Market conditions and Covid-19

The Covid-19 pandemic and the response to it, including global lockdowns, has caused substantial disruption to business operations and trade which has resulted in significant cash flow and financial challenges for many businesses. As a result, in a number of cases, financing covenants have been breached which have triggered defaults under financing arrangements.

Shenzhen Everich Supply Chain Co, Ltd (in Liquidation in the Mainland of the People's Republic of China) [2020] HKCFI 965 (date of judgment: 4 June 2020)

For the second time the Hong Kong Court has recognised a PRC winding-up proceeding and granted assistance to the administrator of a PRC company appointed by a PRC Court. The Hong Kong Court also granted the administrator an express right to take control of the company's subsidiaries in Hong Kong.

Background

One of the largest bankruptcy orders ever made in the English courts (in the region of £870 million) has been set aside to allow a creditors’ meeting to take place in order to consider an individual voluntary arrangement. In (1)Gertner (2) Laser Trust v CFL Finance Ltd [2020] EWHC 1241 (Ch), Mr Justice Marcus Smith has held that unless a breach of the good faith rule can be established, it is inappropriate for the court to refuse an application supported by a majority of creditors to stay a bankruptcy petition.

COVID-19 has impacted all businesses and economies around the globe with a precipitous decline in demand and supply as a result of quarantine orders, business closures, and social distancing. International Monetary Fund research suggests that the world economy may shrink (in the year 2020) by 3% with the trade volume falling by 11% and the oil prices by 42% (World Economic Outlook, April 2020: The Great Lockdown). In these challenging circumstances and with significant level of debt, many companies are at the onset of insolvency.

The Federal Reserve recently announced that it’s Municipal Liquidity Facility (MLF) is taking applications from eligible issuers and will soon purchase notes at the following interest rates.

This is part of our Commercial Real Estate Finance COVID-19 Impact Series, which is aimed at providing informed and real-time guidance tailored to various sectors of commercial real estate owners. In the context of recent bankruptcy filings by national shopping center tenants, this article examines the interplay between a tenant bankruptcy and a landlord’s obligations under its loan documents.

The next article in our Commercial Real Estate Finance COVID-19 Impact Series looks at landlord/tenant issues arising from the COVID-19 pandemic through the lens of our Bankruptcy and Restructuring Practice Group, providing informed and real-time guidance tailored to various sectors of commercial real estate owners. In the context of recent bankruptcy filings by national shopping center tenants, this article highlights key areas for consideration when a tenant files bankruptcy and what steps landlords can take to be proactive in these circumstances.

Americans are in an unemployment crisis due to COVID-19 business closings, and many are accruing debt in order to maintain their basic lives – unpaid utilities, buy food on credit, etc. For many, the vehicle to obtain that debt is credit cards, home-equity loans, or simply failing to pay creditors who invoice customers after providing goods and services, such as doctors.[1]

Stephenson Harwood’s Middle East team provide top tips on how to quickly recover debt in the UAE.

The strategy we set out in this bulletin is intended to crystallise the debt in the eyes of the national courts of the UAE making recovery of the debt quicker than it otherwise might be.

Issue letters of demand

Covid-19 has brought about much uncertainty for businesses worldwide and it is timely for a special edition of Going Concerns to provide a "survival guide" in the following jurisdictions Singapore, the People's Republic of China ("PRC"), Hong Kong, United Kingdom and the United Arab Emirates ("UAE"). This special edition will also touch on recent legislation and stimulus packages introduced by governments of the above (where applicable) in response to the Covid-19 outbreak, which will impact both creditors and debtors.

Survival guide