Industrial and manufacturing businesses face all kinds of challenges: pricing and competitive pressures; regulatory demands; cross-border trade regulations and obligations; and litigation risk stemming from environmental and tort claims. These challenges create risks around every corner, some even rising to the level of "bet-the-company" issues – the things that keep GCs up at night.
On Wednesday, November 3, the House Judiciary Committee approved legislation on a party-line vote that could drastically reshape chapter 11 restructurings, particularly in cases involving significant tort liability. The bill, the Nondebtor Release Prohibition Act of 2021 (the “NRPA”) is sponsored by Judiciary Chairman Jerry Nadler (D-NY), Oversight Chairman Rep. Carolyn Maloney (D-NY), and Rep. David Cicilline (D-RI), who chairs the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law, which has jurisdiction over bankruptcy law-related issues.
The development of new powertrain technology; challenges within established markets, such as diesel emissions issues; and falls in automotive production – production in the United Kingdom has fallen during the last 12 consecutive months – have had a significant impact on the automotive and mobility industry.
A majority of today’s large Chapter 11 cases are structured as quick Section 363 sales of all the debtor’s assets followed by confirmation of a plan of liquidation, dismissal of the case, or a conversion to a Chapter 7. The purchaser in the sale is often one of the debtor’s prepetition secured or undersecured lenders, which may also act as the debtor-inpossession (DIP) lender and purchase the debtor’s assets through a credit bid, with no cash consideration.
Hogan Lovells partners Chris Donoho and Ron Silverman spoke to DebtWire Radio about current issues concerning cross-border restructurings. They addressed the factors that prompt foreign-based companies to avail themselves of the U.S. Bankruptcy Code in lieu of local insolvency proceedings. They also talked about the hurdles that such companies must overcome to secure a U.S. court’s administration of their Chapter 11 cases.
How does U.S. Chapter 11 law differ from other foreign insolvency regimes around the world?
An important decision was issued last week by the Bankruptcy Court for the District of Delaware in favor of Squire Patton Boggs’ client CCA Bahamas, Inc. (“CCA Bahamas”). The decision provides guidance on when U.S. bankruptcy courts should dismiss cases filed by foreign debtors. See In re Northshore Mainland Services, Inc., et al., Case No. 15-11402 (KJC).
Chapter 15 of the Bankruptcy Code provides a mechanism for a foreign debtor or representative in non-U.S. insolvency proceedings to protect such debtor’s U.S. assets from U.S. creditors’ collection actions or to stay any litigation commenced in the U.S. The ultimate goal in a chapter 15 proceeding is to preserve the value of the assets of the foreign debtor for the benefit of all its creditors globally.
In Europe each year there are an estimated 200,000 corporate insolvencies. More than half of the companies set up do not survive their first five years of trading and more than 1.7 million jobs are lost every year as a result. One in five of those companies will have international operations that cross national borders.
The European Union (EU) has sought to introduce an element of harmonization across its Member States, to facilitate the effective operation of cross-border insolvencies.
The Eastern District of Pennsylvania held that secured creditors do not have a right to credit bid their claim when the sale of a debtor’s assets is conducted under a plan of reorganization.