The first of three compliance deadlines for US regulations requiring resolution-related amendments to qualified financial contracts is January 1, 2019, and delaying compliance until the subsequent deadlines creates additional risk. Compliance programs may not be able to eliminate this risk due to the scope of contracts to be remediated and the staggered compliance period that looks back to the first compliance date.
The new laws have made Singapore more attractive
The maritime and offshore (M&O) sector has endured almost a decade of distress since the global financial crisis. Overzealous ordering of newbuild vessels during the boom years, made available by cheap credit and the lure of increasing global demand, has left many sectors of the maritime industry oversaturated.
This article was published in a slightly different form in the November 2016 issue of Futures & Derivatives Law by The Journal on the Law of Investment & Risk Management Products.
Introduction
Securing support from principal creditors makes all the difference between a chapter 11 restructuring that saves a troubled shipping company and one that sinks it.
When a shipping company's financial distress is extreme, it must work fast to preserve value and stem losses. The use of chapter 11 by shipping companies to coerce principal creditors to support an unfavorable restructuring where ownership refuses to share risk is costly, value destructive and generally fruitless.
For the past decade, shipping companies in every sector have faced continuing challenges from, among other things, declining demand, low charter rates, and an oversupply of new and more modern vessels. These factors have eroded second-hand vessel values and caused financial distress and insolvency for many shipping companies, requiring out of court financial restructurings and, in some cases, U.S. bankruptcy filings.
On September 15, 2009, the United States Bankruptcy Court of the Southern District of New York ordered Metavante Corporation (“Metavante”) to make payments to Lehman Brothers Special Financing Inc. (“LBSF”) under a prepetition interest rate swap agreement guaranteed by Lehman Brothers Holdings Inc. (“LBHI” and, together with LBSF, “Lehman”) after Metavante had suspended ordinary course settlement payments under the swap.1 Metavante claimed a contractual right to withhold payment under Section 2(a)(iii) of the 1992 ISDA Master Agreement as a result of Lehman’s bankruptcy.
Recent changes in Peruvian insolvency laws1 will now allow financial institutions and insurance company counterparties to close-out and net obligations under derivatives and repurchase agreements with Peruvian financial institutions or insurance companies which become subject to bankruptcy proceedings.