New legislation hit the statue books on Wednesday bringing updates to the legislation governing special administrations for regulated water companies in England and Wales. The changes are timely (some may even consider them overdue) given the current market instability, and provide flexible options should the regime have to be used.

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The Colombian airline Aerovias Nacionales de Colombia S.A. – Avianca (“Avianca”) has made a habit of accessing the structured credit markets by monetizing its expected stream of credit card receivables, filing for U.S. Chapter 11 protection when in distress, and then challenging the structured credit agreements to which it had committed. Recently, Avianca reached a settlement with the lenders to its existing future flow receivables transaction, entered into in December 2017, which will result in a restructured loan facility.

Supply chain finance products have a well-deserved reputation of being fairly low risk propositions. The majority of facilities are uncommitted, exposures are typically short-term and many counterparties are highly rated and well capitalized.

The Technology and Construction Court (TCC) has delivered a significant judgment in Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in liquidation) [2018] EWHC 2043 (TCC) where the company seeking to refer a dispute to adjudication was in liquidation. The substance of the dispute related to the contractor's claim for payment allegedly due for work completed, and damages for loss of profits.

The contract and the facts

In the final part of this series, we look at how you can protect your position and be prepared in the event of an impending insolvency.

Thinking ahead

It is always prudent to assess insolvency risk before finalising a contract. The trading history and financial position of a company should be carefully reviewed and a financial risk assessment made at both the outset and during the lifetime of a project. Obtain an up to date set of accounts and a credit report before entering into your contract to enable you to assess the counterparty's financial viability.

In the second of our mini-series on insolvency in construction, we consider what you need to do when you find out that the party you are in contract with has become (or is about to become) insolvent.

Who are you in contract with? Which specific entity?

The first thing you should do in the event of a counterparty's alleged insolvency is check which legal entity you are in a contract with.

This is in order to prevent you from acting too early and committing a repudiatory breach yourself, if you take pre-emptive action against your counterparty.

Insolvency is high on the agenda in the construction industry.

In the first of this mini series, we take a look at the meaning of insolvency and summarise the main insolvency processes that can typically affect parties involved in construction projects. The series will also address contract issues and minimising risk, so keep an eye out for our future articles on this topic.

Over the past several years, non-recourse receivables financing has been embraced by many major financial institutions and non-bank investors in the US market. With its (i) favorable regulatory treatment for regulated institutions, (ii) perceived positive risk/reward profile and (iii) adaptability to recent technological advancements such as distributed ledger technology (i.e., blockchain), non-recourse receivables financing likely will grow increasingly popular in the US market.

In In re Bernard L. Madoff Investment Securities LLC (“Madoff”),1 the United States Court of Appeals for the Second Circuit reaffirmed  its broad and literal interpretation of section 546(e) of the Bankruptcy Code, which provides a  safe harbor for transfers made in connection with a securities contract that might otherwise be  attacked as preferences or fraudulent transfers.