On October 14, 2022, the U.S. Court of Appeals for the Fifth Circuit issued a long-awaited ruling on whether Ultra Petroleum Corp.
In Short
The Situation: Courts have disagreed over whether a make-whole premium triggered by a borrower's bankruptcy filing must be disallowed as unmatured interest. They have also disputed whether the "solvent-debtor exception" requiring the payment of postpetition interest to unimpaired unsecured creditors of a solvent debtor survived the enactment of the Bankruptcy Code. Finally, courts have split on what rate of postpetition interest unimpaired unsecured creditors of a solvent debtor are entitled to receive.
The following briefing provides a round-up of the Cayman legal and regulatory developments during the third quarter of 2022 that may be of interest to funds clients. We are pleased to note that there is nothing critical or requiring immediate action at this time.
Summary of recent legal and regulatory developments
In Short
The Situation: Bankruptcy courts have split on what rate of post-petition interest unimpaired creditors of a solvent debtor are entitled to receive. Bankruptcy courts have variously ruled that such creditors were entitled to the contractual rate of interest, interest at the federal judgment rate (about the rate on a one-year Treasury bill) as of the bankruptcy petition date, or an equitable rate. Another possibility is that no interest is payable at all.
Domestic procedures
Cross border
Creditors
Avoidance transactions
Contributions to liquidation estates and liability of officers
This article answers FAQs on restructuring and corporate recovery options available in the Cayman Islands.
This article answers FAQs on restructuring and corporate recovery options available in the Cayman Islands.
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Domestic Procedures
What are the principal insolvency procedures for companies in your jurisdiction? | Liquidation: voluntary and official. Cayman does not have an equivalent to the English concept of the company administration or to the Chapter 11 process in the United States. Schemes of Arrangement/“Soft Touch Liquidations” allow the company to enter into an agreement with its shareholders and/or creditors. |
The High Court of Hong Kong refused to allow a Chapter 11 Trustee to disclose a Decision from Hong Kong winding up proceedings in the US bankruptcy court. The US proceedings were commenced to prevent a creditor from taking action following a breach of undertakings given to the Hong Kong court in circumstances where the company had no jurisdictional connection with the US.
Following our previous article, the Court of Appeal dismissed an appeal following the High Court deciding that a moratorium in relation to restructuring proceedings in Azerbaijan could not be extended in breach of the Gibbs rule, allowing two significant creditors to proceed with their claims in the English Courts.
Despite the debtor's contention that his primary residence was in the United States, the Court held that it had jurisdiction to make a Bankruptcy Order following a petition presented by HMRC.
HMRC presented a bankruptcy petition against Robert Stayton on 30 May 2014 who owed approximately £653,640. The matter came before the court on a number of occasions before the final hearing, with judgment being handed down in November 2018.