Recapping 2021, Bloomberg reported that last year saw the fewest annual bankruptcy filings in nearly four decades, falling 24% from 2020. A total of 3,596 chapter 11 cases were filed in 2021, about 3,000 fewer than the year before. The stimulus funds and easy access to liquidity combined with debt forbearance were pointed as the driving forces behind the drop in bankruptcy filing. As a result, distressed investors found themselves looking at increasingly unusual opportunities for returns, a trend that is set to continue in 2022. The year 2022 started with just $62 billion of distressed bonds and loans outstanding, down substantially from nearly $150 billion at the end of 2020.
According to WSJ, Puerto Rico's bankruptcy plan, which analysts expect to be approved in the next several weeks, would end defined-benefit retirement programs covering tens of thousands of active teachers and judges in Puerto Rico. Retirement ages would be increased, delaying when pensions can be tapped. Spiraling pension obligations are not unique to Puerto Rico, with burdens having ballooned for many other U.S. cities and states in the last two decades. For example, Chicago has $11 billion in bond debt and net pension liabilities of $53 billion.
Per Reuters, the Sackler family has until January 14 to make a deal with nine states and the District of Columbia and to negotiate changes to the Purdue bankruptcy plan after the settlement was rejected by the U.S. District Court in December. The short-term mediation efforts, with Judge Shelley C. Chapman as mediator, come after Purdue and the Sacklers filed challenges to the district court decision reversing the bankruptcy court approval.
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