When you read the papers do you start from the front or back? I usually skim read the front-page headlines and immediately flick to the back (sport) pages. It’s less dispiriting that way. Or if it’s the weekend, I fumble my way through the different sections, past the gazillions of adverts showcasing tyre inflators and hair loss treatments, before I land at the sports section. They don’t make it easy for you do those weekend editors.

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

Junior debt – sometimes referred to as subordinated debt, occasionally talked about as mezzanine debt – is referred to as such because it ranks behind other, more senior, debt owing by the same borrower. Junior creditors can come in many different shapes and sizes and can include shareholder lenders and specialist debt investors or funds.

In the current difficult business environment, lenders will be weighing up their options in respect of defaulting borrowers – for some lenders that might include attempting to own the underlying business through a credit bid. Where debt is trading at a discount, a credit bid can also be a cost-efficient opportunity for an opportunistic buyer to acquire assets. So, what is a credit bid and what issues might such parties need to consider in using one?   

What is a credit bid?

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

KEY POINTS

Friday's Business section of The Times made interesting reading to us debt finance nerds.

A raft of new legislation was introduced during the pandemic with the aim of shielding businesses from the full economic impact of lockdown. One such piece of legislation was the Corporate Insolvency and Governance Act 2020 (CIGA). Some of the protections implemented by CIGA were temporary – for example, restrictions on the presentation of winding up petitions or the suspension of liability for wrongful trading. However, a number of permanent changes to insolvency legislation remain in force.

Banks often take security for the loans they advance – doing so gives them some additional protection if a borrower fails to repay the loan when due. Where the borrower is a company, that security can take the form of a mortgage, a security assignment, a pledge, lien, or a charge. In this short article, we explain what a charge is and the differences between a fixed and floating charge.

But firstly, what is a charge?

Wind the clock back a couple of years to (dare I mention it…) the Covid-19 pandemic, and insolvency practitioners were getting mildly giddy about a new development in the form of a standalone moratorium. Slotting in at the forefront of the Insolvency Act 1986 courtesy of the Corporate Insolvency and Governance Act 2020 (CIGA), the moratorium was designed to give companies a breathing space to find a solution to their troubles when insolvency was knocking on their door.