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Global bankruptcy financial restructuring and insolvency group releases the Q4 2020 issue of International Restructuring Newswire

Posted in Canada, Europe, UK, US

Our global bankruptcy financial restructuring and insolvency team has released its quarterly International Restructuring Newswire.
International Restructuring Newswire - Norton Rose Fulbright
Our team has published five articles examining new developments and a number of the tools available for financial restructurings in the United Kingdom, Germany, the Netherlands and Canada.

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Global financial response to the COVID-19 crisis

Posted in Bankruptcy Courts, Involuntary Bankruptcy, US

We have launched our interactive cross-border guide to the financial support on offer to businesses during the COVID-19 crisis and considerations for banks, corporates and directors trading through the turmoil.

We also look at some of the issues being considered in the lending market as well as changes in insolvency law, reviewable transactions and tips for good governance of distressed companies.

Hopefully this guide will be of assistance to global operators looking to compare and contrast the impact of the crisis on their financial arrangements across a number of relevant jurisdictions.

A link to the product is here: https://www.nortonrosefulbright.com/covid-19-InternationalGovernmentResponse

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US group uses an English scheme of arrangement to restructure its debts

Posted in UK, US

On 10 September 2019 the High Court in London sanctioned two schemes of arrangement as a part of the successful restructuring of the syncreon group. This transaction was unique because it involved a US based group utilising an English scheme of arrangement to surgically restructure its debts, avoiding an all-encompassing insolvency process. Recognition of the English procedure was obtained in the US and Canada.

The syncreon group is a global specialized contract logistics company supplying the automotive and technology industry. The group is headquartered in Michigan, USA with over 100 locations in 20 countries and 14,000 employees worldwide.

As … Continue Reading

Supreme Court settles trademark Circuit split

Posted in US

On May 20, 2019, the US Supreme Court ruled that a licensor’s rejection of a trademark license in bankruptcy does not terminate the licensee’s right to continue using the licensed mark. Mission Product Holdings Inc. v. Tempnology LLC, 587 US __ (2019). The decision brings trademarks into alignment with how patents and copyrights are already treated under the Bankruptcy Code.

Samuel Kohn, Susan Ross, Bandar Al-Saif and Joy Wang have provided a briefing.… 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 or restructuring proceeding in the U.S. … 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 foreign insolvency proceeding or consents to the plan. Earlier this week, the Court of Appeal of England and Wales affirmed the application of the Gibbs rule in a case under the Cross-Border Insolvency Regulations 2006 (“CBIR”), Great Britain’s version of the UNCITRAL Model … Continue Reading

Eleventh Circuit rules doctrine of equitable mootness applies in chapter 9

Posted in US

On August 16, 2018, the United States Court of Appeals for the Eleventh Circuit issued an opinion in the chapter 9 case of Jefferson County, Alabama, reversing the decision of the District Court and ruling that the doctrine of equitable mootness applies in municipal bankruptcies.

In Jefferson County’s chapter 9 case, the bankruptcy court confirmed the County’s chapter 9 plan over the objection of a group of sewer ratepayers, which provided for the issuance of approximately $1.8 billion of new sewer warrants with maturities that ranged up to 40 years. The chapter 9 plan included a provision that the bankruptcy … Continue Reading

Chapter 15 does not provide back door for appeals of confirmed foreign restructuring plans

Posted in US

It is common for a foreign debtor with assets or other connections to the U.S. to request an order enforcing its restructuring plan in the U.S. under Chapter 15 of the Bankruptcy Code. U.S. courts will generally grant comity to a foreign plan if it has been confirmed by a foreign court with jurisdiction and enforcement of that plan in the U.S. would not prejudice the rights of U.S. citizens or otherwise violate domestic public policy. Resolution of all appeals in the foreign jurisdiction is not a pre-requisite to enforcement of that plan by  the U.S. court under Chapter 15. … Continue Reading

In a 5-4 decision, SCOTUS levels the retail playing field

Posted in US

Brick and mortar retail businesses have been experiencing financial distress, with retail defaults at an all time high. In 2018 alone, there have been over a dozen retailers filing for bankruptcy protection, several of which, including Toys “R” Us and The Bon-Ton Stores, have been forced to liquidate. However, while many traditional “mall tenants” and other brick and mortar retailers have been struggling, online retailers have been flourishing. The convenience and speed of online retail, coupled with ongoing advances in technology and delivery distribution capabilities, have led to a consistent increase in e-commerce customers. Further fueling the divide between e-commerce … Continue Reading

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

Posted in US

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

Posted in US

 

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 … Continue Reading

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

Posted in US

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 … 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. 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 Continue Reading

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

Posted in US

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 … Continue Reading

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

Posted in US

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 … Continue Reading

Good News/Bad News in Keeping Affiliates out of Bankruptcy

Posted in US

A bankruptcy filing by one company does not necessarily mean that its affiliates will also file for bankruptcy. It is common for a financially distressed company to file for bankruptcy while its financially sound affiliates continue business operations in the ordinary course. The bad news, however, is that a court may disregard a company’s decision not to file for bankruptcy in connection with an affiliate bankruptcy filing if the company is managed and operated in a manner that disregards the corporate separateness between it and affiliates(s) that have filed for bankruptcy. Consequently, the assets of a non-debtor company may be … Continue Reading

Lenders Beware: Diligence Needed to Protect that Guarantee Claim From Substantive Consolidation in Bankruptcy

Posted in US

Last month, the Bankruptcy Court for the Southern District Of New York overruled an objection to proposed substantive consolidation provisions included in the plan of reorganization for Republic Airways Holdings Inc. See In re Republic Airways Holdings Inc., 565 B.R. 710 (Bankr S.D.N.Y. 2017). The bankruptcy court’s ruling provides a good refresher on the requirements of substantive consolidation in the Second Circuit. More importantly, the decision shows the importance that diligence plays not only at the time a lender/creditor enters into a transaction with its borrower, but also later on if both the borrower and the borrower’s guarantor end … Continue Reading

SCOTUS Ends Structured Dismissals that Circumvent Priority Rules

Posted in US

TruckPhoto_WEBEarlier today, in Czyzewski v. Jevic Holding Corp., the Supreme Court put an end to “structured dismissals” that allow a debtor to leave bankruptcy while circumventing the Bankruptcy Code’s creditor payment priority scheme.

A Chapter 11 debtor generally has three options for exiting bankruptcy: (1) a confirmed plan of reorganization (or liquidation); (2) conversion to Chapter 7 and liquidation of the debtor’s estate; or (3) dismissal of the bankruptcy case entirely. Chapters 11 and 7 both broadly require the debtor’s estate to make distributions to creditors in accordance with a statutorily mandated order of priorities (although Chapter 11 … Continue Reading

Appeals Court Strengthens Protections for Bankruptcy Committee Members

Posted in Bankruptcy Courts, US

Serving on a court-appointed bankruptcy committee can come with many benefits, and the list just got a little longer. In Blixseth v. Brown, the Ninth Circuit held that committee members enjoy some of the same protections as trustees when it comes to potential attacks for actions taken during a bankruptcy case. Applying the Barton doctrine, the court held that a committee member could not be sued outside the bankruptcy court for actions taken in its committee member capacity without bankruptcy court approval.

Background

In the late 1990s, Timothy Blixseth (“Blixseth”) and Edra Blixseth (“Edra”), then husband and wife, developed … Continue Reading

Delaware Bankruptcy Court Limits Access to Emails in Cross-Border Bankruptcy Case

Posted in US

A recent decision by Judge Sontchi in the Bankruptcy Court for the District of Delaware casts some light on the methods that representatives of non-U.S. debtors can—and can’t—use to track down those who owe such debtors money.

The Representatives of the Irish liquidation proceeding for Irish Bank Resolution Corporation Limited (“IBRC”) obtained recognition of the Irish proceeding under Chapter 15 of the Bankruptcy Code on December 18, 2013. Following that recognition, the Representatives sought to use the discovery mechanisms available in the United States to gain access to the contents of a Yahoo email account maintained in the name of … Continue Reading

Good Deeds May Be Rewarded in Chapter 7—at least in the Sixth Circuit

Posted in US

ThinkstockPhotos-123820749Under the Bankruptcy Code, a creditor may be reimbursed its actual and necessary expenses in making a “substantial contribution” in a chapter 9 or 11 case. Whether a creditor has made a substantial contribution is a question of fact, but generally requires that a creditor demonstrate a tangible benefit to the estate. It is unlikely that a creditor would “throw good money after bad” and attempt to make a substantial contribution in a chapter 7 case where creditor recoveries are typically limited to pennies on the dollar. There may nevertheless be instances where a creditor’s actions substantially contribute to a … Continue Reading

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

Posted in US

ThinkstockPhotos-454037465Chadbourne & 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 15 recognition of Hellas II’s liquidation proceeding. In March 2014, on behalf of the English liquidators, Chadbourne filed a lawsuit in the New York bankruptcy court asserting New York fraudulent transfer law and unjust enrichment claims and seeking the recovery of approximately €1 billion that … Continue Reading

Consensual Third-Party Releases: What Constitutes “Consent”?

Posted in US

ProductionLine_117192563There has been a lot of discussion, by both the courts and practitioners, regarding whether the bankruptcy court, as part of a chapter 11 plan, can release a third party from creditors’ claims over the objection of such creditors. We have talked about these non-consensual third-party releases on this blog as well. Courts are not unanimous on this issue, and the controversy provides something to talk about. Less time is spent discussing the less remarkable statement that bankruptcy courts can approve third-party releases when creditors consent to such release. However, what constitutes consent?

Earlier this summer, the bankruptcy court for … Continue Reading

Narrow Means Narrow

Posted in US

SupremeCourt_178740915_100dpiOn May 26, 2015, the Supreme Court of the United States (SCOTUS) decided Wellness International Network, Ltd. v. Sharif—another case addressing issues raised in the wake of the Court’s “narrow” Stern v. Marshall decision. While the case clarified some of the jurisdictional issues raised by litigants post-Stern, many issues remain and each Justice seems more content than the next to decide these issues on the narrowest grounds possible.… Continue Reading