Then, the day before yesterday, Musk suddenly responded to the months-old tweet, cryptically saying that “a lot has happened in eight years” – perhaps a clue that the billionaire is in the process of going public with another major company.

At least that’s an interpretation of Musk’s answer.

“But has a lot changed? ” CNBC space reporter Michael Sheetz asked in response. “Or do you think SpaceX as a whole still won’t be released to the public until the Mars missions take place, with only a possible Starlink IPO before that?”

Musk stopped short, however, and has yet to respond to Sheetz. In March 2020, Musk also laughed the idea of ​​SpaceX turning Starlink into a stand-alone public company.

Notably, the CEO’s tweet was sent a few hours before SpaceExplored published a leaked email Musk sent to SpaceX employees claiming the company is in crisis and faces “real risk on how to file bankruptcy”

In 2013, Musk tried to reassure SpaceX employees that “if you think SpaceX will perform better than the average public company, then our stock prices will continue to appreciate at a faster rate than the stock market.” .

The CEO argued that state-owned companies often go through “extreme volatility,” which – if Musk’s Tesla electric car company can be trusted – is a fair assessment.

If Musk’s comment actually means he’s planning to go public with SpaceX, it could mean the space company is up for a tough race.

Over three years ago, Musk caused a huge uproar when he tweeted that it “plans to privatize Tesla at $ 420” with “guaranteed funding,” about eight years after the company went public in 2010.

What turned out to be a misguided joke on the grass landed him an embarrassing Securities and Exchange Commission lawsuit.

In his 2013 letter, Musk argued that Tesla and SolarCity were public because “they had no choice.”

He also estimated that SpaceX was worth around $ 4 billion at the time. Today, SpaceX is worth much more, reaching a valuation of 100 billion dollars in October.

Then there is the fact that as a public company, SpaceX would face a full glove of government bureaucracy – and if recent trends are to be followed, SpaceX prefers to move forward at a breakneck pace.

Has Musk learned his lesson from his fateful Tesla tweet? Considering he was tweet about doing a dump this week again, investors will have to remain vigilant.

READ MORE: Elon Musk responds to tweet on SpaceX keeping private with “a lot has happened in 8 years” [Bloomberg]

Learn more about Elon Musk: Elon Musk laconically tackles SpaceX bankruptcy leak

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What we’re reading this week [November 29, 2021] – Insolvency / Bankruptcy / Restructuring https://companyofcyclists.com/what-were-reading-this-week-november-29-2021-insolvency-bankruptcy-restructuring/ Wed, 01 Dec 2021 19:30:00 +0000 https://companyofcyclists.com/what-were-reading-this-week-november-29-2021-insolvency-bankruptcy-restructuring/ United States: What we’re reading this week [November 29, 2021] 01 December 2021 Mayer brown To print this article, simply register or connect to Mondaq.com. Los Angeles Business Journal reports on the expected increase on how to file bankruptcy filings by hotels in light of the patchy economic recovery and reduced government support as lenders’ […]]]>

United States: What we’re reading this week [November 29, 2021]

To print this article, simply register or connect to Mondaq.com.

Los Angeles Business Journal reports on the expected increase on how to file bankruptcy filings by hotels in light of the patchy economic recovery and reduced government support as lenders’ patience is expected to run out.

The Wall Street Journal writes that companies are taking a wait-and-see approach to the new Omicron variant of Covid-19 that emerged last week.

The Economist assesses Jerome Powell’s program for his second term as Federal Reserve Chairman.

LATAM Airlines on Friday announced that it has filed a Chapter 11 reorganization plan that the airline says has the backing of its largest group of unsecured creditors and various shareholders, and that will provide more than $ 8 billion in new equity, convertible notes and debts to allow the company to get out of Chapter 11.

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National Museum of American Jewish History buys back bankruptcy building with gift from Stuart Weitzman https://companyofcyclists.com/national-museum-of-american-jewish-history-buys-back-bankruptcy-building-with-gift-from-stuart-weitzman/ Wed, 01 Dec 2021 19:23:34 +0000 https://companyofcyclists.com/national-museum-of-american-jewish-history-buys-back-bankruptcy-building-with-gift-from-stuart-weitzman/ (JTA) – Shoe entrepreneur Stuart Weitzman came to the rescue of the financially struggling National Museum of American Jewish History in Philadelphia. The museum had accumulated $ 30 million in construction debt and lost ownership of its new building, coming out of Chapter 11 bankruptcy in September. Now, a donation from Weitzman will allow the […]]]>

(JTA) – Shoe entrepreneur Stuart Weitzman came to the rescue of the financially struggling National Museum of American Jewish History in Philadelphia.

The museum had accumulated $ 30 million in construction debt and lost ownership of its new building, coming out of Chapter 11 bankruptcy in September. Now, a donation from Weitzman will allow the museum to buy back the building and establish an “eight-figure” endowment, the Philadelphia Inquirer reported Tuesday.

The institution is renamed the Weitzman National Museum of American Jewish History.

Museum CEO Misha Galperin announced the news on Tuesday in a item for eJewishPhilanthropy. The Inquirer interviewed Galperin, who declined to share the exact amount of the donation, but said he was providing more than half of the funds needed for an upcoming capital and endowment fundraising campaign.

“I can tell you [the Weitzman gift] allowed us to buy our building immediately and build an eight-figure endowment, ”Galperin told the Inquirer. ” That’s all I can say. It is very significant and it deserves the name of… museum. It really secures our future.

When the museum filed on how to file bankruptcy in March 2020, it owed bondholders $ 30 million over costs associated with a recent $ 150 million construction project.

The museum was able to emerge from bankruptcy in mid-September 2021 after bondholders forgave nearly $ 14 million in debt and the family of business executive Mitchell Morgan agreed to purchase the building. from the museum for $ 10 million and rent it for $ 1,000 per month.

“The Morgan family has also given us the option to repurchase the building at any time over the next 42 months,” Galperin told the Inquirer. “The Weitzman donation will allow us to immediately buy the building from the Morgan family.

This is not the first time Weitzman has donated to the museum. In 2018, he donated $ 1 million to create the First Families Gallery, which focuses on the lives of the early Jewish settlers of colonial America.

Weitzman made his fortune as a pioneering shoe designer. The company he founded was acquired by luxury design brand Coach in a $ 574 million deal in 2015. His wife, Jane Gerson Weitzman, is a member of the board of directors of 70 Faces Media, the nonprofit association that operates the Jewish Telegraph Agency.

Closed to visitors since the pandemic lockdowns, the museum has built its virtual platform, with six online exhibits and dozens of programs. In the past 20 months, four million people have participated in the museum’s activities, according to Galperin.

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Toys ‘R’ Us to open new flagship store after already going bankrupt https://companyofcyclists.com/toys-r-us-to-open-new-flagship-store-after-already-going-bankrupt/ Wed, 01 Dec 2021 18:40:51 +0000 https://companyofcyclists.com/toys-r-us-to-open-new-flagship-store-after-already-going-bankrupt/ Photo (c) ermingut – Getty Images With how to file bankruptcy and liquidation behind it, Toys “R” Us is hoping to open its first returning store – a 20,000-square-foot, two-level flagship location in the American Dream megacentre in Bergen County, New Jersey. The store is scheduled to open in mid-December, just in time for Christmas. […]]]>

Photo (c) ermingut – Getty Images

With how to file bankruptcy and liquidation behind it, Toys “R” Us is hoping to open its first returning store – a 20,000-square-foot, two-level flagship location in the American Dream megacentre in Bergen County, New Jersey. The store is scheduled to open in mid-December, just in time for Christmas.

The company’s new store was designed to recall the brand consumers know and love, featuring Geoffrey the Giraffe, interactive experiences and product demonstrations. New to the scene are add-ons like Geoffrey’s Café and Ice Cream Shop and a two-story slide.

“American Dream is a one-of-a-kind retail hub offering massive entertainment experiences that make it a great destination for families. Launching our first Toys “R” Us flagship product here is a no-brainer, “said Yehuda Shmidman, Toys Chairman and CEO of” R “Us.

“The Toy ‘R’ Us brand is large and growing rapidly. Today, we have over 900 stores and ecommerce sites operating in 25 countries outside of the United States, and now our plans for expansion in the United States are in high gear, propelling us into the next chapter of growth for our global brand. “

Toys “R” Us deal with Macy’s still ongoing

WHP Global, owner of Toys’ R ‘Us’, announced earlier this year that the company will open more than 400 Toys’ R’ Us stores in Macy’s stores nationwide starting in 2022. Sales expert Retail notes that while those locations pale in comparison to the company’s previous 700 big box stores before its collapse, the deal with Macy’s puts it back in the mix for toy-seeking consumers.

“The partnership with Macy’s gives the Toys R Us brand more geographic depth but less direct contact with customers”, wrote Ben Unglesbee from Retail Dive. “Toys R Us’ merchandising and in-store operations are primarily driven by Macy’s, which envisions increased sales in the toy category by housing an iconic toy retail brand. “

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5Qs for bankruptcy lawyer Mark Indelicato on the future of shopping center tenants https://companyofcyclists.com/5qs-for-bankruptcy-lawyer-mark-indelicato-on-the-future-of-shopping-center-tenants/ Wed, 01 Dec 2021 17:52:50 +0000 https://companyofcyclists.com/5qs-for-bankruptcy-lawyer-mark-indelicato-on-the-future-of-shopping-center-tenants/ During more than 30 years at the Thompson Coburn Hahn & Hessen New York law firm, Mark Indelicato has studied both on how to file bankruptcy and rebuilding of dozens of retail chains. As legal advisor to the official Unsecured Creditors Committee, made up of commercial creditors and landlords, he has attended meetings with several […]]]>

During more than 30 years at the Thompson Coburn Hahn & Hessen New York law firm, Mark Indelicato has studied both on how to file bankruptcy and rebuilding of dozens of retail chains. As legal advisor to the official Unsecured Creditors Committee, made up of commercial creditors and landlords, he has attended meetings with several major retail brands backed against the wall by the pandemic. We had a phone interview with him to hear his assessment of how things might turn out in the near future.

Mark, you and your business have been instrumental in resolving bankruptcies involving retailers like Syms, Loehmann’s, and Crabtree & Evelyn. Did the general tone of these procedures change with some of the Chapter 11 reporters during the pandemic?
An interesting outcome of the pandemic is a new symbiotic relationship between landlord and tenant because, frankly, they desperately need each other. It depends on who you are, however. To the extent that the malls need the stores, the relationship is good, but when they don’t need them, they’re tougher than they’ve ever been and willing to let them go because they can’t afford to support tenants.

So tenants need to take a closer look at where they stand when it comes to renegotiating leases?
A very interesting dynamic has emerged. Some large shopping center owners were involved in the acquisition of some of these troubled retail operations. So if you have a mall owner who has a stake in, say, Brooks Brothers, how is another menswear retailer going to get into that mall and hope to compete effectively there? You suddenly have to compete with the owner on two levels.

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Wage loss notices reportedly sent to former AAF players https://companyofcyclists.com/wage-loss-notices-reportedly-sent-to-former-aaf-players/ Wed, 01 Dec 2021 14:21:07 +0000 https://companyofcyclists.com/wage-loss-notices-reportedly-sent-to-former-aaf-players/ Before, we had the XFL, USFL, FCF, and the Spring League; we had the American Football Alliance (AAF). It was the first spring league in a long time that looked promising. Sadly, he suffered the same fate as many of his predecessors when the AAF withdrew just eight weeks after the start of its inaugural […]]]>

Before, we had the XFL, USFL, FCF, and the Spring League; we had the American Football Alliance (AAF). It was the first spring league in a long time that looked promising. Sadly, he suffered the same fate as many of his predecessors when the AAF withdrew just eight weeks after the start of its inaugural season.

This does not mean that there was no hope.

Charlie Ebersol and the AAF struggled at first but were apparently rescued by Tom Dundon when he appeared to have invested enough money to keep the league afloat for their inaugural season. When Dundon arrived he came up with a pledge of significant funding. But, when the writing was on the wall, Dundon pulled the plug on the league to save his wallet.

Since then, Tom Dundon has even argued that he should be compensated by the players for the AAF bankruptcy.

Well, it looks like we have some information on how to file bankruptcy and payments..

Former AAF player Logan Tuley-Tillman tweeted his former teammates telling them to check their email for bankruptcy notices in order to recover lost wages.

UPDATE: Another former AAF player Kenneth Farrow also tweeted about the settlement notices.

It’s been over two years since the AAF entered the field, but better late than never when it comes to late payments to players. If you’ve played for the AAF, or know someone who has, you better check these inboxes. We hope everyone will receive their fair trial payments, but I would expect it to be less due to the way the settlements will be deployed.

With the AAF dead and buried and the XFL working on a revival in 2023, all eyes are now on FOX and USFL. The new USFL should have the funding in order, and given that it is owned by FOX; dissemination should never be a problem.

The AAF was trying to beat the XFL in the market, but in turn struggled in the process.

We’ll keep you posted as soon as we learn more about AAF’s bankruptcy.

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