A free-standing moratorium for financially distressed but ultimately viable companies was introduced in 2020. It is sometimes called a Part A1 moratorium, after the part of the Insolvency Act 1986 which provides for it.
Protecting your business from exposure to supplier and customer insolvency
As we move through Q1 of 2023, significant shifts are occurring in the Global financial and economic landscape which are of significant consequence for business. The marked upward shift in the cost (and reduced availability) of finance, largely unseen for over a decade, combined with high energy and natural resource/raw material costs and challenges and currency fluctuations has the potential to sharply to expose financial distress in businesses in many countries and global supply chains.
The 11 October 50-page judgment of Hildyard J in The joint administrators of Lehman Brothers International (Europe) v FR Acquisitions Corporation (Europe) and JFB Firth Rixson will interest not only those who deal with ISDA Master Agreements (who may want to read the entire judgment), but also many lawyers and financial and commercial institutions. This is because the events of default which it had to consider, and especially the meaning of the word “continuing” in this context, are relevant to bonds, loans and various commercial contracts.
The Government’s roadmap out of lockdown signals a return to trading for a number of businesses hard-hit by the COVID-19 pandemic. There is however potential for heightened financial distress in the coming period as existing support measures are withdrawn and currently deferred liabilities become payable, bringing the challenges faced by this sector into sharp focus.
The onset of COVID-19 has precipitated and accelerated substantial change for businesses in fashion retail, adding to particular headwinds already facing the sector in the UK. While many brick-and-mortar fashion retailers were already experiencing challenging trading conditions at the start of 2020 – ranging from rent and rates overheads to increased online competition – restrictions on and changes to consumer preferences resulting from the pandemic have intensified the challenges facing many fashion retailers and businesses operating in the supply chain.
Protecting your business from exposure to supplier and customer insolvency
The risk of unforeseen counterparty customer or supplier financial distress and failure amidst the on-going challenges for businesses from COVID-19 means that pre-emptive legal and operational protections against the risk of heavy financial loss or business disruption from customer/supplier failure are more valuable than ever.
“[C]ourts may account for hypothetical preference actions within a hypothetical [C]hapter 7 liquidation” to hold a defendant bank (“Bank”) liable for a payment it received within 90 days of a debtor’s bankruptcy, held the U.S. Court of Appeals for the Ninth Circuit on March 7, 2017.In re Tenderloin Health, 2017 U.S. App. LEXIS 4008, *4 (9th Cir. March 7, 2017).
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.
A Chapter 11 debtor “cannot nullify a preexisting obligation in a loan agreement to pay post-default interest solely by proposing a cure,” held a split panel of the U.S. Court of Appeals for the Ninth Circuit on Nov. 4, 2016. In re New Investments Inc., 2016 WL 6543520, *3 (9th Cir. Nov. 4, 2016) (2-1).
While a recent federal bankruptcy court ruling provides some clarity as to how midstream gathering agreements may be treated in Chapter 11 cases involving oil and gas exploration and production companies (“E&Ps”), there are still many questions that remain. This Alert analyzes and answers 10 important questions raised by the In re Sabine Oil & Gas Corporation decision of March 8, 2016.[1]