The Bankruptcy Court for the Southern District of New York recently held in Edward S. Weisfelner, as Litigation Trustee of the LB Creditor Trust v. Fund 1., et al.
In a case of importance to foreign representatives of foreign debtors seeking the assistance of US courts pursuant to chapter 15 of the Bankruptcy Code, the US Court of Appeals for the Second Circuit has held that the debtor eligibility requirements of section 109(a) of the US Bankruptcy Code apply in cases under chapter 15 as they would in cases under other chapters of the Bankruptcy Code. The decision in Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), Case No. 13-612 (2d Cir. Dec.
Introduction
On April 16, 2013, in Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.),1 the US Court of Appeals for the Second Circuit issued an important decision informing fundamental concepts of cross-border insolvency law as implemented pursuant to Chapter 15 of the Bankruptcy Code.
In the current economic climate, there has been increased interest from clients and their advisers in using offshore companies in cross-border restructurings. The use of offshore companies in restructurings is often driven by tax and structuring advice, where there is a desire to continue the group operating as a going concern and to achieve a favourable outcome for creditors (usually outside of formal insolvency proceedings).
Such companies can offer a number of advantages when used as part of a restructuring plan, including:
Key Issues
The transaction documents (eg ISDA, GMRA or prime brokerage agreements) for derivatives transactions (or other transactions involving netting provisions) are usually governed by English law or New York law. However, there are a number of local law issues which our clients should consider when proposing to enter into such transactions with offshore counterparties, including the following key issues:
There has been a considerable amount of interest from clients recently on putting Jersey companies holding UK real property and other assets into English administration. Where a Jersey company and its creditors intend to rescue the company as a going concern, or English administration would achieve a better realisation for creditors than a désastre or a winding up, it may be advantageous to commence English administration.