During the better part of 2020, the federal government has injected an unprecedented level of stimulus into the Australian economy in an attempt to mitigate the economic impact of COVID-19. As a result, despite a significant contraction in the Australian economy, roughly half as many Australian companies are entering insolvency processes today compared with the same time last year. As that stimulus is wound back, it seems inevitable that the number of insolvencies will rise.
In recent years, market participants have watched with interest from across the Atlantic as U.S. out-of-court liability management and restructuring transactions moved material assets out of the creditors' collateral pools, to enhance liquidity, to raise additional debt or to extend the maturity of existing debt. Many have wondered when these sort of transactions will reach European shores.
That moment has now arrived.
INTRODUCTION
Recent changes in the Australian regulation of third-party funders will have a dramatic effect on the funding of certain disputes. Although these changes were accompanied by Government and industry commentary that they would not affect litigation funding for insolvency-related claims, this may not be the case for all insolvency funding arrangements.
In Short
The Situation: In Australia, the Takeovers Panel ("Panel") is the primary forum for hearing disputes in relation to takeover bids and other corporate control transactions involving public companies. In light of the current COVID-19-led financial distress being experienced by many companies, understanding when the Panel will be the appropriate forum to consider disputes in relation to a company in administration is important. This question arose in the course of the current Virgin Australia Group administration.
Singapore confirms further widening of third-party funding options
In Short
In Short
The Situation: On August 11, 2020, a Credit Derivatives Determinations Committee for EMEA ("DC") unanimously determined that the Chapter 15 filing by British retailer Matalan triggered a Bankruptcy Credit Event under standard credit default swaps ("CDS").
The Result: The DC's decision diverged from its only prior decision (involving Thomas Cook) on whether a Chapter 15 petition constituted a Bankruptcy Credit Event.
The United Kingdom and Australia have recently implemented legislative changes to permit external administrators to assign or sell causes of action available to them.