In the current difficult business environment, lenders will be weighing up their options in respect of defaulting borrowers – for some lenders that might include attempting to own the underlying business through a credit bid. Where debt is trading at a discount, a credit bid can also be a cost-efficient opportunity for an opportunistic buyer to acquire assets. So, what is a credit bid and what issues might such parties need to consider in using one?   

What is a credit bid?

This article will look at the recent decision of David Doyle J in In the Matter of HQP Corporation Limited (in Official Liquidation) (7 July 2023) and its effect on the ability of investors to recover damages from a company in which they have acquired shares as a result of a fraudulent misrepresentation.

Introduction

The case involved an application by liquidators for direction in relation to three issues in the winding up of the Company:

The court has the power to challenge any decision of the officeholder in an insolvency process on application by a dissatisfied party. The ambit of that power depends upon the nature of the insolvency process but, broadly, the following categories of people will be entitled to apply:

The Insolvency Service released the quarterly insolvency statistics for July - September 2023 on 31 October, painting a picture of growing corporate distress. This period saw a total of 6,208 company insolvencies, which together with Q2 2023 marks the highest number of quarterly insolvencies since the midst of the financial crisis in 2009.

Although a comparison with Q2 figures shows a slight reduction of 2% in overall insolvencies, the figures for Q3 showed a marked rise in both compulsory liquidations (14% up on Q2) and administrations (11% higher than Q2).

In the recent decision of FamilyMart China Holding Co v Ting Chuan (Cayman Islands) Holding Corporation [2023] UKPC 33 (FamilyMart),[1] the Judicial Committee of the Privy Council (the Board) found that, although an arbitral tribunal does not have the power to determine whether it is just and equitable to wind up a company nor to make a winding u

Summary

In this High Court case ICC Judge Barber ordered a disqualified director to compensate creditors for losses under s15A of the Company Directors' Disqualification Act 1986 (CDDA) as a result of negligent conduct in trading a company illegally.

Facts

On 6 October 2023, Parker J handed down his reasons for dismissing an application to bring the voluntary liquidation of Port Link GP Ltd, General Partner (GP) of The Port Fund L.P. (TPF) under the supervision of the Grand Court pursuant to section 124 of the Companies Act. (Section 124)

The Grand Court of the Cayman Islands has recently dismissed a petition for the appointment of restructuring officers pursuant to the restructuring regime introduced in the Cayman Islands in August 2022. The case provides helpful clarification of the nature of evidence that is required to be put before the Court to engage its jurisdiction to appoint restructuring officers and will allow companies to be better prepared when seeking to utilise the Cayman Islands restructuring regime with the benefit of the automatic moratorium.

As can often be the way, August was a disappointing month for many, with the dull and dreary weather casting a shadow over plans made for the school holidays. So too, it seems, was August a bad month for the business community – perhaps in some cases linked to the weather, with poorer performance by seasonal businesses reliant on fair weather custom.

Do you have any Cayman vehicles that you are considering terminating?