Hartford Business Journal

February 8, 2021

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16 Hartford Business Journal | February 8, 2021 | HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com T he COVID-19 pandemic has hobbled Connecticut's economy, forcing an estimated 36% of small businesses to close their doors as of December, according to a recent Harvard University analysis. Amid that turmoil, one might expect bankruptcy filings to be skyrocketing. However, defying predictions from seasoned area attorneys, that hasn't been the case. In fact, the exact opposite has happened and it's got nothing to do with any federal courthouse closures related to the pandemic. Commercial bankruptcy cases in Connecticut fell nearly 30% in 2020 from the year prior, close to twice the rate of decline nationwide, according to the latest available data from the American Bankruptcy Institute. An even bigger surprise, given new debtor-friendly rules passed by Congress just months before the novel coronavirus became a known threat, was that Chapter 11 bankruptcy reorganizations — which allow businesses to restructure and discharge debts while retaining control of their operations, as opposed to liquidating assets to repay creditors — were down even more sharply. Bankruptcy experts say a combination of factors, from government stimulus to creditors' and borrowers' perceptions about the cost and overall burden of bankruptcy reorganization, have all played a role. The CARES Act last March made far more businesses eligible for a new and less costly form of bankruptcy, but only for a one- year period, which meant many attorneys were forecasting a slew of reorganization filings early in 2021 from businesses that have been in financial trouble but holding on as long as they could. "I would have said five weeks ago that I think we're going to see a tidal wave of bankruptcies coming in January, February and March, but now you have the new stimulus act and a second round of [Paycheck Protection Program] money," said Robert Kaelin, a partner at law firm Murtha Cullina in Hartford who specializes in bankruptcy and commercial litigation. "PPP saved countless businesses. It really worked." In Connecticut, more than 64,000 employers shared in $6.7 billion worth of potentially forgivable loans from the PPP program through August, but additional money has flowed into the state since then with the total amount now approaching $8 billion, according to the U.S. Small Business Administration. The handful of COVID-19 vaccines approved by the U.S. Food and Drug Administration since December have also been key, according to Irve Goldman, an attorney at Pullman & Comley. The fact that vaccines exist and are said to be effective has engendered additional flexibility in lenders, many of which already granted various forbearance and other relief in 2020. "I think that in Connecticut the banks and the landlords aren't really putting as much pressure on businesses than they would in normal times," Goldman said. "I think people can see the end in sight. If they can just hang in there Despite punishing pandemic and friendlier rules, fewer CT biz file for bankruptcy Pullman & Comley attorney Irve Goldman said he's surprised more small companies struggling amid the pandemic aren't taking advantage of a relatively new cheaper and streamlined federal bankruptcy option. HBJ PHOTO | BILL MORGAN

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