The Board of Governors of the U.S. Federal Reserve System (Board) recently proposed a rule (Proposed Rule) that will impact parties to any "qualified financial contract" (QFC), as described below, with a global systemically important banking organization (GSIB) or a GSIB affiliate (together, a covered entity). The Proposed Rule will eliminate certain contractual rights with respect to the QFC when:

the covered entity counterparty is placed in a Federal Deposit Insurance Corporation (FDIC) receivership; or

On October 7, 2015, the British Columbia Court of Appeal reversed the Supreme Court of British Columbia's decision in Barafield Realty Ltd. v. Just Energy (B.C.) Limited Partnership ["Barafield Realty"].¹ In July of 2014, we wrote the attached bulletin http://www.mcmillan.ca/Assigning-contracts-in-Canadian-insolvency-proceedings on the lower court decision.

Addressing a novel issue in In re: International Oil Trading Company, LLC, 548 B.R. 825 (Bankr. S.D. Fla. 2016), the United States Bankruptcy Court for the Southern District of Florida recently denied in part an involuntary debtor’s motion to compel production of communications between the judgment creditor who had filed the involuntary bankruptcy petition and the petitioner’s litigation funder. The Court found that the attorney-client privilege and work product protection were applicable to certain disclosures made to the litigation funder, a non-lawyer third-party.

As discussed in our May 2016 bulletin, New Rules for Asset Sales by Insolvent Producers (at least for now), the decision of the Court of Queen's Bench of Alberta in Re Redwater Energy Corporation, 2016 ABQB 278 ("Redwater") determined that provisions of the provincial legislation governing the actions of licensees of oil and gas assets did not apply to receivers and trustees in bankruptcy of insolvent companies, given the paramountcy of the Bank

Essentially all securitization structures utilize a bankruptcy remote entity, a/k/a special purpose entity (“SPE”), to reduce the lenders’ or investors’ exposure to a bankruptcy of the sponsor. A standard feature of SPEs is the appointment of an independent person (director, member, manager) to the body managing the SPEs. That independent person’s consent is required for “major decisions,” one of which is the filing of, or consenting to a bankruptcy of the SPE (hence the court’s reference to them as “blocking directors”).

In Alberta, regulations have historically prohibited purchasers of oil and gas assets from cherry picking operating interests in economic properties while leaving behind interests in uneconomic wells. This has had a significant negative impact on the ability of a receiver or trustee to market and sell assets owned by insolvent companies and on the prices those assets are able to attract.

You know, there’s never a dull moment when one reports on the regulatory states’ endless and so often fruitless and wrong-headed tinkering with the global economy. So now… let’s talk bail-in.

A recent decision by the U.S. Court of Appeals for the Second Circuit, In re Tribune Company Fraudulent Conveyance Litigation,¹ represents a significant victory for shareholders who may get cashed out in connection with a leveraged transaction that precedes a company bankruptcy.

SEC and FDIC Propose Dodd-Frank Broker-Dealer Resolution Rules

Two recent court decisions may affect an equity sponsor’s options when deciding whether and how to put money into - or take money out of - a portfolio company. The first may expand the scope of “inequitable conduct” that, in certain Chapter 11 settings, could lead a court to equitably subordinate a loan made by a sponsor to its portfolio company, placing the loan behind all of the company’s other debt in the payment queue. The second decision muddies the waters of precedent under the U.S. Bankruptcy Code on the issue of the avoidability of non-U.S.