After Energy Future Holdings (EFH), maybe not so much. The size of the break-up fee approved by the bankruptcy court in EFH was undoubtedly large by any account – US$275 million. But it was approved following all necessary filings, notice and hearings. All parties and counsel involved were highly sophisticated and experienced. The court that approved the fee was the Delaware bankruptcy court, by all accounts one of the most experienced and sophisticated bankruptcy courts in the nation. And there wasn’t even a hint of fraud, misrepresentation or failure to disclose material facts.

Shareholder of a Korean corporation (“Cuzco Korea”), the sole member of a chapter 11 limited liability company debtor (“Cuzco USA” or the “Debtor”), brought an adversary proceeding against the Debtor and others, asserting claims directly, derivatively on behalf of Cuzco Korea and “double derivatively” on behalf of the Debtor. On the defendants’ motion to dismiss, the bankruptcy court for the district of Hawaii was required to consider the impact of Korean law on the derivative claims as well as notions of forum non conveniens.

In a decision widely anticipated by investors in emerging market and distressed debt, the Court of Appeal has upheld the decision of the High Court to refuse to grant an indefinite moratorium on claims under certain English law debts under the Cross Border Insolvency Rules (“CBIR”). In doing so, the Court of Appeal has reaffirmed a long-standing principle of English common law that provides important protection to creditors; known as the Rule in Gibbs, the rule provides that a debt may only be discharged according to its own governing law.

For many decades, companies in the business of leasing “over-the-road” vehicles such as trucks, tractors, and trailers, have used terminal rental adjustment clause (TRAC) leases to maximize the value they can provide to their customers. Traditionally speaking, TRAC leases combine the tax advantages of leasing with an option to purchase the equipment at the end of the lease term for a residual amount determined at the inception of the lease. Since 1981, it has been well-settled that TRAC leases constitute “true” leases, and not disguised financing transactions, for federal tax purposes.

Trademark licensing is a driving force in business relationships. One common example is where one business owns a trademark, which it licenses out to other companies who manufacture and sell the products bearing the mark. But, what happens if the trademark owner goes bankrupt? Bankruptcy law gives a debtor the right to “reject” contracts to free itself of obligations, but if a trademark owner/licensor “rejects” a trademark license agreement, how does that affect the trademark licensee?

Following consultations on insolvency and corporate governance in 2017 and 2018, the Government recently published its response setting out some notable proposed changes to the existing insolvency and corporate governance legislation. Following the high profile failures of Carillion and BHS, the Government’s response is largely aimed at encouraging the recovery of viable companies, improving transparency and promoting responsible directorship. This article will primarily look at the proposed changes focused on facilitating a rescue culture.

Happy birthday, Aubrey Drake Graham. Most people know Mr. Graham strictly by his middle name. The Canadian rapper Drake has carved out a hugely successful career for himself. He sells lots and lots of records – or whatever it is that they sell in the music business these days. Surprise: Drake’s music isn’t exactly our thing. We still play the Beatles more than anything else, we sing along with Crosby, Stills, & Nash in the car, and we have difficulty naming songs post-dating Nirvana.

R&I Alert

Restructuring & Insolvency News

October 2018, Issue 3

In This Issue:

• What happens to committee claims when a

case is converted from a chapter 11 case to

a chapter 7 case? 1

• Equitable mootness: alive and well in the

third circuit 1

• Buyer beware: anti-assignment clauses

enforceable under delaware law 2

• Bankruptcy court finds substantive consolidation

of non-debtors not an available remedy in

seventh circuit 3

• A creditor is allowed to be “selfish” when

Obtaining a favourable arbitration award often proves to be only half of the battle. Facing obstructive counterparties refusing to honour awards, often based in jurisdictions where enforcement is slow, difficult and uncertain, is a source of regular frustration to those pursuing claims in arbitration. That is why anyone involved in international trade should be familiar with the variety of measures available to enforce their awards.