In recent weeks, the dispute in Windstream’s bankruptcy between Windstream and its REIT spinoff Uniti Group over the lease transaction that ultimately led to Windstream’s chapter 11 bankruptcy has continued to escalate with Windstream filing an adversary complaint against Uniti. In its complaint, Windstream seeks to recharacterize the lease as a disguised financing alleging that the lease resulted in a long-term transfer of billions of dollars to Uniti to the detriment of Windstream’s creditors.

Yesterday, in an 8-1 decision, the US Supreme Court held in Mission Product Holdings, Inc. v.

On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company,1 ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year.

Both the First Energy Solutions and PG&E bankruptcies have seen proceedings regarding power purchase and similar agreements (PPAs) that raise this question.

Background

Contracts often contain provisions that enable a party to terminate or modify the contract based on the other party's bankruptcy filing, insolvency or deteriorating financial condition. In general, the Bankruptcy Code renders these types of provisions (sometimes referred to as "ipso facto" clauses) ineffective. Specifically, under section 365(e)(1) of the Bankruptcy Code (emphasis added):

After months of speculation, it is now official : PG&E (both the parent, PG&E Corporation, and its subsidiary, Pacific Gas & Electric Company), having faced extraordinary challenges relating to catastrophic wildfires in 2017 and 2018, has announced that a voluntary bankruptcy filing “is appropriate, necessary and in the best interests of all stakeholders, including wildfire claimants, PG&E’s other creditors and shareholders, and is ultimately the only viable option to restore PG&E’s financial stability to fund ongoing operations and provide safe service to customers.” As

On 13 September 2018, the UK Government published a guidance notice (Guidance) on handling civil disputes, including cross-border insolvencies, in the event that the UK exits the EU without having first agreed a framework for ongoing civil judicial cooperation, and from which time and date (11 pm on 29 March 2019) the UK will not benefit from the EU rules to replace the current arrangements.

Merit Management Group, LP v. FTI Consulting, Inc., No. 16-784 (2018)

The High Court has considered a recent Court of Appeal ruling on whether trustees in bankruptcy should be able to deploy privileged documents in the discharge of their duties.

The existing position under Avonwick

The facts of Shlosberg v Avonwick Holdings Limited [2016] EWCA Civ 1138 involved a company called Webinvest. Webinvest was beneficially owned by Mr Shlosberg. Avonwick lent US$100 million to Webinvest, with Mr Shlosberg personally guaranteeing the loan.

The English Supreme Court has considered various new categories of creditor claims against a company with unlimited liability in administration where, unusually, there was enough money to pay all creditors and a surplus existed.

In proceedings commonly referred to as the Waterfall I litigation, the Supreme Court considered issues relating to the distribution of funds from the estate of Lehman Brothers International Europe (in administration) (LBIE), in circumstances where there was a surplus of assets amounting to approximately £8 billion.

At first glance, it seems that cross-border insolvencies between the UK and EU are likely to become more time-consuming, complex and expensive post-Brexit. However, the situation may not be as dire as it first appears due to the existence of alternative legislation and the exemptions to the EU legislation. As with other areas of law, when it comes to insolvencies much will depend on what steps are taken to maintain the current arrangements with the EU or whether they fall away altogether.