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Record Number of Corporate Restructurings, Bankruptcies Expected in Region

The following from Gawthrop Greenwood was covered by Delaware Public Media, well as the Reading Eagle and Daily Local News.

Gawthrop Greenwood is expecting to advise clients through a record number of corporate bankruptcies and out-of-court corporate debt restructurings and workouts.

“The shift started with quite a few long-standing businesses ranging from multinational corporations to closely held family businesses, which needed assistance with cash-flow projections as well as negotiating new terms with lenders, vendors and employees,” says David deBruin, a partner in Gawthrop Greenwood’s Restructuring and Corporate Bankruptcy department. “Now we’re beginning to see an uptick in ‘workout’ services, where we help businesses work with their current lenders to resolve a distressed or defaulted loan.”

During his 24 years in practice ─ in addition to representing distressed corporations in out-of-court debt restructurings, and Chapter 11 debtors-in-possession ─ deBruin has represented banks, lenders, investors, lessors, leaseholders, creditors, purchasers, vendors, creditor committees, Chapter 7 trustees and preference defendants in bankruptcy courts located in Delaware, Pennsylvania and New Jersey.

“Businesses across a wide swath of industries and in vastly different financial conditions are making very tough decisions about how to stretch cash on hand, substantially cut costs, refinance debt to avoid loan defaults and potentially reorganize,” says deBruin

His colleague Michael Merlie, a practitioner of corporate and business law for over 25 years, has also represented creditors in bankruptcy matters, including obtaining relief from the automatic stay and successfully defending preference actions.

“These are daunting times for our region’s businesses and corporations. The shutdown of a huge segment of the economy caused by the COVID-19 pandemic has left most companies grappling with massive hits to their revenues,” says Merlie.

Merlie says the most high-profile signs of trouble began when one brick-and-mortar mall staple, The Cheesecake Factory, said that it wouldn’t be able to make rent payments on all of its leases because of the drastic loss of business. Many Fortune 500 companies have tapped billions of dollars in credit from banks in preparation for an uncertain future.

In addition, companies that depend heavily on in-person consumer spending are especially stressed by the economic fallout from the coronavirus pandemic. Traditional retailers ─ whose financial positions were already precarious due to the huge increase in e-commerce ─ are running into additional trouble, as a record number of people have filed for unemployment and even more people are forced to cut back on shopping and spending.

Then there is the psychological toll.

“The psychological interplay between a business and its bank in a workout of a distressed or defaulted loan involves many issues that go beyond the plain language of the loan documents and the supporting case law,” says deBruin. “There are often significantly conflicting emotional pressures inherent in a restructuring situation, which need to be recognized and diffused. However, in the ‘chess game’ of a restructuring, emotional and psychological issues may strongly influence both parties’ actions.”

Merlie says, generally, a bank will have well-documented loan agreements that provide for a myriad of remedies, although some are likely to be draconian and deserve considerable thought before being exercised because they can threaten the economic survival of the borrower.

“Couple that with the anxiety of ‘losing it all’ and one may begin to understand the psyche of the borrower approaching the restructuring process,” says deBruin. “Absent a negotiated out-of-court workout, the borrower may choose to file for bankruptcy protection.”

When the overall debt structure is complex and the lenders (and vendors) start vying over who gets paid first, a debtor may choose to seek protection in Federal Bankruptcy Court, where all the corporate debts can be renegotiated under the watch and approval of a Federal Bankruptcy Judge and the United States Trustee. A Chapter 11 bankruptcy filing allows a debtor to seek new financing, sell off troublesome but profitable subsidiaries or underutilized assets, and close unprofitable stores, plants, or locations. A reorganization under Chapter 11  allows a business to catch its breath and ideally provides it with a fresh start.

Says Merlie, “Every credit situation is unique. The leverage and perspective each party brings to the table varies, and actions of creditors must be tailored to the particular situation, including the personality and background of the debtor.”

Media Contact:

Kristen Stewart,, 610-658-5889


Gawthrop Greenwood, PC has offices in West Chester, PA and Wilmington, DE serving clients throughout the greater mid-Atlantic region and nation. For more than a century, the firm has stood behind its core principle of providing high-quality legal services with personal attention. Gawthrop Greenwood’s diverse portfolio of clients comprises entrepreneurs, businesses, and governmental entities that entrust the firm with their representation in a wide range of matters including mergers and acquisitions, commercial litigation, estate and tax planning, land use and development, and domestic relations. A complete listing of the firm’s practice areas and attorneys, as well as a variety of legal resources, can be found at

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