The Grand Court of the Cayman Islands has issued its first judgment appointing Restructuring Officers under the new section 91B of the Cayman Islands Companies Act, which came into force on 31 August 2022.
Introduction
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.
A recent decision of the Cayman Islands Grand Court is an important reminder that a liquidator's costs claimed from trust assets must be proportionate and reasonable, and will be refused on certain grounds.
Background
The Cayman Islands Government has published a Commencement Order confirming that the Companies (Amendment) Act, 2021 will come into force on 31 August 2022.
The Amendment Act introduces a new corporate restructuring process and the concept of a dedicated restructuring officer into the Cayman Islands Companies Act (2022 Revision).
Under the Amendment Act, the filing of a petition for the appointment of a restructuring officer will trigger an automatic global moratorium on claims against the company, giving it the opportunity to seek to implement a restructuring.
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.
A Cayman segregated portfolio company, Performance Insurance Company SPC, was placed into official liquidation. The joint liquidators' appointment extended to all of the underlying segregated portfolios (SPs), some of which were solvent and others insolvent. Two of the solvent SPs applied to the Grand Court of the Cayman Islands seeking the appointment of an additional liquidator of the company to separately represent the interests of those solvent SPs on the basis that the original liquidators were conflicted in administering both the solvent and insolvent SPs.
In an ex parte on short notice application, the Cayman Islands Grand Court considered the four hurdles that must be overcome for the appointment of joint provisional liquidators (JPLs).
The application was brought by an individual investor in Seahawk China Dynamic Fund (the Applicant and the Company). The Applicant submitted that he became aware of dishonest conduct on the part of Hao Liang (Mr Liang) who held all of the management shares in the Company.
The Cayman Islands' legislature has recently gazetted the Companies (Amendment) Bill, 2021 (the Amendment Bill), proposing the introduction of a new corporate restructuring process and the concept of a dedicated 'restructuring officer' into the Cayman Islands Companies Act (2021 Revision). Under the Amendment Bill, the filing of a petition for the appointment of a restructuring officer would trigger an automatic global moratorium on claims against the company, giving it the opportunity to seek to implement a restructuring.
A recent decision of the Cayman Islands Court of Appeal has confirmed its jurisdiction to hear an appeal of a decision of the Grand Court made pursuant to section 152(1) of the Companies Act (2021) Revision to dissolve a Company following its official liquidation.
Background