In preparation for a post COVID-19 world, Chinese outbound investors have begun to source for bargain deals in other countries, with markets characterised by corporate restructurings, low prices, depressed valuations, distressed assets, and fire sales. In this article, we briefly set out some suggestions for Chinese outbound investors when entering into bargain M&A deals in this unprecedented M&A landscape.

Since its 1989 opinion in Folendore v. Small Business Admin., the Eleventh Circuit Court of Appeals has allowed debtors to completely strip off and void wholly unsecured junior liens in Chapter 7 bankruptcies under Section 506(d) of the Bankruptcy Code. Complete lien stripping forever prevents creditors from seeking relief against a debtor’s collateral if it is underwater, even if the property value later increases. Since Chapter 7 debtors are also discharged of personal liability, subordinate debt is, in such cases, rendered worthless.

That may soon change.