The Bottom Line

The Bottom Line

The new Insolvency Practice Direction came into force on 25 April 2018. Some of the key changes to the Practice Direction include: 

British department store House of Fraser have announced plans to close 31 stores across the UK, placing thousands of jobs at risk. Proposals have been filed for Company Voluntary Arrangements ("CVA") of House of Fraser (Stores) Ltd and House of Fraser Ltd which it claimed are central to the significant restructuring of the business.

In May, it was announced that the parent group of House of Fraser would sell a 51% stake to the Chinese owner of Hamleys, C.Banner International, who would inject £70 million into the business.

The Facts

The case concerned an application made by the Liquidators of a BVI incorporated company, Peak Hotels and Resorts Limited ("Peak"). The application was intended to determine the effectiveness of a charge granted by Peak to Candey Limited, Peak's former solicitor.

Peak was the holding company of a joint venture vehicle that became the subject of lengthy international litigation proceedings following the breakdown of relations between the joint venture partners and shareholders. Candey acted for peak in the litigation.

Background

Avanti Communications Group PLC ("Avanti") are a satellite operator headquartered in London, with subsidiaries across Europe and Africa, providing fixed satellite services in Europe, the Middle East and Africa.

Avanti had issued Senior Secured Notes maturing in 2021 and 2023 and had borrowed under a senior term loan. Due to delays associated with two of Avanti's satellites, Avanti experienced financial difficulties, with a materially over-leveraged capital structure.

The Bottom Line

In yet another of the many cases against Residential Mortgage Backed Securities (RMBS) trustees for their alleged responsibility for losses suffered by investors, Judge Jesse Furman of the Southern District of New York precluded inquiry into the conduct of the trustee where a bankruptcy plan intervened. The plaintiffs were caught in a bind. Alleging misfeasance by the trustee prior to the commencement of the bankruptcy case would have been barred by the statute of limitations. Allegations of misfeasance subsequent to the commencement of the case were swept away by confirmation of the plan.

In the first article of this two-part series on sell-side opportunistic engineering in the CDS market, we surveyed a number of strategies that could be used by sellers of CDS protection to create sell-side gains. In this second part, we analyze two recent situations where a proposed refinancing dramatically affected the CDS market for the reference entity because of the reduction in the sell-side risk. Although these cases may or may not have been driven by CDS considerations, they illustrate how sell-side CDS strategies may be effectively implemented.

Over the past few years, the CDS market has seen an increase in activism and the evolution of creative refinancing and restructuring strategies intended to achieve particular outcomes in the CDS market.