In theory, the Bankruptcy Code assures trade vendors that their postpetition claims will be paid in full. In practice, that promise has increasingly rung hollow. This program examines the concept of administrative insolvency and the severe risks it poses for creditors extending unsecured trade credit to Chapter 11 debtors. Through case studies of recent administratively insolvent Chapter 11 cases, the presenters explore how § 363 asset sales, going-out-of-business liquidations, and the growing phenomenon of “Chapter 22” repeat filings have eroded the protections that administrative expense priority was designed to provide. Each case study illustrates how trade vendors who supplied the very goods that made sale proceeds possible were left with pennies on the dollar, while secured lenders were paid from the proceeds of the goods and services trade vendors provided postpetition. The program concludes with practical strategies creditors can deploy to protect themselves, including monitoring administrative solvency, negotiating protective default triggers, demanding sale process safeguards, and shifting to cash-on-delivery terms when warning signs emerge.

Speakers:

Time: 11:30 a.m. CT