The Personal Insolvency Bill 2012 has passed Committee Stage in the Dáil. The Select Committee on Justice, Defence and Equality made a number of changes to the Bill, many of these being technical changes to clarify provisions or to correct inconsistencies.

Key changes

Some of the key changes made by the Select Committee were as follows:

The Irish telecommunications company eircom recently successfully concluded its restructuring through the Irish examinership process. This examinership is both the largest in terms of the overall quantum of debt that was restructured and also the largest successful restructuring through examinership in Ireland to date. The speed with which the restructuring of this strategically important company was concluded was due in large part to the degree of pre-negotiation between the company and its lenders before the process commenced.

The Bankruptcy Code provides a number of “safe harbors” for forward contracts and other derivatives. These provisions exempt derivatives from a number of Bankruptcy Code provisions, including portions of the automatic stay,1 restrictions on terminating executory contracts,2 and the method for calculating rejection damages.3 The safe harbor provisions also protect counterparties to certain types of contracts from the avoidance actions created under Chapter 5 of the Bankruptcy Code, such as the preference and fraudulent transfer statutes.4

1. Introduction

Recent cases interpreting Chapter 15 of the United States Bankruptcy Code (11 U.S.C. § 101, et seq., as amended) (the “Bankruptcy Code”) suggest that there are different standards for recognizing whether domestic entities and foreign entities have filed insolvency proceedings in the proper venue.

The Bankruptcy Abuse, Prevention and Consumer Protection Act of 2005, which was signed into law in the United States on April 20, 2005 and went into effect, for the most part, on October 17, 2005, created a new chapter of the United States Bankruptcy Code (11 U.S.C. 101, et seq., as amended) (the “Bankruptcy Code”) – Chapter 15. Chapter 15 replaces and modifies the earlier Bankruptcy Code sections that dealt with multi-national insolvency proceedings.

On July 9, 2012, the Seventh Circuit decided in Sunbeam¹ that the rejection of a trademark license by a bankrupt trademark licensor does not deprive the trademark licensee of its right to continue to use the trademark, and disagreed with the 1985 Fourth Circuit decision in Lubrizol² that held to the contrary.³ In reaction to the Lubrizol decision, which held that the rejection of a license by a bankrupt licensor of intellectual property terminated the rights of the licensee, Congress enacted Section 365(n) of the Bankruptcy

The much anticipated Personal Insolvency Bill has been published and introduces wide-ranging measures to seek to deal with the issue of personal debt affecting many people in the country today. The headline changes are the reduction of the period a person is bankrupt from 12 to 3 years and the introduction of three new debt resolution processes which, while being under the jurisdiction of the Courts are predominantly non judicial based processes involving the newly established Insolvency Service.

The Issue

The issue is whether the insolvency of a borrower under a non-recourse loan can trigger recourse liability for itself and its “bad boy,” non-recourse carve-out guarantors.

On June 13, 2012, the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) published an opinion ruling on whether the Mexican Plan of Reorganization (the “Concurso Plan”) of the Mexican glass-manufacturing company, Vitro, S.A.B.

In our last issue, we reported that the Supreme Court was poised to resolve a split between judicial circuits over the right of a secured creditor to credit bid in a Chapter 11 plan context. Specifically, the Third, Fifth and Seventh Circuits split on the issue of whether a Chapter 11 plan can be crammed down over the secured lender’s objection, where the plan provides for the sale or transfer of the secured lender’s collateral with the proceeds going to the secured lender without the secured lender having the right to credit bid for its collateral up to the full amount of its claim.