On October 17, 2022, Justice Andrea Masley of the NY Supreme Court issued a decision and order denying all but one of the motion to dismiss claims filed by Boardriders, Oaktree Capital (an equity holder, term lender, and “Sponsor” under the credit agreement), and an ad hoc group of lenders (the “Participating Lenders”) that participated in an “uptiering” transaction that included new money investments and roll-ups of existing term loan debt into new priming debt that would sit at the top of the company’s capital structure.

On October 14, 2022, the Fifth Circuit issued its decision in Ultra Petroleum, granting favorable outcomes to “unimpaired” creditors that challenged the company’s plan of reorganization and argued for payment (i) of a ~$200 million make-whole and (ii) post-petition interest at the contractual rate, not the Federal Judgment Rate. At issue on appeal was the Chapter 11 plan proposed by the “massively solvent” debtors—Ultra Petroleum Corp. (HoldCo) and its affiliates, including subsidiary Ultra Resources, Inc.

Recently, the Supreme Court of the United Kingdom released its judgment in BTI 2014 LLC v Sequana SA¹. This marks the first occasion on which the nature, scope and content of directors' duties to creditors when a company is nearing insolvency (the "Creditor Duty") has been considered by the Supreme Court.

Last week, the Supreme Court of the United Kingdom released its judgment in BTI 2014 LLC v Sequana SA. This marks the first occasion on which the nature, scope and content of directors' duties to creditors when a company is nearing insolvency (the "Creditor Duty") has been considered by the Supreme Court.

While the timing of competing English and German insolvency applications in Re Galapagos allowed for clear determination of jurisdiction under the UK Insolvency Regulation, there remains potential uncertainty as to how similar competing applications made following 31 December 2020 will be resolved in the post-Brexit environment.

Background

On July 6, Delaware Bankruptcy Court Judge Craig T. Goldblatt issued a memorandum opinion in the bankruptcy cases of TPC Group, Inc., growing the corpus of recent court decisions tackling “uptiering” and other similar transactions that have been dubbed by some practitioners and investors as “creditor-on-creditor violence.” This topic has been a hot button issue for a few years, playing out in a number of high profile scenarios, from J.Crew and Travelport to Serta Simmons and TriMark, among others.

So far this year, fewer European and American businesses have encountered financial distress that required either bankruptcy or restructuring procedures than in the same period in 2020. This decline occurred despite the ongoing economic impact of COVID-19.

Pre-packaged administration sales (where a sale of key assets is agreed prior to the appointment of administrators and then implemented by the administrators immediately following their appointment), have been a widely-used and highly successful tool to rescue businesses, or parts of businesses, that may otherwise have languished in administration interminably.

The economic impact of the COVID-19 pandemic led to a wave of creditor schemes of arrangement ("schemes") and restructuring plans ("RPs") in the second half of 2020, which shows no sign of abating in 2021. For the uninitiated, the scheme (a long-established tool) and the newer RP process are court led UK restructuring options that a company can use to bind a minority of creditors into a restructuring. An RP can also be used to "cram down" an entire dissenting creditor class into a deal where certain conditions are met.

On August 26, 2020, the Court of Appeals for the Third Circuit held that the Bankruptcy Code does not require subordination agreements to be strictly enforced in order for a court to confirm a cramdown plan, so long as the plan does not discriminate unfairly.