In recent years, Indonesian companies have shown both a greater willingness to use foreign restructuring processes, as well as a greater need to do so given the increasingly sophisticated financing structures and investor bases seen for Indonesian businesses. Some of the notable Chapter 15 protection cases include those involving the Duniatex Group in 2020, PT Bakrie Telecom Tbk in 2018, PT Bumi Resources Tbk in 2017, and Berau Capital Resources Pte Ltd (a Singapore SPV of PT Berau Coal Energy Tbk) in 2015.
On September 14, 2020, the US Bankruptcy Court for the Southern District of New York recognized the Indonesian court-supervised restructuring plan for the Indonesian Duniatex textiles group ("Duniatex Group") under Chapter 151. Chapter 15 is a powerful and accessible tool for protection under the US Bankruptcy Code for non-US debtors facing litigation claims in the US.
Courts and professionals have wrestled for years with the appropriate approach to use in setting the interest rate when a debtor imposes a chapter 11 plan on a secured creditor and pays the creditor the value of its collateral through deferred payments under section 1129(b)(2)(A)(i)(II) of the Bankruptcy Code. Secured lenders gained a major victory on October 20, 2017, when the Second Circuit Court of Appeals concluded that a market rate of interest is preferred to a so-called “formula approach” in chapter 11, when an efficient market exists.
Post-judgment interest is not something most lenders consider when making a loan. In fact, it is not ordinarily the subject of significant analysis even when litigation becomes necessary. Where the United States District Court is the preferred venue, however, parties easily can fall into the quandary of being stuck with the federal statutory post-judgment interest rate, which is currently less than 1% per annum.
In an appeal certified directly from the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to the Court of Appeals, the Third Circuit issued a ruling upholding Judge Kevin Gross’s decision that a chapter 11 debtor-employer may reject the continuing terms and conditions of a collective bargaining agreement (“CBA”) under 11 U.S.C. § 1113, despite that the CBA expired post-petition.
The Bankruptcy Court’s Decision
On January 17, 2014, Chief Judge Kevin Gross of the Bankruptcy Court for the District of Delaware issued a decision limiting the right of a holder of a secured claim to credit bid at a bankruptcy sale. In re Fisker Auto. Holdings, Inc., Case No. 13-13087-KG, 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014). Fisker raises significant issues for lenders who are interested in selling their secured debt and for parties who buy secured debt with the goal of using the debt to acquire the borrower’s assets through a credit bid.
The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case. In general terms, the rule provides that if a class of unsecured creditors rejects a debtor’s reorganization plan and is not paid in full, junior creditors and equity interestholders may not receive or retain any property under the plan. The rule thus implements the general state-law principle that creditors are entitled to payment before shareholders, unless creditors agree to a different result.
A senior creditor can obtain significant leverage over a chapter 11 debtor if it is able to vote not only its claim but the claims of junior creditors in connection with the solicitation of a plan of reorganization. Obtaining such leverage, however, has proven problematic in the past. Among other things, courts have been reluctant to enforce pre-bankruptcy assignments or waivers of voting rights contained in intercreditor agreements, holding that such assignments or waivers may violate the Bankruptcy Code and rules. In Avondale Gateway Center Entitlement, LLC v.
On August 2, 2010, Maru E. Johansen, in her capacity as the foreign representative (the “Foreign Representative”)1 in respect of Mexican insolvency proceedings regarding Compania Mexicana de Aviacion, S.A. de C.V. (“Mexicana”), filed a petition for recognition in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), commencing a case under Chapter 15 of the United States Bankruptcy Code.2 Mexicana and its affiliates operate Mexicana Airlines, Mexico’s largest airline.