Zone of Insolvency

Zone of Insolvency

Francisco Vazquez (US)

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Contagion liability risk in the United States and Australia for parent entities arising from the insolvency of a subsidiary

Posted in Australia, US
With the influx of insolvency cases expected on a global basis in coming months as government support measures are wound back, now is an opportune time for businesses to consider the extent of their potential exposure if a subsidiary liquidates. In particular, can losses be isolated within a liquidating subsidiary, or will there be a contagion… Continue Reading

Opposing the National Bankruptcy Conference’s proposal to legislatively repeal Fairfield Sentry

Posted in US
On August 20, 2018, the National Bankruptcy Conference (the “NBC”), a group of bankruptcy judges, professors, and professionals that has consulted with Congress on the drafting of the U.S. Bankruptcy Code, sent a letter to Congress proposing a series of amendments to Chapter 15, which governs the process for obtaining recognition of a foreign insolvency… Continue Reading

English Court of Appeal affirms application of the “Gibbs Rule” in a cross-border restructuring

Posted in Australia, US
Under the English common law rule known as the “Gibbs rule,” a contractual obligation can be changed or discharged only in accordance with the law governing that obligation. Consequently, a debt governed by English law may not be discharged in a foreign insolvency or under a foreign restructuring plan unless the creditor submits to the… Continue Reading

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

Posted in US
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.… Continue Reading

Bankruptcy Court Authorizes Hellas II Liquidators to Proceed with Claims against Apax, TPG and Others

Posted in US
Chadbourne & Parke LLP currently represents the English liquidators of Hellas Telecommunications (Luxembourg) II SCA, a company that formerly owned one of the largest mobile phone operators in Greece. On behalf of the English liquidators, in 2012 Chadbourne obtained an order from the US Bankruptcy Court from the Southern District of New York granting Chapter… Continue Reading

Provisional Liquidators’ Proper Planning Enabled Chapter 15 Recognition

Posted in US
At times, United States courts have been reluctant to grant recognition to foreign proceedings involving offshore “exempted” companies under Chapter 15 of the Bankruptcy Code. For example, the United States Bankruptcy Court for the Southern District of New York denied a request for recognition of the Cayman Islands liquidation of certain Bear Stearns funds. Following… Continue Reading

Break-Up Fees Available to Lenders too?

Posted in US
A break-up fee is typically used to encourage a party to act as the initial or “stalking horse” bidder in connection with a sale under section 363 of the Bankruptcy Code.  Under certain circumstances, a potential debtor may agree to pay a break-up fee to a prospective lender to entice the lender to provide the… Continue Reading

Recent Supreme Court Decisions Do Not Preclude Recharacterization Of Debt To Equity

Posted in US
A bankruptcy court, as a court of equity, is not bound by a party’s characterization of a transaction.  This is particularly true with respect to an insider’s advance to a debtor that, while nominally structured as loan, is in essence a disguised equity contribution.  In such cases, a bankruptcy court may acknowledge economic realities and… Continue Reading

When Is “Good faith” Good Enough?

Posted in US
Under section 548(c) of the Bankruptcy Code, a “good faith” transferee may retain any interest received in an otherwise avoidable fraudulent transfer under the Bankruptcy Code “to the extent that such transferee … gave value to the debtor in exchange for such transfer.”  To successfully utilize this affirmative defense, a transferee must demonstrate that it… Continue Reading

Creditors’ Trusts Continue to Sidestep the Section 546(e) Safe Harbor

Posted in US
On the heels of the New York District Court’s decision in the Tribune Company fraudulent conveyance litigation, the New York Bankruptcy Court has similarly held that section 546(e) of the Bankruptcy Code, which protects settlement payments from fraudulent transfer claims brought by a bankruptcy trustee under the Bankruptcy Code, does not preclude individual creditors, or… Continue Reading

Foreign or Domestic, Licensees Have Rights Too

Posted in US
In a United States bankruptcy case, licensees of intellectual property are granted certain protections under Bankruptcy Code section 365(n) if a debtor rejects (terminates) the license. These protections, however, are not guaranteed when the debtor licensor is subject to a foreign insolvency proceeding. Nevertheless, as previously reported in the February 2012 issue of the International… Continue Reading

In re Millard: An Example Of Recognition Under Chapter 15

Posted in US
Chapter 15 of the Bankruptcy Code provides a relatively straightforward procedure to obtain recognition of a “foreign proceeding” in the United States. In particular, a foreign proceeding shall be recognized if (1) the foreign proceeding is a foreign main or foreign nonmain proceeding, (2) the petition for recognition was filed by a foreign representative and… Continue Reading

Buyer Beware: A Claim Purchased From A Potential Defendant To An Avoidance Action May Be Subject To Disallowance

Posted in US
Section 502(d) of the Bankruptcy Code provides that “any claim of any entity from which property is recoverable” by a debtor’s estate shall be disallowed unless the entity has turned over such property to the estate. As we previously discussed in Can A Claims Purchaser Acquire Claims Free of Defects? in the International Restructuring Newswire… Continue Reading