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.
In a recent decision,1 the Grand Court of the Cayman Islands considered the approach the Court will take when reviewing official liquidators' fees, the extent to which the Wednesbury reasonableness test is relevant and the need to file sufficient evidence in advance of the fee approval application hearing.
This past year was marked by extraordinary deal activity. Record breaking M&A activity drove record breaking private credit activity. Private equity M&A activity was at a substantial high, with over 8,500 deals worth $2.1 trillion, a 60% increase over 2020. Not surprisingly, in this environment, defaults were at all-time lows. The Proskauer Private Credit Default tracker showed an active default rate of approximately 1% at the end of 2021, compared to 3.6% in 2020.
Despite the Supreme Court’s rejection of a structured dismissal in 2017,[1] there is a growing trend of bankruptcy courts approving structured dismissals of chapter 11 cases following a successful sale of a debtor’s assets under Section 363 of the Bankruptcy Code.
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.
The primary investment thesis of a private credit lender is simple — get the loan repaid at maturity. Private credit lenders do not make loans as a means to acquire their borrower’s business. There are circumstances, however, where private credit lenders must be prepared to take ownership when the borrower is distressed and there is no realistic prospect of near-term loan repayment. Becoming the owner of a borrower’s business may very well be the loan recovery option of last resort.
U.S. District Court for the District of North Dakota
In Kotalik v. A.W. Chesterton Co., several defendants filed motions to enforce the plaintiffs’ compliance with disclosure requirements of North Dakota’s Asbestos Bankruptcy Trust Transparency Act. Counsel for the defendants as well as plaintiffs moved the court for a hearing on the issue. Lastly, plaintiffs’ counsel moved for a certification of a question to the North Dakota Supreme Court regarding the constitutionality of the Trust Transparency Act.
Our private credit clients are preparing for the next restructuring cycle and have called us about ultrafast bankruptcy cases. These chapter 11 cases have grabbed headlines because they lasted less than a day. Specifically, FullBeauty Brands and Sungard Availability Services emerged from bankruptcy in 24 hours and 19 hours, respectively. Is this a trend and which companies are best suited to zip through chapter 11?
A. Prepacks, Pre-Negotiated Cases, and Free-Falls
The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.
The Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) require each corporate party in an adversary proceeding (i.e., a bankruptcy court suit) to file a statement identifying the holders of “10% or more” of the party’s equity interests. Fed. R. Bankr. P. 7007.1(a). Bankruptcy Judge Martin Glenn, relying on another local Bankruptcy Rule (Bankr. S.D.N.Y. R.