Executive Summary

This week’s TGIF considers a recent Federal Court of Australia decision (Connelly (liquidator) v Papadopoulos, in the matter of TSK QLD Pty Ltd (in liq) [2024] FCA 888). In the case, it was determined that a restructuring adviser who engineered an asset-stripping scheme may be found liable for the full value of the loss arising out of the scheme.

Key Takeaways

Two recent cases out of the Third Circuit and the Southern District of New York highlight some of the developing formulas US courts are using when engaging with foreign debtors. In a case out of the Third Circuit, Vertivv. Wayne Burt, the court expanded on factors to be considered when deciding whether international comity requires the dismissal of US civil claims that impact foreign insolvency proceedings.

When a majority of a company’s board approves a tender offer in good faith, can it still be avoided as an actually fraudulent transfer? Yes, says the Delaware Bankruptcy Court, holding that the fraudulent intent of a corporation’s CEO who was a board member and exercised control over the board can be imputed to the corporation, even if he was the sole actor with fraudulent intent.

Background

Over the past several years, unitranche facilities have become increasingly prevalent. This growth has been driven by the ever-growing class of private credit and direct lenders who initially developed the unitranche facility structure, along with traditional bank lenders now joining this market. The unitranche structure has several advantages, including typically quicker execution for the parties involved and in some cases a lower cost of capital to the borrower.

This week’s TGIF summarises the Federal Court of Australia’s recent decision granting leave to proceed against a company despite the appointment of a small business restructuring (SBR) practitioner under Pt 5.3B of the Corporations Act 2001 (Cth) (Corporations Act).

Key takeaways

Recently, in In re Moon Group Inc., a bankruptcy court said no, but the district court, which has agreed to review the decision on an interlocutory appeal, seems far less sure.

Bed Bath & Beyond, the home goods retailer, has filed bankruptcy under Chapter 11 and plans to conduct liquidation sales and close all of its brick-and-mortar stores by June 30, as reported by The New York Times. The retailer points to an inability to adjust to the growth of online shopping as a reason for its downfall.

Yes, says the Delaware Bankruptcy Court in the case of CII Parent, Inc., cementing the advice routinely given by bankruptcy counsel to borrowers in default. We always counsel borrower clients in default of the risk associated with lenders taking unilateral actions pre-filing, stripping debtors of valuable options and assets. Thus, we normally recommend to always obtain a forbearance and undertake the preparations required to file a bankruptcy petition immediately upon forbearance termination, although whether or not to file depends on variety of factors that should be considered.

The Second Circuit recently held that a non-party to an assumed executory contract is not entitled to a cure payment (although it may be so entitled if is a third-party beneficiary of the contract). The result would have seemed obvious to bankruptcy practitioners. So, what in the world made the party pursuing payment take this to the Second Circuit? Well, surprisingly, as the Second Circuit decision shows, the answer is not found in the plain text of the Bankruptcy Code. And while it was argued prior to the Supreme Court’s ruling in Bartenwerfer v. Buckley, No. 21-908, 598 U.S.