AAT approves registered liquidator application of non-resident and provides important clarification in respect of the new registration regime

By Scott Atkins and Jonathon Turner on June 8, 2018 Posted in Australia

Norton Rose Fulbright represented Mitchell Mansfield, an Australian citizen but who now resides in and works in Singapore, of Borelli Walsh in a successful appeal before the Administrative Appeals Tribunal (AAT) in relation to his application for registration as a liquidator.

The appeal raises significant issues about the new statutory regime for the registration of liquidators following the reforms introduced by the Insolvency Law Reform Act 2016 (Cth) (ILRA) and is the first case before the AAT where the operation of the new regime has been considered. Deputy President J Redfern (Redfern DP) handed down her decision and reasons for decision on 5 June 2018.

New statutory scheme for registration of liquidators

Pursuant to the reforms introduced by ILRA, an applicant seeking to become a registered liquidator is required to apply to the Australian Securities and Investments Commission (ASIC). ASIC in turn refers the application to a specially convened committee (Committee) under section 20-10 of the Insolvency Practice Schedule (Corporations) (Corporations Schedule) for determination of the application against criteria specified in subsection 20-20(4) of the Corporations Schedule.

The Committee is comprised of a delegate of ASIC, a registered liquidator chosen by the Australian Restructuring Insolvency and Turnaround Association (ARITA) and an appointee of the Minister for Revenue and Financial Services. The Insolvency Practice Rules (Corporations) 2016 (Cth) (Corporations Rules) prescribe the standard of qualifications, experience, knowledge and abilities required for the purposes of 20-20(4)(a) of the Corporations Schedule. Continue Reading

AAT approves application of non-resident insolvency practitioner to become a registered liquidator

By Scott Atkins on June 7, 2018 Posted in Australia

Partner Scott Atkins and senior associate Jonathon Turner acted for Mitchell Mansfield of Borelli Walsh Singapore in a successful appeal before the Administrative Appeals Tribunal (AAT) in relation to an application under the new statutory scheme for registration as a liquidator. Reasons for the decision were handed down on Tuesday.

The appeal raises significant issues about the new regime following the reforms introduced by the Insolvency Law Reform Act 2016, and is the first case before the AAT where the operation of the new regime has been considered.

We will be releasing a comprehensive analysis of the decision shortly.

Republic of Myanmar: new insolvency and restructuring laws

By Scott Atkins and John Martin on May 9, 2018 Posted in Australia

Sydney-based Financial Restructuring and Insolvency Partners of Norton Rose Fulbright, Scott Atkins and John Martin, together with Special Counsel Rodney Bretag, are close to finalising a new insolvency and restructuring law for the Republic of Myanmar.

The team from NRF are working with the Asian Development Bank and the Union Supreme Court. Their work is focussed upon strengthening and modernising the legal and institutional framework of Myanmar’s insolvency and restructuring regime as well as undertaking associated capacity development of institutions and the legal and accounting professions to support the introduction of the new laws. The overarching objective is to create a platform that matches not only the present circumstances with Myanmar’s broader legal and commercial systems, but is also sophisticated enough to maintain its relevance into the future as Myanmar’s economy develops.

Rolling DIPs vs. Creeping DIPs

By Tony Reyes on May 7, 2018 Posted in Canada

Has the law changed in Canada based on the September, 2017 decision of Justice Myers of the Ontario Superior Court of Justice in the Toys ”R” Us (Canada) Ltd. case? Section 11.2 of the Canadian Companies’ Creditors Arrangement Act (“CCAA”) allows the Court to create a charge to secure a DIP financing. However, that section provides that “the security or charge may not secure an obligation that exists before the order is made”. This had been interpreted in prior cases as a prohibition on using DIP proceeds to pay pre-filing secured loans. The Court would, however, permit post-filing receipts to be swept in favour of the pre-filing secured loan, so the wisdom in Canada was that a “creeping” DIP payment structure was fine, whereas using DIP proceeds to repay pre-filing secured debt was not permitted. Justice Myers focused on whether the DIP charge (in favour of the same group of lenders who had provided pre-filing financing) was “being used to improve the security of the pre-filing ABL lenders or to fill any gaps in their security coverage”. He concluded that it was not, so permitted the DIP proceeds to be used to repay the pre-filing secured loan in full. We think the Court was correct in focusing on whether priorities were being re-ordered, since it is our view that this is what the above-noted restriction in Section 11.2 of the CCAA was intended to prevent.

SCOTUS Determines That 546(e) Safe Harbor Does Not Protect Transfers Where Financial Institution Is A Mere Conduit

By Kristian Gluck and Shivani Shah on March 9, 2018 Posted in U.S.

In a decision significantly impacting the ability of a plaintiff to prosecute avoidance actions, the United States Supreme Court, in Merit Management Group, LP v. FTI Consulting, Inc., 583 U.S. ___ (2018), unanimously held that a transfer of funds, where a financial institution served as a mere conduit, does not entitle the recipient of the transfer to avail itself of the “safe harbor” defense provided for in section 546(e) of the Bankruptcy Code. Focusing on the construction and plain meaning of the statutory language, the Court’s ruling resolved the current split among circuits interpreting and applying section 546(e). Continue Reading

Chapter 11 Plan for a Group of Debtors May Be Confirmed if Approved by Creditors of a Single Debtor

By Francisco Vazquez on February 27, 2018 Posted in U.S.

In a matter of first impression at the Circuit level, the United States Court of Appeals for the Ninth Circuit held that a court may confirm a plan filed on behalf of multiple debtors that has been approved by an impaired class of creditors of only one of the debtors. JPMCC 2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Properties Inc. (In re Transwest Resort Properties, Inc.), 881 F.3d 724 (9th Cir. 2018). This ruling is in contrast with the Delaware bankruptcy court’s ruling in the Tribune Company Chapter 11 case, where as successfully advocated by Norton Rose Fulbright attorneys, the court held that a plan must be approved by an impaired class of creditors of each of the debtors party to the plan. The following is a brief description of the case background and the court’s analysis. Continue Reading

First Circuit Weighs in on Scope of Intellectual Property Protected by Bankruptcy Code Section 365(n)

By Shantel Watters-Rogers on February 15, 2018 Posted in U.S.

In a decision last month, the First Circuit maintained the relatively narrow scope of protection provided to intellectual property licensees upon rejection of a license in bankruptcy. Focusing on the statute’s language, the court of appeals held that Bankruptcy Code section 365(n) fails to protect either a trademark license or exclusive distribution rights of a debtor’s trademarked goods, even when the trademark-related rights are incorporated into a license containing other protected intellectual property. See Mission Product Holdings, Inc. v. Tempnology LLC, No. 16-9016 (1st Cir. January 16, 2018). The First Circuit’s decision deepens a split among the circuits regarding the rights of trademark licensees when a licensor-debtor rejects a license in bankruptcy. Continue Reading

Contract Provisions Do Not Override Distribution Provision of an Italian Restructuring Plan

By Francisco Vazquez on January 26, 2018 Posted in U.S.

U.S. companies that engage in business in multiple jurisdictions should be mindful of a recent decision by the United States Bankruptcy Court for the District of Delaware. In the Chapter 15 case of Energy Coal S.P.A., the bankruptcy court held that U.S. choice of law and forum selection provisions in a contract with a non-U.S. company did not override the terms of a foreign restructuring plan that was approved by a foreign court. The court stated that it is “appropriate to expect U.S. creditors to file and litigate their claims in a foreign main bankruptcy case.” See In re Energy Coal S.P.A., Case No. 15-12048 (Bankr. D. Del. Jan. 02, 2018). Continue Reading

So. Cal. Luxury Real Estate Developer Woodbridge Group Files Chapter 11 Case

By David M. LeMay on December 7, 2017 Posted in U.S.

Woodbridge Group of Companies, a luxury real-estate developer, filed for chapter 11 reorganization on December 4, 2017. Woodbridge and its 200-plus affiliates operated a sprawling, complex real estate enterprise that focused on the acquisition and development of high-end properties.

Although the company estimates the value of its properties to be nearly $1 billion, it asserts it was forced to seek chapter 11 protection due to increasing operational and regulatory costs combined with an inability to access new capital. Woodbridge’s inability to recapitalize outside of chapter 11 is due, at least in part, to questionable capital-raising practices and the attendant regulatory scrutiny.

Woodbridge’s Private Fundraising Practices Questioned By Regulators

Woodbridge historically raised capital through a “private fundraising operation” that has spawned more than 20 inquiries by state regulators and an ongoing investigation by the U.S. Securities and Exchange Commission (which is seeking information from Woodbridge, its affiliates, and its insiders). Since 2012, Woodbridge and its affiliates had financed their expansion by offering short-term notes to individual investors promising substantial returns. Typically, the notes were issued by a Woodbridge affiliate and were described as being ultimately secured by a first-priority lien on valuable real property. More than $750 million of these notes—held by nearly 9,000 investors—were outstanding when Woodbridge filed for bankruptcy. Continue Reading

Second Circuit Adopts “Efficient Market” Approach to Calculate Cramdown Interest

By Christy L. Rivera on October 24, 2017 Posted in U.S.

Last week, the Second Circuit established an “efficient market”-based approach for calculating cramdown interest rates. Adopting a test established by the Sixth Circuit, the Second Circuit held that courts must apply a market interest rate where an efficient market exists. See Momentive Performance Materials Inc. v. BOKF, NA (In the Matter of: MPM Silicones, L.L.C.), — F.3d —-, 2017 WL 4700314, No. 15-1682, (2d Cir. Oct. 20, 2017). The decision will be welcomed by secured creditors (and distressed investors) who previously could be forced to accept replacement debt with below-market interest rates under a chapter 11 plan. Lower “formula”-based interest rates are still possible in the Second Circuit, but only where a market does not exist for comparable new debt.