Delaware’s Bankruptcy Court is starting to see companies claiming Chapter 11 as a result of the economic shutdown during the coronavirus pandemic.
Several companies filed for chapter 11 bankruptcy in the District of Delaware during the month of April. These include an amusement park company, multiple regional airlines and a list of healthcare providers including the massive Quorum Health Corporation and its 23 affiliate hospitals.
And one restaurant operator filed suit against the Small Business Administration for denying it loans under the Paycheck Protection Program based on the company’s bankruptcy status.
David deBruin is a director in Gawthrop Greenwood’s Restructuring and Corporate Bankruptcy department. He says his law firm’s Wilmington office has received a significant increase in bankruptcy inquiries from businesses and financial institutions.
“The filings that took place [in Delaware] during the recession of 2008-2009, the number of bankruptcy filings in Delaware [in 2020] will undoubtedly surpass what happened in those times,” said deBruin.
One of the airlines to recently file for chapter 11 in Delaware is the Dallas-based Superior Air Charter, an affiliate of JetSuit.
Ted Gavin is Managing Director with Wilmington’s Gavin Solmonese and is Chief Restructuring Officer for Superior Air Charter. He says the COVID-19 pandemic grounded the private charter service’s ten planes back in March.
“The company’s business basically shut down to zero revenue and they were just bleeding cash, so they did the responsible thing and put it into bankruptcy to make sure that the assets were protected,” said Gavin.
The U.S. economy shrank in the first quarter of 2020 at a 4.8% annual pace — the fastest since the Great Recession. And federal officials say the pace will likely quicken as the year goes on.
Gavin says given the large number of companies incorporated in Delaware, he expects the economic downturn will lead to a “healthy portion” of bankruptcy cases for the state.
“I think that the meat of the increase will be second, third quarter, maybe early fourth quarter of this year as it fully plays out, but we’re already starting to see some COVID-related cases filed,” said Gavin.
He adds increased activity in the Delaware legal economy is good news since it ripples through the entire statewide economy.