In 2023, we saw an increase in both voluntary administration and receivership appointments in Australia. In the context of Australia's economic climate this was unsurprising — debtor companies were grappling with volatile markets, supply chain disruptions and uncertain economic conditions, and secured lenders were invoking either or both of these regimes as a means of protecting their investments.
Investors in the Australian market are more sophisticated than ever and – unsurprisingly – so too are the restructuring transactions being promoted by these investors. One such transaction is the credit bid. While not a transaction structure that is formally recognised in Australia, a credit bid is a valuable tool in a financier's playbook that can be implemented to achieve a return where the original financing is unable to be repaid in accordance with its terms.
Credit Bidding
A creditors' scheme of arrangement ("Scheme") can be a powerful restructuring tool implemented to achieve a variety of outcomes for a business, ranging from deleveraging or a debt-to-equity conversion to a merger and/or issue of new debt/equity instruments. When managed appropriately, a Scheme can reshape a business' debt and equity profile, setting it up for an improved go-forward operating platform. Below we set out an outline of the Scheme process in Australia and consider some key features that are unique to Australian schemes.
As participants in the Australian debt restructuring market continue to innovate we expect to see an increase in these control transactions, testing further again the Australian statutory regimes.
A summary of recent developments in insurance, reinsurance and litigation law.
Engelhart CTP v Lloyd's Syndicate 1221: Court holds that all risks cargo policy did not cover fraudulent documents for a non-existent cargo
Armes v Nottinghamshire County Council: Supreme Court again considers the nature of the relationship required to find a defendant vicariously liable
A summary of recent developments in insurance, reinsurance and litigation law.
This Week's Caselaw
Essar v Norscot: Court confirms that arbitrators can award the costs of litigation funding/time limits for challenging a corrected award
The 2010 Act has now been updated by regulations (the Third Parties (Rights against Insurers) Regulations 2016) to reflect changes in insolvency law. Accordingly, the long-awaited 2010 Act will finally come into force on 1 August 2016.
It will be recalled that the 2010 Act is intended to make it easier for third party claimants to bring direct actions against (re)insurers where an insured has become insolvent. The key changes coming in are as follows:
http://www.bailii.org/ew/cases/EWHC/Ch/2015/3721.html
Two insurance intermediaries entered into administration. Although heavily insolvent, they had significant funds held in client accounts. Those funds represented insurance premiums collected from customers but not yet paid on to the insurers. The issue therefore arose as to whether the insurers, the customers or the unsecured creditors of the intermediaries were entitled to those funds.