In the US distressed market, liability management has emerged as an effective and widely accepted tool to increase liquidity, restructure debts and extend a borrower’s runway to help it avoid insolvency. However, although not unheard of, it is yet to achieve the same prevalence in Europe, where documents are still catching up to the level of flexibility seen in the US, and different capital structures and legal regimes raise different issues.

In the wake of the high profile collapse of the private equity firm Abraaj Capital, the Dubai International Financial Centre (“DIFC”) updated its insolvency regime with the introduction on June 13, 2019 of the new DIFC Insolvency Law (Law No.1 of 2019) (the “DIFC Insolvency Law”).

With the significant strain placed on market participants as a result of the combined impacts of the global COVID-19 pandemic, the oil price war and the ensuing liquidity and credit crunches, we expect that a number of enterprises in the United Arab Emirates ("UAE") will either be forced to carry out restructurings or otherwise undergo formal court-supervised insolvency processes.

There are important issues and procedures to be considered when a foreign buyer seeks to purchase the assets of a U.S. entity that is distressed or subject to a U.S. insolvency proceeding and which is involved in business activities with a nexus to U.S.