Distressed Debt, Restructurings and Workouts: A 2018 Outlook
In the second half of 2017, the distressed and restructuring communities witnessed a slew of key judicial opinions that concern some of the most material and contentious components of today’s Chapter 11 landscape, including makewhole premiums and cramdown interest rates (Momentive Performance Materials), nonconsensual third-party releases (Millennium Health) and plan gifting (Nuverra). These decisions will likely not only have a material impact on recoveries that secured and unsecured creditors are entitled to receive as part of a company’s Chapter 11 reorganization, but also how and where companies will conduct their complex, in-court restructurings in 2018. During this course, the panel will revisit these decisions, analyze the rulings and discuss the impact that they may have on 2018’s restructuring landscape.
Business restructurings, bankruptcies, and reorganizations create distressed debt investing opportunities. This webinar will address recent developments in Federal Income Tax with respect to market discount, cancellation of indebtedness income, original issue discount, and debt restructurings involving disregarded entities.
Michael J. Kearney, Of Counsel
Satterlee Stephens LLP
Whether the rules for doubtful collectibility apply to debt instruments issued with OID?
- Common law “doubtful collectibility” doctrine.
- Original Issue Discount (“OID”).
- No doubtful collectibility exception to OID accrual.
- TAM 9538007 – Holder must continue to accrue OID even when the financial condition of the issuer is deeply distressed.
Allocating payments between accrued interest and principal.
Whether the market discount rules apply to deeply distressed debt investments?
- Camp Proposal – February 2014 (Ways and Means Committee Tax Reform Proposals, 113th Cong.)
- Cap the accrual of market discount to limit the accrual to amounts considered interest equivalent and not attributable to distress.
- Maximum accrual rate: the greater of (1) original yield to maturity of the debt instrument plus 5 percent and (2) AFR at time of purchase plus 10 percent.
Internal Revenue Code Section 108 - Exclusion of cancellation of debt (“COD”) income.
- IRS Action On Decision 2015-001 (February 2015)
- IRS Chief Counsel Advice 201604017
Debt restructurings for disregarded entities and their owners.
- IRS Regulations §1.108-9 (issued June 9, 2016)
- Termination of a disregarded entity’s tax status in bankruptcy in order to trap the entity’s federal tax liability in the entity.
- Majestic Star Casino LLC (3rd Circuit Court of Appeals; 2013)
Richard M. Goldman, Senior Legal Content Specialist
Current Makewhole Landscape:
- Recent Second Circuit Momentive Decision
- Comparison to November 2016 Third Circuit Opinion in Energy Future Holdings
Cramdown Interest Rate:
- Momentive Decision
Third Party Releases
- Recent Millennium Health Decision
- Delaware Decision in Nuverra Environmental
- Compare to Second Circuit Decision in DBSD
Who Should Attend:
- Financial Reporting Professionals
- Financial Counsel
- Senior Executives
- Financial Industry Analysts
- Corporate Counsel
- Bankruptcy and Restructuring Lawyers
- Bankruptcy and Restructuring Professionals
- Other Related/Interested Professionals
Michael Kearney is of Counsel to Satterlee Stephens LLP and practices tax law with a focus on transactional tax matters.
Mr. Kearney advises on the tax aspects of domestic and cross-border mergers and acquisitions, joint ventures, debt financings, and financial restructurings involving corporations, partnerships and LLCs. He counsels clients on matters involving controlled foreign corporations, passive foreign investment companies, effectively connected income, unrelated business taxable income, and income tax treaties.
In the private investment funds area, Mr. Kearney has advised both fund sponsors and significant LP investors on the tax structuring of private equity fund and hedge fund formations, co-investments, and secondary transactions for domestic and foreign funds. He also represents non-U.S. resident individuals on strategic tax planning and structuring related to U.S. investments.
Michael Kearney is of Counsel to Satterlee Stephens LLP and practices tax law with a focus on transactional tax matters. …
Richard Goldman is a Senior Legal Content Specialist with Debtwire where he is responsible for tracking dozens of high profile in-court and out-of-court restructurings across various industries and sectors, including retail, E&P, healthcare, minerals and mining, and automotive. In his role, Richard is responsible for analyzing the reorganization and litigation strategies, as well as key judicial opinions, that shape today’s Chapter 11 landscape. Prior to joining Debtwire in 2015, Richard was a restructuring and litigation attorney, practicing in the New York offices of Weil, Gotshal & Manges LLP, Kirkland & Ellis LLP and Togut, Segal & Segal LLP where he represented debtors, official committees, lenders, purchasers and trustees in several high-profile restructurings. Richard holds a BS from Cornell University and earned his JD from Brooklyn Law School where he graduated cum laude.
Richard Goldman is a Senior Legal Content Specialist with Debtwire where he is responsible for tracking dozens of high profile in-court and out-of-court restructurings …
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Method of Presentation:
Experience in Bankruptcy Law
NY Category of CLE Credit:
Areas of Professional Practice
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About Satterlee Stephens LLP
Since 1894, Satterlee Stephens LLP has been building a history of success, helping clients solve challenging legal problems and achieve their commercial and personal goals. In our 120-year history, we have represented numerous companies and individuals recognized as great American success stories. The firm represented Mark Twain and was responsible for both naming and incorporating General Motors. A partner, Harlan Fiske Stone, went on to become Chief Justice of the U.S. Supreme Court. This record of success continues.
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