In recent weeks, a number of transactions have come across our desks involving levered feeders set up as an investment vehicle for insurance-related investors. For regulatory reasons, these vehicles are established such that each such investor’s commitment is comprised of both a loan commitment (the “Debt Commitment”) and an equity commitment (the “Equity Commitment”). This structure presents a challenge for lenders trying to balance the requested borrowing base treatment for investor commitments of this type against the potential bankruptcy implications that this structure poses.

On December 19, 2019, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) affirmed a ruling of the United States District Court for the Southern District of New York (the “District Court”) dismissing constructive fraudulent conveyance claims brought by representatives of certain unsecured creditors of Chapter 11 debtor Tribune Company (“Tribune”)

The National Economic Research Associates ("NERA"), an economic consulting firm, demonstrated in a recent article how economic analysis can be used to assess allegations related to credit default swaps ("CDS") and the creditworthiness of a company.

In the recent decision of Boensch as Trustee of the Boensch Trust v Scott Darren Pascoe [2019] HCA 49, the High Court has clarified whether property held by a bankrupt on trust for another vests in the bankrupt's trustee in bankruptcy, and the circumstances in which a trustee in bankruptcy will have reasonable cause to lodge a caveat to protect an interest in the trust property.

Background

In the recent decision of In the matter of Parkway One Pty Limited (in liquidation) [2019] NSWSC 1495 (Parkway), Rees J dismissed an application to terminate the winding up of Parkway One Pty Ltd (in liquidation) (the Company) due to inconclusive evidence as to the solvency of the Company and, having regard to the non-compliance by its director of her statutory duties and the likelihood of the Company not being able to service the current and foreseen indebtedness, her Honour held that it would be contrary to commercial morality to terminate the wi

In a recent decision, the Federal Court of Australia declined to annul a bankruptcy in circumstances where the bankrupt claimed the proceedings should have been adjourned given his incarceration and solvency at the time the order was made: Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713. The judgment is useful in reiterating what factors the Court will consider when deciding whether to order an annulment under section 153B(1) of the Bankruptcy Act 1966 (Cth) (the Act).

Generally, once a company enters into liquidation, litigation against that company cannot be commenced or be continued without the leave of the Court (Corporations Act 2001, s 471B). However, occasionally a liquidator may cause a company to commence or defend litigation after the commencement of the winding up. What happens if the company in liquidation is unsuccessful in that litigation and is subject to an adverse cost order? How will such an adverse cost order rank amongst other competing creditors?

Getting to the top

The Federal Court of Australia recently struck off an insolvency practitioner from the register of liquidators and restrained him for ten years for acting as an insolvency practitioner. The case concerns the conduct of David Iannuzi, who the Court found had "repeatedly fell short of the standards that would ordinarily be expected of him as a competent registered liquidator". The judgment sets out in detail the conduct that the Court found to be unsatisfactory and serves as a reminder of the standards expected of liquidators.

Background

On August 9, 2019, in a unanimous decision (written by a former bankruptcy judge), the Eighth Circuit Court of Appeals affirmed the confirmation of the Peabody Energy Chapter 11 plan (“Plan”)¹ with a prominent backstopped rights offering component.

It is well known that a company served with a statutory demand has 21 days to comply. If the recipient fails to pay the amount of the demand (or obtain a court order extending the period for compliance) within the period of 21 days after the demand is served, the creditor may rely on the failure as a basis to apply for the company to be wound up in insolvency. But what if the company pays, or seeks to pay, the amount of the statutory demand after the 21 day period has expired?