Bankruptcy, Bailout, or Bust: Early Corporate Responses to the Business and Financial Challenges of COVID-19
Bankruptcy Law Letter, Vol. 40, Issue 7 (2020)
20 Pages Posted: 23 Jan 2021
Date Written: July 1, 2020
As the nation grapples with the profound human tragedy of the novel coronavirus (“COVID-19”), U.S. companies are feeling the business and economic impacts of a global public health crisis. The travel industry has experienced massive declines in passenger volume. Hospitals and medical service providers have endured steep revenue losses. With government officials recommending social distancing measures, businesses large and small that rely on foot traffic and in-person activities have suffered major financial setbacks. Meanwhile, wage reductions and job losses have caused sharp declines in consumer spending.
Just as every economic crisis is unique, so, too, is each firm. As corporate managers consider options such as participating in a bailout program, pursuing capital market transactions, or even filing for bankruptcy, their decisions are constrained by the firm’s overall financial condition and existing legal commitments. To make the best policy decisions, lawmakers should continue to consider the important economic and political dimensions of governmental responses to severe economic crises. But their policy choices—particularly those that are based on assumptions about the way corporations respond to various incentives or disincentives—must also be guided by a clear understanding of the way firms actually approach decisions of this sort.
In this issue of Bankruptcy Law Letter, we will gain a deeper appreciation of the firm-level decision making process by considering how companies in the cruise, airline, healthcare, and consumer sectors have recently adjusted their finances in response to COVID-19.
Note: Reprinted from Bankruptcy Law Letter, July 2020, with permission of Thomson Reuters. Copyright © 2020. Further use without the permission of Thomson Reuters is prohibited. For further information about this publication, please visit http://legalsolutions.thomsonreuters.com/law-products/ , or call 800.328.9352
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