• Commercial rent arrears continue to accumulate as a result of the pandemic, such that arrears are estimated to reach £9 billion by March 2022 and comprise a much larger slice of the typical debt stack than they did pre-pandemic.
• The UK government has proposed a binding arbitration scheme to help resolve the arrears and further extend the existing protections from enforcement and insolvency procedures that

• Brexit ripped up the rules on automatic cross-border recognition of formal insolvency proceedings and restructuring tools between the UK and the EU.
• Recognition will now depend on a patchwork of domestic legislation, private international law and treaties and may lead to different outcomes depending on the jurisdiction.
• Cross-border recognition is still achievable but involves careful navigation and a more tailored approach in individual cases to selection of the most effective process and its route to recognition.

Legal landscape

The consequent distress in the market is evident with 9 supplier insolvencies in the last few weeks alone, including Avro Energy, Utility Point and People’s Energy.

Today, 1 October 2021, is important as Ofgem is due to increase tariff caps from that date. This is also the date when the restrictions on petitioning for the winding up of companies on the basis of insolvency will be eased.

Legal landscape – energy regulations

In distressed situations, there are a number of issues to navigate, including:

Before soliciting votes on its bankruptcy plan, a chapter 11 debtor that has filed for bankruptcy typically must obtain court approval of its disclosure statement. As part of the disclosure-statement approval process, interested parties are afforded the opportunity to object. For example, a party may object on the grounds that the disclosure statement lacks sufficient information about the debtor. Sometimes, however, a party objects to the disclosure statement because the chapter 11 plan described by the statement cannot be confirmed.

The ability of a bankruptcy court to reorder the priority of claims or interests by means of equitable subordination or recharacterization of debt as equity is generally recognized. Even so, the Bankruptcy Code itself expressly authorizes only the former of these two remedies. Although common law uniformly acknowledges the power of a court to recast a claim asserted by a creditor as an equity interest in an appropriate case, the Bankruptcy Code is silent upon the availability of the remedy in a bankruptcy case.

In Stern v. Marshall, 131 S. Ct. 2594 (2011), the estate of Vickie Lynn Marshall, a.k.a. Anna Nicole Smith, lost by a 5-4 margin Round 2 of its Supreme Court bout with the estate of E. Pierce Marshall in a contest over Vickie's rights to a portion of the fortune of her late husband, billionaire J. Howard Marshall II. The dollar figures in dispute, amounting to more than $400 million, and the celebrity status of the original (and now deceased) litigants may grab headlines.

Over the past five years, courts have issued rulings of potential concern to buyers of distressed debt. Courts have addressed, among other things, “loan to own” acquisition strategies resulting in vote designation; equitable subordination, disallowance, and other lender liability exposure based upon the claim seller’s misconduct; disclosure requirements for ad hoc committees of debtholders; the adequacy of standardized claims-trading agreements; and claim-filing requirements in the era of computerized records.

Rehabilitating a debtor’s business and maximizing the value of its estate for the benefit of its various stakeholders through the confirmation of a chapter 11 plan is the ultimate goal in most chapter 11 cases. Achievement of that goal, however, typically requires resolution of disagreements among various parties in interest regarding the composition of the chapter 11 plan and the form and manner of the distributions to be provided thereunder.