The UK Financial Services Authority (“FSA”) confirmed on 31 Oct. 2011 that MF Global UK Limited (“MF Global UK”) will be subject to the new Special Administration Regime (“SAR”).^[1] This is the first time that the new regime, set out in The Investment Bank Special Administration Regulations 2011 (“SAR Regulations”)^[2] has been invoked.

Background

The U.S. Bankruptcy Court for the District of New Jersey recently held that a Cayman Islands collateralized-debt obligation issuer (“CDO”) could be a debtor under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”) and declined to dismiss an involuntary case commenced against the CDO by certain noteholders on the grounds that the notes held by such noteholders were “non-recourse” notes. Below is a discussion of the court’s decision and its potential implications. The decision is currently being appealed.

The U.S. Court of Appeals for the Fifth Circuit, on Aug. 16, 2011, affirmed the lower court’s decision authorizing reimbursement of expenses to qualified bidders for a reorganization debtor’s assets. In re Asarco, LLC, 2011 BL 213002 (5th Cir. Aug. 16, 2011). In the court’s view, the debtor provided “a compelling and sound business justification for the reimbursement authority.” Id. at *12.

Facts

On Aug. 30, 2011, the United States Bankruptcy Court for the Southern District of New York approved the disclosure statement with respect to the revised second amended joint Chapter 11 plan of Lehman Brothers Holdings Inc. and its affiliated debtors (the “Debtors”). The order approving the Debtors’ disclosure statement and establishing certain procedures related to the hearing to consider confirmation of the plan (the “order”) can be accessed here.

The United States Bankruptcy Court for the Southern District of New York, overseeing the bankruptcy cases of Lehman Brothers Holdings Inc. (“LBHI”) and its affiliated debtors (collectively, the “Debtors”), entered an order on Aug.

DURING THE PAST YEAR, many investors in the distressed debt market have received postreorganization private equity1 either through a confirmed plan of reorganization or through participation in a rights offering. Unlike publicly traded equity, each new issuance of postreorganization equity leaves recipients, issuers, and agents potentially facing uncharted territory in terms of how the instrument is to trade and settle.

CURRENTLY, NEGOTIATION and documentation of claims trades remain largely unregulated, with only limited oversight from bankruptcy courts and the Securities and Exchange Commission. Generally, the bankruptcy court’s, or the claims agent’s, involvement in claims trading is ministerial, i.e., maintaining the claims register and recording transfers if the form complies with the rule. Only if there is an objection to a claims transfer does the bankruptcy court become involved in the substance of a transfer.

On June 28, 2011, the U.S. Court of Appeals for the Seventh Circuit held that secured creditors have a statutory right to credit bid1 their debt at an asset sale conducted under a "cramdown" plan. In re River Road Hotel Partners, LLC, ___ F.3d. ___, 2011 WL 2547615 (7th Cir. June 28, 2011).2 The Seventh Circuit's decision creates a split with recent decisions in the Third and Fifth Circuits regarding a lender's ability to credit bid its secured debt. See In re Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010); In re Pacific Lumber, Co., 584 F.3d 229 (5th Cir.

On 23 February, the European Commission (“Commission”) opened an in-depth investigation, to verify whether the measures notified in the context of the restructuring of the Czech national flag carrier Czech Airlines are in line with the EU rescue and restructuring aid guidelines. The measures comprise a loan of CZK 2.5 billion (around €94 million) granted by the State-owned undertaking Osinek under allegedly preferential conditions, its later de-collateralisation and transformation into equity capital and a potential guarantee for the purchase of an airplane.

On 21 January, the Office of Fair Trading (“OFT”) announced that it would carry out a market study, supported by Ofwat, the UK water and sewerage regulator, looking at the market for treatment of organic waste. The study will look at whether the market is working effectively to deliver the best outcomes for customers. The OFT decided to launch this study after considering a proposal and request from Ofwat. The OFT will lead on the study and utilise its experience in conducting market studies and of the municipal, commercial and industrial organic waste sectors.