Hartford Business Journal

HartfordBusiness.com | February 8, 2021 | Hartford Business Journal 17 For the last 100 years, we've made it our mission to provide the highest quality care for all of your needs, from physician visits to maternity care to advanced orthopedic surgery, breast health, cancer care and more. We're proud to be one of only 8% of hospitals in the U.S. to be designated a Magnet hospital for the highest levels of nursing professionalism. We earned Silver Recognition from Excellence North Alliance for our culture of quality and performance excellence; our home care and skilled nursing are rated five stars by CMS; and our medical group is rated 95%+ for patient satisfaction. At Bristol Health, we reach higher because excellence is part of our culture. And because our patients deserve it. We Specialize in Excellence 25+ specialties. Advanced surgical care. A culture of excellence. 833.4BHDOCS | bristolhealth.org Celebrating a Century of Care together it's going to give the business a chance to get back on sound footing." While fewer bankruptcies can offer insight into the health of a state's economy, there are caveats to using such data, particularly in a state like Connecticut, which is not a hub for bankruptcy cases, though attorneys have been working with the court to make local rules more attractive in recent years. "Most of the larger Chapter 11 filings for well over 10 years have been getting filed in Delaware or the Southern District of New York," said Kaelin. While Chapter 11 commercial bankruptcy filings fell in Connecticut from 36 cases in 2019 to just 10 last year — their lowest level since at least 2012 — such filings were up 29% across the country, according to ABI, whose Executive Director Amy Quackenboss also credited government relief programs and lender deferments for the overall decline in commercial bankruptcy filings. New advantages go largely unused Recognizing that some small businesses might survive a bankruptcy if not for its high costs and other hurdles, Congress in 2019 passed the Small Business Reorganization Act (SBRA). The law provides a new avenue for a business to pursue a cheaper, faster form of Chapter 11 bankruptcy, known as "subchapter V," while still allowing owners to restructure debt and keep control of their company. The SBRA had just taken effect when the pandemic struck last March, and through the CARES Act, Congress temporarily expanded access to it, making businesses with as much as $7.5 million in debt eligible for subchapter V, up from the new law's original threshold of $2.5 million. Attorneys have watched closely, anticipating that the SBRA would generate a wave of bankruptcy reorganizations. Murtha Cullina's Kaelin estimates that the cost and length of time needed to complete a subchapter V bankruptcy could be about half that Robert Kaelin of a normal Chapter 11. "One of the big drivers behind the [SBRA] was that bankruptcy was becoming too expensive, cumbersome and time-consuming, particularly for medium-sized and smaller businesses," Kaelin said. "They simply cannot absorb the time and the cost like a big national retailer can." Subchapter V removes key leverage normally held by unsecured creditors in a regular Chapter 11 process. For example, it eliminates a rule that normally allows creditors to block a bankruptcy plan that pays them less than desired, according to Pullman & Comley's Goldman, who sees the SBRA as a game changer for troubled businesses. "I think it's the most far-reaching bankruptcy reform that the court has seen since the bankruptcy code was enacted in 1978, really," he said. However, it's seen little use so far, even with the looser eligibility rules set to expire in March, barring additional action by Congress. A review of federal court filings in Connecticut during the past year reveals just a handful of companies opting for the novel path through Chapter 11, including Chip's Family Restaurant in Southington and Beacon Pharmacy in New Britain. Owners of both businesses and their attorneys did not respond to requests for comment for this story. Connecticut is punching beneath its weight so far when it comes to the SBRA. Across the country, there have been more than 1,400 subchapter V filings, heavily concentrated in states like New York, Florida, Texas and California, according to the ABI. Goldman said the SBRA's temporary $7.5 million debt eligibility limit remains an attractive offering for troubled companies, and he suspects the new law may just have flown under the radar for many. "It is curious that it hasn't been used as much as I think bankruptcy professionals would have thought," he said. "I just don't think it's widely known that it's available." Both Kaelin and Goldman believe subchapter V bankruptcies will catch on in the years to come, pandemic or not. "It really does substantially change the dynamic of how a Chapter 11 works," Goldman said. 2012 0 100 200 300 400 500 2013 2014 2015 2016 2017 2018 2019 2020 Total commercial bankruptcies Ch. 11 bankruptcies CT annual commercial bankruptcy filings Source: American Bankruptcy Institute

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