Jan Crawford of CBS News gave a talk on The Supreme Court Under Trump at the ABI Luncheon.  She asked the audience to turn back to 1990 – 1991.  David Souter and Clarence Thomas had just replaced two liberal giants on the court.  After Ruth Bader Ginsberg and Stephen Breyer were appointed in 1994,the same nine justices would serve together for eleven years.   It was a time of great hope for conservatives. With seven Justices nominated by Republicans, they were poised to undo the great excesses of the Warren Court.  Instead, the Rehnquist Court put Roe v. Wade on firmer ground, affirmative action was upheld and the wall of separation between church and state remained intact. These disappointments would guide future Republican presidents. The selection process changed because of past disappointments.   These efforts had three components:1. Vetting2. Spine Test3. DynamicsPresident Trump has now named two Justices to the Court:  Neil Gorsuch and Brett Kavanaugh.  Will these new nominees change court in way that past ones have not?   At the moment the snapshot is still blurry.Justice Souter exemplies the failure of vetting which allowed a stealth nominee onto the court.  Justice Alito was subject to extensive vetting leading to the conclusion that he had never written a wrong opinion. The list of potential nominees that Donald Trump released as a candidate list was conventional.  They were judges a president Romney would appoint. Judge Gorsuch wowed Trump.  He was not someone who would worrying about what the New York Times would say.  He had a solid judicial philosophy but had been through the storm.  President Trump saw Brett Kavanaugh the same way. Strong conservative justices can effect the court. When Clarence Thomas joined the court in 1991, the narrative that he didn’t deserve to be on the court and that he just followed Justice Scalia. How wrong narrative was. The papers of Justice Blackmun describe a case where the justices were poised to vote 9-0 on a decision.  The next day, Justice Thomas told the Chief that he wanted to change his mind and circulated a memo.  Based on Thomas's persuasion, the Court flipped from 9-0 to 5-4 the other way based on the strength of Thomas's argument.. Justice Scalia followed Justice Thomas. This example shows how a new justice can mean a new court.While Justice Thomas exemplified the spine test, Chief Justice Roberts and the congenial Justices Alito and Gorsuch demonstrate the importance of dynamics, that is, judges who will be able to persuade other judges.    The liberal judges are taking note. Justice Kagan was very welcoming to Justice Kavanaugh.   There has been a bit of a bro-mance between the Chief Justice  and Kavanaugh.The court had a quiet term when Justices Kavanaugh and Gorsuch joined the court.  It's not going to be quiet this time.  Abortion, gun rights, race, Dreamers, immigration, and presidential power are all going to be on the docket. The big cases will come down in May and June smack in the middle of the presidential campaign. The Supreme Court is the one institution in Washington that works.  There are nine really smart people on the court. Rhetoric on right and left is that the court is political. Trump says judges are political. Hillary Clinton is taking shots at Trump judges. Ms. Crawford said it was a mistake to say the Trump nominees are not qualified.With two liberal judges in their 80s, the court is likely to be in for change once again.

U.S. Rep. Katie Porter, the law professor turned Congresswoman, spoke to the ABI luncheon at this year's NCBJ.    Like many of the speakers, she  had an Elizabeth Warren story.   When she was attending Harvard Law School, she was told that she needed to take tax so she could learn how to study a statutory code.  She couldn't get the professor she wanted so she ended up taking bankruptcy from Prof. Elizabeth Warren.    She said that capitalism encourages risk taking.  It rewards winners but doesn’t provide for the losers. Bankruptcy protects against the downsides of capitalism. She gave her own personal story of the downside of capitalism.   Growing up in a farming community in Iowa, she was riding on the bus one day when it stopped in the middle of town.   The bus driver said, "the bank closed."  Someone (probably Rep. Porter) said, Of course it's closed.  It's after 3:00 o'clock.   However, what the bus driver meant was that the bank had failed.   The future Rep. Porter ended up living through people losing their house, losing their possessions as the farm economy failed.  Bankruptcy is a way to understand why these things happen and how we address them.  After practicing briefly, she did empirical research into why people filed bankruptcy.  However, she realized wow little we learn about the creditors.  She looked into mortgage companies and realized that they did not do well.Rep. Porter said that her interest in bankruptcy sets her apart from many of her colleagues.  "Not a lot of people run for congress to work on Sec. 727."   She said that she is concerned with how our free market intersects with our legal and regulatory framework. She said that she sees herself as a champion of capitalism and said that bankruptcy is inextricably part of capitalism.  She said that we need to talk about health of capital markets plus guard rails on the excesses of capitalism.   She described herself as a champion of antitrust enforcement because it strengthens capitalism.   Rep. Porter said that we should reduce barriers to entry, enforce consumer protection and protect the rights of investors.   She said that these are all elements of how we create a strong prosperous capitalist economy. She gave Purdue Pharma as an example of how bankruptcy can benefit the public.  She said that bankruptcy has a tremendous potential to make people better off with transparency and public participation.  In a case with major public implications such as Purdue, bankruptcy allows us to pause, bring everyone together and have a collective public conversations about how to address claims.Rep. Porter serves on the Financial Services Committee while bankruptcy is under the jurisdiction of the Judiciary Committee.   She said that committee jurisdiction hampers ability to make policy in bankruptcy.  She added that committee assignments don’t bring all of the right players together.She described herself as a bankruptcy nerd and damn proud of it.  The Financial Services committee has jurisdiction over student loans.  She said that the taxpayer would gain more than they would lose from from forgiving a large chunk of student loans. She said the best answer is not telling students they have one way ticket to bankruptcy.Rep. Porter is a member of the College Affordability Caucus.  She said that the sticker price of college is too high so that students have to backfill with scholarships plus debt. She said that you should be able to get through a state university without debt.I asked her a question about bipartisanship.   She singled out Rep. Van Taylor (R-Texas) as a Republican member she enjoys working with and said that even though she disagrees with Mark Meadows, she gets along with him well.   She said that her least favorite member of Congress is one who uses his time to ask each witness including  Jamie Dimon whether they are a socialist or a capitalist.  Not one person said they were a socialist. In response to a question from the Wall Street Journal, she said she was not committed to bankruptcy venue reform at this time.  She said that the public aspect of bankruptcy is important, including putting proceedings in the communities where they are happening.  On the other hand, she said that the academic research on concentration of cases in one or two districts is abating.  She said that it is a debate worth having and wondered why there are not more venue transfer motions.Rep. Porter said that she supports an increase in Chapter 7 trustee fees.  She said there is bipartisan support for this measure but not the bandwidth.Personal Note:   I first discovered Rep. Porter when she was Prof. Porter and spoke at NCBJ.   As a bankruptcy nerd, I was glad to see someone with her experience running.  Her mother lives in Austin and I attended a fundraiser for her there.  I hope that she changes her view on bankruptcy venue reform since that is important to me.   

Mark Zandi, Chief Economist at Moody’s, gave a talk entitled the Two-Handed Economist.  He said that my task is to give you the horizons for the economy.   The Bankruptcy Forecast He said we currently have a good economy.  Bankruptcies are steadily declining.  Personal bankruptcies maxed out at 1.5 million during the financial crisis; today they are down to 750,000 per year.  At the  peak of the financial crisis, there were  60,000 business bankruptcies per year; now we are down to 20,000.  He said that we’ve hit bottom and  he would expect both personal and business bankruptcies to increase.  Business bankruptcies will rise substantively greater than personal bankruptcies because personal households have done a better job of deleveraging.   Personal bankruptcies will increase but relatively modestly.   Non-financial corporations have now substantially levered up and underwriting has weakened.  Mr. Zandi said, that is a prescription for financial problems when the economy does not cooperate.   He told the bankruptcy professionals in the room that "going forward you will be a lot busier."Will There Be a Recession? He said that the most likely scenario is that we avoid an economic downturn in the next 12-18 months, but the economy will struggle.   Recession risks are high.  If I am wrong we will suffer an economic downturn next year.    He then outlined five areas he would cover: What Are the Odds of a Recession? Mr. Zandi said that recession odds are pretty close to even.   The bulk of world is in slowdown phase.   Real GDP in the U.S. was growing just over 3% after being juiced by tax cuts.  Now, it's down to 2%.  Once growth slows below 2%, the economy struggles to create enough jobs.   It is a self reinforcing negative cycle.  Once unemployment starts to increase that’s a real problem.  Unemployment is low before every recession.     An inverted yield curve where long term interest rates are lower than short term rates is one of the indicators of a coming recession.  He said that based on the unadjusted numbers, there is a 70% chance of a recession.  However, he said that the adjusted number was 43%   The reason for this is that there are currently negative interest rates in foreign countries.  That means that capital is flowing into the U.S. and is driving down long-term rates.   As a result, it is necessary to adjust for the bias.   What Could Go Wrong? Mr. Zandi presented a risk matrix of factors which could lead to a recession.   Removing the Fed Chair would have a severe effect but is unlikely to occur.   On the other hand, a manufacturing recession is likely to occur but would have limited impact.    The most likely severe impact on the  economy is an escalation in the global trade war. There are two key links between a trade war and a recession.  The first is the cost of tariffs.  Presently there are $70-80 billion per year, which is equivalent to 0.4% of GDP.   In contrast, the tax cuts were $200 billion.   Next year, the cost of tariffs will increase to $130 billion.  Referring to tariffs, he said, "That’s a tax.  Someone’s got to pay it."  He said that the other link is the uncertainty a trade war  creates. It undermines business sentiment.   Business wonder whether the tariff will be 10or will it be 25?  Businesses can go to the Department of Commerce and make a pitch as to why they should be exempt, which he described as crony capitalism at best.  He noted that there is currently flat business investment and that hiring has pulled back. He concluded, "My assumption is that the President will connect all of these dots."  He said he expected the President to make a deal with the Chinese so that businesses feel confident enough to hire.     What is the Road to Recession?Usually when the yield curve inverts, there is a recession in one year.   The yield curve inverted in May 2019 which suggests that a recession is likely by Summer 2020.    When the yield curve is positive, banks can make money.   If they can make money,  they will lend.   If the cost of money is more than they can lend it at, they won't extend credit.   While too much credit is bad and too little credit is bad, too little credit after too much credit is worse.   Firms have leveraged up and will need more money to refinance.  If they come looking for money and banking system is not lending that’s a problem.He predicted that if there is a recession, it will occur at noon on June 20th 2020.  The next indicator to go is the stock market. The stock market has predicted nine of the last five recessions according to economist Paul Samuelson.   The stock market can signal a recession anywhere from a couple of months to a year ahead of time.  A booming stock market is not a protection against a recession as shown by the fact that the stock market was at a record high in October 2007.   Consumers are on edge.  There has bee a decline in consumer confidence.  Consumers are usually the last to figure it out.  If consumer confidence falls for 2-3 months, we’re there.   Google searches for "recession" are trending up.  Consumers are not in the bunker yet, but they have their hand on the bunker door.What will the Policy Response Be?Policy makers are working hard to avoid a recession.  The Fed has cut rates three times.   Having rates  at 1.5-1.75% is helping.  Currently, there is a 4% fixed mortgage rate.   When rates go below 4%, it brings light back to the refinance market. However, there is a limit to how much the Fed can cut rates.  There will be a point in time when investors say oh my God, we are closing in on 0%.  If they keep cutting rates they will run out of room.   He said that is getting closer than you think. There is already a lot of debt with negative yield.   If we’re in a recession,  we’re going negative.   It’s going to be hard for the Fed not to push short term rates into negative. We are going into an election year.  In an election year, it is hard for Congress to pass sweeping measures to help the economy. While an infrastructure package is something that could get done, it won’t benefit anyone until 2021.How Bad Will It Be?In a typical recession, unemployment goes to 6-7% We've been through this ten times since World War II.    Housing and commercial real estate will lead the way.  The economic indicators suggest typical economic downturn.  However, Mr. Zandi is not so sure. There is currently  $2.7 trillion in debt owed by  highly leveraged companies.  At the peak of the subprime mortgage crisis, there was  $2.7 trillion worth of subprime mortgages.  Because the economy is bigger today, the impact is not as severe.However, there is a lot of bunching at two levels of bond debt.  There is a lot of bunching of BAA bonds, which is one notch below investment grade, and B3, which is one notch above C.  There is  leveraging right up to those lines.  If bonds drop below BAA, fiduciary investors can no longer hold them in their portfolios.  If bonds drop to C, they get kicked out of Collateralized Loan Obligations for being junk bonds.     Another risk is in the shadow system, that is, mortgages originated originated by nonbanks.  The   shadow system is big and it does not have the same level of regulation as banks.  Many of the loans being originated by non-banks are sold to GNMA and are loans made to low income and first time homeowners.   Nonbanks rely on big banks for funding.   In a recession, lines of credit may be closed and repo market may shut down.  This means nonbanks will get cut out of funding.  If they can’t make loans, the housing shuts down.   This is not about capital, is a threat from a liquidity event.  The only way you get out of a liquidity event is for the Fed to enter the system.  By now, it should be clear why this presentation was titled the Two Handed Economist.  On the one hand, Mr. Zandi thinks we are likely to avoid a recession.   On the other hand, there are triggers out there which might lead to a recession.  On the one hand, economic indicators suggest that any recession could be mild.  On the other hand, risks pertaining to leveraging and liquidity mean that things could go seriously off the rails.   The only thing that is certain is that we are in a time of uncertainty.Author's Note:  I tried to capture Mr. Zandi's words are closely as possible.  In some places, I missed a word or a phrase and filled in what I thought was an equivalent word or phrase.   This is similar to what artificial intelligence would do except that I am using my actual intelligence to fill in the gaps. I apologize in advance if I made any errors in presenting Mr. Zandi's reasoning.I also apologize that I was taking pictures of Mr. Zandi's slides from an angle so that the photos are a bit slanted and it looks like they were drunk.

Continuing our blog posts about failed or closed restaurants,when client’s contact us about a failed or closed restaurant, weask them to prepare and bring us an Income Statement and a BalanceSheet for the restaurant.The purpose of the Income Statement or Profit and Loss Statement is toshow the revenue and expenses for the restaurant for the current year andto determine the profitability of the restaurant, if any.The purpose of the Balance Sheet is to determine what money or property isowed by the restaurant (liabilities), such as back rent to the Landlord,sales tax, wages due to employees or money owed to suppliers.We also want to know what property or assets the restaurant has tosatisfy the claims of creditors.In our experience of representing  failed or closed restaurants, a couple of facts become apparent:Restaurants have little to no inventory, the perishable goods must be used or thrown out.-The accounts receivable are generally credit card based and collected by therestaurant in 5 to 20 days-The  used pots, pans and knives have little value- Fixtures or property attached to the walls or the floor belong to the Landlord and-The bar stools, tables and other property is generally auctioned off by the restaurantowner  in a going out of business sale or sold by an auctioneer for 10 to 15 cents on the dollar.There is however one asset that is often overlooked by restaurant owner and that is the lease. The lease needs to be reviewed to determine if the rent is below market, at market or abovemarket and how many years are left on the lease (the term).A lease with less than three years remaining on its term, generally has little to no value.Simerly a lease that is at market or over market generally has no value.However an “under market” lease with 3 or more years on its term, may have a significant value.The approach that we suggest for the under market lease  is that the assignment andsublet provisions of the lease be reviewed, then the restaurant owner should contactthe landlord and indicate that they are considering closing their business and theywould like to assign or sublet the lease to a third party or have the landlord “by them out”out their lease.The restaurant owner with an under market lease, may want to contemplate hiring areal estate broker to review the lease, to negotiate with the landlord and to market the lease to third parties.The general standard in New York for the approval of an assignment or sublet of alease by a tenant is known as “not unreasonably withheld”. In plain English whatthis means is that if a tenant finds a suitable party, that wants to take over the lease,the landlord must be “reasonable” in approving or not approving /consenting to anassignment of the lease or the Landlord can be sued.The Landlord will want the lease to be sublet to a third party and not assigned, so thatthe landlord will have recourse against the existing restaurant owner and the new restaurant tenant. If the restaurant lease is able to be assigned or sublet, then the tenant’s security deposit (which generally is two to three months of rent) will bepreserved and ultimately returned to the restaurant owner.That money (sublet money & security deposit) can often times create a significantamount of money, that can be used to pay creditors, such as sales tax, or monies duethe landlord that are guaranteed by the restaurant owner.A number of issues related to failed or closed restaurants have been discussed in prior blog posts.Clients with failed or closed restaurants, that have questions regarding the closing of the restaurant,or a bankruptcy filing by the restaurant or restaurant owner or a sublet or assignment of the leaseshould contact Jim shenwick at 212-541-6224 or at [email protected] Shenwick has experience in workouts, bankruptcy filings and office leasing. 

One of the best panels that I attended at NCBJ was New Consumer Loan Products and Potential Bankruptcy Issues    The panel included Tyler Brown from Hunton Andrews Kurth, Carol Evans from the Federal Reserve Bank of Washington, D.C., Prof. Adam Levitin from Georgetown University Law Center and Gary Reeder, Vice-President of Innovation and Policy at the Center for Financial Innovation.What Is Fintech? Carol Evans from the Federal Reserve discussed the recent survey of household economics and decisionmaking.  12% could not cover unexpected $400 expense while 27% would have to borrow or sell assets to do so.   Meanwhile, the racial wealth gap is widening.  These developments create both a need for new consumer loan products and a risk that consumers will be victimized by them.  Fintechs are an important player in the consumer market.  Fintechs are the companies in this space while fintech is the product they offer.   Fintech spans a continuum ranging from the ATM to innovative credit scoring to transferring money by mobile phones.  Fintechs do not have not a brick and mortar presence.  Instead, they interact with consumers online through the web or an appFintech has a lower cost of underwriting which can improve financial inclusion.  Some Fintech companies also provide consumers with budgeting assistance. Additionally, 32% of small businesses used online lenders in 2018.Early Wage Access is an employee benefit being offered by some employers. It is a variation of payday lending.Alternative Data Another trend in Fintech is the use of alternative data, which is data outside of a credit report.  Some data sources don’t have an obvious connection to lending and may be proxies for race, gender, etc.  Facebook friends and social networks are one example.   If your Facebook friends have a poor credit history, you may have poor credit as well.  However, cash flow underwriting, which looks at the funds flowing through your bank account can help if you have gig economy income.     Targeted marketing poses a risk of discrimination.   For example, Asian Americans might be charged more for test preparation products.   Consumers might be might be offered different products based on race, gender, national origin.   HUD has sued Facebook because advertisers on Facebook could target ads based on prohibited categories.  HUD alleged that Facebook was facilitating redlining.The fact that an algorithm is data driven does not ensure that it is fair or objective.  Amazon developed an algorithm for hiring technical positions.  It turned out that it would have discriminated against women and was never implemented.Issues With Student Loans Both Gary Reeder and Prof. Levitin discussed issues related to student loans.   Financial institutions that don’t just provide student loans are offering to refinance student loan debt.  Examples are Future Fuel, Six Up and Vemo.  How do you determined dischargeability when student loans and consumer loan combined.   Once you pierce that layer of protection, the entire pool is polluted. However, if you solely consolidate student loans it’s ok. What if administrative costs are rolled in.  Is that still solely a non-dischargeable student loan?The recent Crocker opinion from the Fifth Circuit shows that not all private loans fit the definition of a nondischargeable student loan.   In Crocker, a loan to study for the bar exam was found to be dischargeable. Merely saying something is a student loan may not be enough to keep it from being dischargeable.There has been a trend in for profit colleges failing.  The Department of Education is supposed to have a program to forgive student loans from for profits that fail.  However, this is made more difficult by the fact that there may be multiple counterpartiesProf. Levitin spoke about income sharing agreements.  Income sharing agreements are alternate forms of student loan financing.  Instead of borrowing a sum certain, a student agrees to pay a fixed percentage of income for a fixed period of years over a fixed minimum.   A student with a high wage job pays more than someone with a minimum wage job.  It is like an Income Contingent Repayment Plan on the front end. They are not widespread. Purdue University and some nonaccredited institutions are offering financing through IS As.  IS As are not a good financing mechanism compared to traditional federal student loans.  They compete with private student loans.    Are IS As credit?   If they constitute credit, it implicates many federal statutes.  What if the plan offered is different  for computer science majors v. African American studies majors?In bankruptcy, is an ISA a claim?    Is it dischargeable? Accrued but unpaid obligations are clearly claims.  Future obligations are probably also a claim, but there is a little more room to argue. Is it secured?  Is it perfected?  How do you deal with it in a chapter 13?Choice of Law Choice of law is becoming a hot topic.  Online installment lending has increased to $50 billion outstanding.   Lenders have an incentive to shop for state law which is beneficial to them.  Prof. Levitin gave the example of a lender in Utah with borrowers in 30 states.  The contract designates Utah law.   The first question is regulatory.  Can a state regulate an out of state lender offering credit to its citizens? The Tenth Circuit said that Kansas can require regulation of a non-Kansas lender.  The Seventh Circuit reached an opposite result, but the facts were unusual.   An Illinois lender was making loans to Indiana borrowers, but the borrowers had to physically go to Illinois.In choice of law analysis, the first question is does the contractual choice of law have a rational relationship to the transaction.  If there is only a nominal relationship, then maybe not.  The second question is whether the choice of law is offensive to the law of the borrower's state.   There have been some creative choice of law provisions used by online lenders, such as Maltese law or  Cook island law.   The panel did not have a lot of confidence that this would work for purely online lenders.  Another angle is partnerships between online lenders and banks or Native American tribes.  Rent a bank is a scheme where a bank originates a loan and then assigns it to a nonbank lender.  Is federal preemption assignable?   This is hotly debatable.  One bankruptcy court has held that a loan is enforceable if it was valid when made.  There arrangements are vulnerable to two lines of attack.  First, there is the argument under the Madden Doctrine that federal preemption is not assignable. The law should look at the characteristics of the current lender, not the loan. Even if there might be assignability,  parties can bring up the true lender doctrine.   Who did marketing?  Who has the credit risk?  Who does the servicing?   However, it may not even be necessary to assign the loan. If the originating bank issues a participation or a credit default swap, the loan stays on the bank’s books.   Prof. Levitin argued that courts need to require certification that the economic interest has not been transferred.  According to Mr. Reeder, the next twist is to assign, then securitize.   A securitization trust  sponsored by a bank is not itself a bank.Merchant Cash Advances Mr. Reeder talked about Merchant Cash Advances.   These are similar to wage advances but for small businesses.  Money transferred from an entity to a recipient.   The person who receives the advance has a contractual obligation to pay a percentage of its future revenue up to ceiling.  So what is the nature of relationship.   The MCA company provided cash and it will be provided cash plus a return in the future.  Is it a debt?  There are three core reasons for arguing that it is not a debt.  First, the MCA party can avoid licensing requirements.  Next is the disclosure regime.  If it's not a debt, then Truth in Lending disclosures don’t apply.   Finally usury caps don’t apply if it is not a loan.   In bankruptcy, when an MCA party shows up and says it has a "claim," does it? It is the problem of calling something an advance not a loan.  States are looking at these transactions.   If it is not a loan, does it ride through the bankruptcy unaffected?  When someone guarantees an MCA, what are they guaranteeing?   Are they guaranteeing payment of the MCA obligation or merely performance by the obligor and is there a difference?My partner, Barbara Barron, and I recently authored an article on MC As called "Why MCA?  Adding Havoc to Chaos" which appears in Vol. 33, Issue 3 of Commercial Law World.   I would be happy to provide a copy to anyone who requests it by sending an email to [email protected].

The Commercial Law League presented a lively panel on Hot Topics in Retail Bankruptcies featuring  Robert Duffy from Berkshire Research Group, LLC, Kenneth Eckstein from Kramer Levin, Mohsin Meghji from M-III Partners, LP, James Sprayregen from Kirkland & Ellis and Marty Staff from BCBG Maxaria.I will acknowledge up front that I have no idea who made which comments so that all content should be attributed to the panel in general. An Overview of Retail BankruptciesThe panel reported trouble across all sectors. Brands used to be the black box of customer preference, but now it’s about price. The e-commerce effect is impacting players across the retail space.   Small and mid-market retailers feel the need to develop an e-commerce presence but are not making any money on it.   Meanwhile, the cost of cost of keeping a bricks and mortar presence has become a burden.   While the total amount of retail space is decreasing, there are winners and losers.   Sears is gone.  Walmart and Target are doing well.   Circuit City is gone.  Best Buy is stronger.   Walmart saw this coming 10-12 years ago.   Target has been reinventing itself over and over.  Wal-Mart and Target are the leaders today.   However, if they stay the same, they will get killed but they have shown ability to innovate.  Brick and mortar stores are becoming a place to look for selections to make on-line.  Meanwhile, the selections in stores are getting smaller making people go online.   There is a place for smaller footprint stores but it is not clear whether retailers can they survive the change.Another trend is re-purposing of retail space.  The panel gave the example of a Sears store which was torn down to make way for apartments. Toys R Us  makes a good study for what can go wrong in a retail bankruptcy.  It had enough unencumbered assets to get a good DIP loan.  They thought they had an 18 month runway but faced an aggressive attack from Amazon and Walmart.   The lesson the panel said was that companies can't survive with this much debt, even with vendor support.   Toys R Us ended up administratively insolvent largely because of a massive critical vendor program.  In order for a retailer to survive, it must pass the who cares test.  Toys R Us thought it would pass it, but wound up with a liquidating plan.  Aeropostale is another case study which illustrates landlords taking a more active role.  Simon Properties wanted to own a retailer.  Simon and General Growth funded the bankruptcy and became the owners of the new company which was divided into an IP Company and an Operating Company.  The company which emerged was much smaller.The 2005 amendments have limited debtors' time to negotiate to seven months.  Another threat to retailers is lenders rolling up pre-petition debt in DIP financing.  To survive, a retailer needs someone who cares.  That may be junior lenders, vendors or landlords.  Debtors need to start planning their bankruptcy soon enough and come in with deal done, which means having someone who can write a check.   Free fall bankruptcies are likely to liquidate.   Waiting until liquidity runs out is another prescription for failure.Retailers shouldn't count on asset-based lenders to help them because ABL lenders don’t have enough risk.   Because they money in an ordinary case they don't behave as though they are at risk.Critical vendors are a bad development.  Debtors are facing the dilemma of what if you just say no?   There are fewer truly critical vendors.  Tech people and shippers are examples of truly critical vendors.  Critical vendor programs eat up liquidity.   Debtors are better off with shorter terms rather than critical vendor payments.  To survive, retailers should cut out critical vendor programs  and rollups to give the company a runway.Dealing with liquidators is a challenge for retailers.   5-7 years ago there were more participants and multiple companies would bid for right to liquidate.  What’s changed in the last 6-18 months is that we don’t have competitive forces.   The four remaining market players have teamed up so there are just two bidding groups.  In order to get a good deal, retainers need to threaten to do it themselves.  Sears proved that it had a lot of expertise in self-liquidating.   The panel felt that the black magic of liquidators is overvalued but noted that lenders like them.  CLLA Keynote Address The Commercial Law League program also included a keynote from Mark Weinberg titled How Ronald Reagan Turned Around a Failing Economy and Ended the Cold War.Mark Weinberg joined the Reagan presidential campaign in 1980, spent all eight years of the Reagan presidency as Assistant Press Secretary and Special Assistant to the President and was Director of Public Affairs for President Reagan for two years after his presidency.  He cited a Reagan quote on bankruptcy. When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. He described the five P's which formed President Reagan's approach to governance:  planning, people, principles, perseverance and partnering. He said that President Reagan came to Washington with a plan to restart the economy and a plan to wear down the Soviet Union.  Weinberg said that Reagan would hire quality people and then stay out of their way.   He also said that President Reagan believed that compromise was an essential part of government so long as one did not compromise principles.  He also believed that there was no limit to how far a man could go so long as he does not want the credit.  He said President Reagan would never say "I alone can fix it."  Mr. Weinberg answered questions from the audience and offered a unique view into a period of our American history.   He said that the Iran-Contra scandal demonstrated that President Reagan could be too trusting in the people around him and that he refused to believe that subordinates would lie to his face.

From: ny.curbed.comBy: Valeria Ricciulli https://ny.curbed.com/2019/11/1/20944015/uber-nyc-taxi-limousine-commission-lawsuit

From: bloomberg.comBy: Henry Goldmanhttps://www.bloomberg.com/news/articles/2019-10-11/nyc-cabbies-say-no-cost-bailout-would-avoid-financial-ruin

From: nytimes.comBy: Azi Paybarahhttps://www.nytimes.com/2019/10/07/nyregion/nyc-taxis.html

From: nytimes.comBy: Brian M. Rosenthalhttps://www.nytimes.com/2019/10/04/nyregion/taxi-medallions-chicago.html