In the US distressed market, liability management has emerged as an effective and widely accepted tool to increase liquidity, restructure debts and extend a borrower’s runway to help it avoid insolvency. However, although not unheard of, it is yet to achieve the same prevalence in Europe, where documents are still catching up to the level of flexibility seen in the US, and different capital structures and legal regimes raise different issues.

Recent weeks have witnessed seismic shifts in the oil and gas industry because of crashing oil prices, demand destruction associated with the COVID-19 pandemic, and crude oil storage reaching record capacity levels. Upstream producers are especially vulnerable to these market pressures and have begun shutting in wells, asserting force majeure, and cutting costs. As counterparties to distressed producers, midstream players face new challenges in navigating contractual relationships and mitigating risk.

There are important issues and procedures to be considered when a foreign buyer seeks to purchase the assets of a U.S. entity that is distressed or subject to a U.S. insolvency proceeding and which is involved in business activities with a nexus to U.S.