We recently reported on Delaware Judge Christopher Sontchi’s decision in the Extraction bankruptcy to permit the rejection of midstream gathering agreements.1 Fellow Delaware Judge Karen Owens followed Extraction in the Southland Royalty decision issued November 13, 2020.2 Judge Owens determined that Southland Royalty Company, LLC (“Southland”), an E&P operator with assets primarily in Wyoming, could reject the gas gathering agreement and sell its assets free and clear of the agreement.
In the latest saga concerning “covenants running with the land” and the rejection of midstream gathering agreements under section 365 of the Bankruptcy Code (the Code), the Honorable Christopher Sontchi, Chief Judge of the Delaware Bankruptcy Court (the Court), issued three1 decisions holding that certain of Extraction Oil & Gas, Inc.’s (Extraction) gathering agreements with its midstream service providers did not create real property interests and, thus, that Extraction could reject such gathering agreements in its chapter 11 bankruptcy proceedings.
Reforms to the Corporate Restructuring and INsolvency Framework
Moratorium
The Bill introduces a moratorium for companies during which they will benefit from a ‘payment holiday’ in respect of certain pre-moratorium debts and protection from legal action and security enforcement without the court’s permission.
Following a number of corporate governance failures in situations of insolvency, the Government has published a consultation paper (located here) aimed at cracking down on directors and employers behaving irresponsibly.
Article Summary:
In Wright (and another) (as joint liquidators of SHB Realisations Ltd (formerly BHS Ltd) (in liquidation)) v Prudential Assurance Company Ltd, the court held that, when the BHS CVA terminated, the landlord was entitled to claim the full rent due under its lease. With more recent retail CVAs seeking to push the envelope even further, is the continued compromise of landlord creditors post-CVA the next issue to be tested in the courts?
Summary: Following a number of corporate governance failures, the Government has published a consultation paper aimed at cracking down on directors and employers behaving irresponsibly. “These reforms will give the regulatory authorities much stronger powers to come down hard on abuse and to make irresponsible directors bear the consequences of their actions.” Greg Clark. Responses are required by 11 June 2018.
Sale of Businesses in Distress
Summary: In Wright (and another) (as joint liquidators of SHB Realisations Ltd (formerly BHS Ltd) (in liquidation)) v Prudential Assurance Company Ltd, the court held that, when the BHS CVA terminated, the landlord was entitled to claim the full rent due under its lease. With more recent CVAs seeking to push the envelope even further, is the continued compromise of landlord creditors post-CVA the next issue to be tested in the courts?