As discussed in our prior blog entitled “New York’s Sovereign Debt Restructuring Proposals,”[1] three bills were introduced in the New York state legislature to overhaul the way sovereign debt restructurings are handled in New York. Those bills sought to implement a comprehensive mechanism for restructuring sovereign debt, limit recovery on certain sovereign debt claims, and amend the champerty defense.

The first half of 2023 witnessed the failure of three financial institutions in quick succession—Silicon Valley Bank (March 10, 2023), Signature Bank (March 12, 2023), and First Republic Bank (May 1, 2023). This was the first time three financial institutions failed in such a compressed time period since the Great Recession of 2008.

On October 14, 2022, the U.S. Court of Appeals for the Fifth Circuit issued a long-awaited ruling on whether Ultra Petroleum Corp.

In Short

The Situation: Courts have disagreed over whether a make-whole premium triggered by a borrower's bankruptcy filing must be disallowed as unmatured interest. They have also disputed whether the "solvent-debtor exception" requiring the payment of postpetition interest to unimpaired unsecured creditors of a solvent debtor survived the enactment of the Bankruptcy Code. Finally, courts have split on what rate of postpetition interest unimpaired unsecured creditors of a solvent debtor are entitled to receive.

The saga of the first Ultra Petroleum Corp. chapter 11 cases appears to have finally come to an end. Numerous articles have been written on the tortured history of whether certain creditors of Ultra Petroleum are entitled to payment of their contractually mandated Make-Whole Amount and default rate of interest.

In Short

The Situation: Bankruptcy courts have split on what rate of post-petition interest unimpaired creditors of a solvent debtor are entitled to receive. Bankruptcy courts have variously ruled that such creditors were entitled to the contractual rate of interest, interest at the federal judgment rate (about the rate on a one-year Treasury bill) as of the bankruptcy petition date, or an equitable rate. Another possibility is that no interest is payable at all.

Introduction

The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities). 

An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below. 

In brief

Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.

Under Australia's insolvency regimes, a distressed company may be subject to voluntary administration, creditor's voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.

In summary

In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.  

The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see

What you need to know