The primary investment thesis of a private credit lender is simple — get the loan repaid at maturity. Private credit lenders do not make loans as a means to acquire their borrower’s business. There are circumstances, however, where private credit lenders must be prepared to take ownership when the borrower is distressed and there is no realistic prospect of near-term loan repayment. Becoming the owner of a borrower’s business may very well be the loan recovery option of last resort.

The draft Lex Covid, which amends insolvency and enforcement laws and draft law on certain measures related to repayment of loans in relation to the COVID-19 pandemic, has been approved by the Czech Parliament and must now be counter-signed by the President.

The insolvency law-related measures include:

Debtor's delay in payments

Our private credit clients are preparing for the next restructuring cycle and have called us about ultrafast bankruptcy cases. These chapter 11 cases have grabbed headlines because they lasted less than a day. Specifically, FullBeauty Brands and Sungard Availability Services emerged from bankruptcy in 24 hours and 19 hours, respectively. Is this a trend and which companies are best suited to zip through chapter 11?

A. Prepacks, Pre-Negotiated Cases, and Free-Falls

The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

The long-discussed amendments to the Czech Insolvency Act entered into force on 1 July 2017.

These aim primarily to strengthen the transparency of insolvency proceedings; reduce paperwork in the insolvency courts; and change the system of allocation of insolvency cases in the area of debt relief.

The following highlights the most fundamental changes introduced last month.

Allocating insolvency cases

The Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) require each corporate party in an adversary proceeding (i.e., a bankruptcy court suit) to file a statement identifying the holders of “10% or more” of the party’s equity interests. Fed. R. Bankr. P. 7007.1(a). Bankruptcy Judge Martin Glenn, relying on another local Bankruptcy Rule (Bankr. S.D.N.Y. R.

Key Points

The safe harbor protection of Bankruptcy Code (“Code”) §546(e) does not protect “transfers that are simply conducted through financial institutions,” held the U.S. Court of Appeals for the Seventh Circuit on July 28, 2016. FTI Consulting Inc. v. Merit Management Group LP, 2016 WL 4036408, *1 (7th Cir. July 28, 2016).

Key points

Yet another major amendment to the Insolvency Act has been recently approved by the Czech government and passed to the Chamber of Deputies. The amendment is expected to become legally binding at the beginning of 2017. However, this timing does not allow for any potential obstacles or prolonged proceedings, which are common features of the Czech Parliamentary process.

Revising existing methods for the allocation of insolvency cases

Bankruptcy courts may hear state law disputes “when the parties knowingly and voluntarily consent,” held the U.S. Supreme Court on May 26, 2015. Wellness Int’l Network Ltd. v. Sharif, 2015 WL 2456619, at *3 (May 26, 2015). That consent, moreover, need not be express, reasoned the Court. Id. at *9 (“Nothing in the Constitution requires that consent to adjudication by a bankruptcy court be express.”). Reversing the U.S.