On May 3, 2017, the Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), acting on behalf of the cash-strapped Commonwealth of Puerto Rico (the “Commonwealth”), filed for bankruptcy protection in the District Court for the District of Puerto Rico. The Commonwealth’s Title III Petition for Covered Territory or Covered Instrumentality (the “Petition”) was filed in accordance with Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), codified at 48 U.S.C. § 2161, et seq.
Last year we reported (here) that Alberta’s Redwater Energy Corporation decision signaled good news for lenders and noteholders secured by Alberta O&G assets because the federal Canadian Bankruptcy and Insolvency Act (“BIA”) prevailed over conflicting provisions in the provincial regulations promulgated by the Alberta Energy Regulator (“AER”).
Last year, we reported that Australia had proposed significant insolvency reforms that, in our view, are long overdue ("A Major Leap Forward for Australian Insolvency Laws").
In the recent case of South Coast Construction v Iverson Road Limited [2017] EWHC 61 (TCC), South Coast Construction ("South Coast") had obtained an adjudicator’s decision against the employer, Iverson Road Limited (“Iverson Road”), in a sum approaching £900,000. Iverson Road refused to pay the award so South Coast commenced enforcement proceedings in the Technology and Construction Court (TCC).
On March 22, 2017, the Supreme Court, in Czyzewski et al., v. Jevic Holding Corp., et al., confirmed that the Bankruptcy Code does not permit “priority skipping” in Chapter 11 structured dismissals. In doing so, the Court held that, although the Code does not explicitly provide what, if any, priority rules apply to the distribution of estate assets in a Chapter 11 structured dismissal, “[a] distribution scheme in connection with the dismissal of a Chapter 11 case cannot, without the consent of the affected parties, deviate from the basic priority rules that apply under the . . .
Introduction
Background
In the case of Horton v Henry, the Court of Appeal has recently upheld the High Court’s decision that a Trustee in Bankruptcy cannot compel a bankrupt to draw down his pension rights where the bankrupt has not elected to do so.
The facts
While not an exhaustive list, here is a reminder of some measures you might want to think about to help mitigate the effects of insolvency on construction projects. As with all these measures (and with insolvency generally) there are a number of complicated issues to be considered, so do seek advice as necessary.
Performance security
Reversing the lower courts, the Third Circuit Court of Appeals has today held that, under New York law (which governs 95% of all indentures), the early repayment of indenture notes in Chapter 11 is an optional redemption requiring the payment of make-whole notwithstanding the automatic acceleration of the notes due to the Chapter 11 filing. Delaware Trust Co. v. Energy Future Intermediate Holding Company LLC (In re Energy Future Holdings Corp.), Case No. 16-1251 (5th Cir. Nov. 17, 2016).
The facts
Through corporate acquisitions and asset transfers, BAT Industries plc (“BAT”) (a Claimant in the proceedings) became liable to contribute to the clean-up of the sediment of the Lower Fox River in Wisconsin, U.S.A. Arjo Wiggins Appleton Limited (“AWA”), a wholly owned subsidiary of Sequana SA (“Sequana”) (a Defendant in proceedings), became liable to indemnify BAT for part of any monies paid out. Provision was duly made in AWA’s accounts to reflect a best estimate of the value of such liability.