Chapter 15

FEATURE: Patenting New Protection for Chapter 15 Licensees (citation: Luke A. Barefoot and Emily Bussigel, Patenting New Protection for Chapter 15 Licensees, XXXI ABI Journal 1, 32-33, 66, February 2012) - Luke A. Barefoot and Emily Bussigel

Units of Berlian Laju Tanker, Indonesia’s largest oil and gas shipping group, filed for Chapter 15 creditor protection in a US bankruptcy court early Wednesday morning, The Jakarta Globe reported on a Reuters story. The company’s units have listed assets and liabilities in the $50 million to $100 million range, according to a filing with the US bankruptcy court in the Southern District of New York. Under US bankruptcy laws, Chapter 15 grants a foreign company protection from creditors looking to seize its assets in the country. On Tuesday, Berlian Laju said some of its subsidiaries had obtained court orders in Singapore to stay all legal proceedings against them for a period of three months. The company said last month it had defaulted on six of its debt instruments, comprising both dollar-denominated debt and local currency bonds. In January, it said it was freezing payments on its debt of $2 billion while it talked to creditors about restructuring its operations and finances. Soaring fuel costs, Europe’s debt crisis and the lack of bank financing is prolonging a four-year shipping crisis that has forced some of the biggest names in the industry to falter. Read more.

Arctic Glacier Income Fund said Wednesday it will file for a court supervised restructuring under the Companies' Creditors Arrangement Act that the ice maker said could result in a sale or recapitalization of the business, The Globe and Mail reported on a Canadian Press story. The process has the support both of Arctic Glacier's secured lenders and two of its unitholders, Coliseum Capital Management and Talamod Asset Management, the fund said. Arctic Glacier's secured lenders have agreed, subject to court approval, to provide up to $50-million in debtor-in-possession financing to fund operations during the CCAA process. The fund said an application will also be made seeking recognition of the CCAA proceedings in the U.S. under Chapter 15 of the U.S. Bankruptcy Code. Arctic Glacier said it expects to maintain all operations at their normal capacity in both Canada and the United States during the process. Read more.

Mexico is studying international best practices for corporate bankruptcy proceedings after glassmaker Vitro SAB’s use of intercompany debt caused some investors to question the country’s laws, Bloomberg Businessweek reported. Vitro, which won a Mexican court’s approval this month for its debt restructuring plan, has called attention to a loophole in the country’s bankruptcy process that allowed it to use loans made to itself to qualify as its own biggest creditor. “As we learn from experience, there may be room for improvement,” Deputy Finance Minister Gerardo Rodriguez said in a telephone interview today from Mexico City. “Looking specifically at the standard that we have currently in our law with regards to the voting rights of intercompany loans, there are different practices around the world and we need to continue exploring them.” The ministry has spoken to both the company and bondholders throughout the process, he said. Any changes to laws would have to go through congress, and the ministry hasn’t proposed such a change, Rodriguez said. Read more.

Individual Chapter 11 and Chapter 15: Part I and Individual Chapter 11 and Chapter 15: Part II - Charles Throckmorton, Hon. Edward A. Godoy, Luis Salazar, Patricia A. Redmond, Soneet R. Kapila

Cross-Border Conundrums: How to Use Chapter 15 Effectively - Eliot Simpson, Gregory S. Grossman, Hon. Robert E. Gerber, Robbin L. Itkin

Oilsands Quest Inc., which explores for oil in sand deposits in western Canada, is seeking protection from its U.S. creditors and shareholders, Dow Jones Daily Bankruptcy Review reported. Oilsands, which once did business as CanWest Petroleum Corp., sought the protection of a Canadian court last November. The Calgary, Alberta, company is now asking the U.S. Bankruptcy Court in Manhattan to recognize the Canadian proceeding and extend its protection to the company in the U.S., where it faces three shareholder lawsuits. Read more. (Subscription required.)

Mexican glass maker Vitro SAB said Tuesday that a court in Mexico has approved its debt restructuring, but that it expects certain of its bondholders who have fought the deal to continue efforts against the plan, Dow Jones reported. In a press release, Vitro said a judge in Monterrey approved the proposed restructuring put forward by the conciliator in the case. The restructuring of $1.5 billion in third-party debt has caused controversy among bondholders, as it involves Vitro voting on an additional $1.9 billion in intercompany debt to secure the majority needed for approval. Vitro, which has been working on a debt overhaul since defaulting in early 2009, said Tuesday that it hopes to implement the restructuring plan as soon as possible. The company said the plan has the approval of holders of 74% of the restructured debt, but that it foresees a group of bondholders opposed to the terms of the restructuring will continue to battle the deal in the courts. Read more. (Subscription required.)

Canadian foamer Domfoam International Inc. has filed for bankruptcy protection in the US after flagging sales and a million-dollar fine over price-fixing led the company into insolvency, PlasticsNews.com reported. Domfoam filed for Chapter 15 protection in the U.S. Bankruptcy Court in Toledo, where it faced more than a dozen lawsuits over the inflated prices it charged for its foam that goes into carpet underlay, furniture and bedding, according to a report from Dow Jones. Judge Mary Ann Whipple granted the company’s request to put lawsuits against the company and its affiliates – Valle Foam and A-Z Sponge Foam Products – on hold while she decides if Domfoam is entitled to full protection in US court system, Dow Jones reported. The protection is aimed at providing stability to allow the company to sell off its businesses and pay its debts. Earlier in January, Domfoam pled guilty to fixing foam prices with a group of other manufacturers. The conspiracy is said to have started in January 1999 and ran for over a decade. Read more.

Struggling Catalyst Paper Corp. has received the go-ahead from a court in British Columbia to begin a planned restructuring, while at the same time filing for protection from creditors in the United States, The Globe and Mail reported. The Richmond, B.C.,-based company said Wednesday a B.C. court had issued an initial order under the Canada Business Corporations Act to begin the restructuring process. The plan would see bondholders take control of the firm. It would also reduce its overall debt by $315.4-million and cut annual cash interest payments by $25.5-million. The filing Wednesday in a Delaware court was made under provisions of Chapter 15, a form of filing that foreign companies operating in the U.S. employ when seeking protection from creditors. But Catalyst emphasized that the Canadian court order is not a bankruptcy proceeding. “While this whole process of restructuring continues we will be running the business as usual and satisfying all of our obligations to our suppliers, customers, employees and retirees just as we ordinarily would,” said Catalyst spokeswoman Lyn Brown. Shares in Catalyst fell from 2 cents each to a penny Wednesday on the Toronto Stock Exchange. The B.C.-based producer of specialty papers, newsprint and pulp operates four mills in British Columbia and Arizona. Catalyst said the debt restructuring will give the company more financial flexibility to deal with a slumping pulp, paper and newsprint market. Read more.