Trillions of dollars of securities are issued on the strength of bankruptcy remoteness and special purpose entities (“SPVs”) intended to be bankruptcy remote. These transactions generally involve hundreds of millions of dollars and investors’ expectations that the SPVs will not be dragged into a potential bankruptcy filing of their non-SPV affiliates.
In a recent opinion, the Bankruptcy Court for the District of Maryland dealt with a conflict between the strong presumption in favor of enforcing arbitration agreements and the Bankruptcy Code’s emphasis on centralization of claims. Based on an analysis of the two statutory schemes and their underlying policies and concerns, the Court decided to lift the automatic stay to allow the prepetition arbitration proceeding to go forward with respect to non-core claims.
Background
On 28 June 2021, the English High Court handed down a judgment declining to sanction a restructuring plan proposed by Hurricane Energy PLC, which sought to cram down the dissenting class of shareholders and hand over the control of the company to its bondholders with a debt-for-equity swap diluting the shareholders down to 5% of their existing shareholding. This is the first time that the English court has declined to sanction a restructuring plan (since their introduction almost a year ago in June 2020), and only the fourth time that the cross-class cram down mechanism has been used.
The application of sovereign immunity principles in bankruptcy cases has vexed the courts for decades. The U.S. Supreme Court’s opinions on the matter have not helped much. Although they have addressed the issue in specific contexts, they have not established clear guidelines that the lower courts may apply more generally. The Third Circuit took a crack at clarifying this muddy but important area of the law in the case of Venoco LLC (with its affiliated debtors, the “Debtors”).
Background
The latest announcements
Suffering with mental health problems and being in financial difficulty are often strongly linked, with one frequently causing or worsening the other. The introduction of The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (referred to in this article as the ‘debt respite regulations’), which, with very limited exceptions, came into force on 4 May 2021, allows an eligible individual breathing space from any action a creditor may take for a ‘problem debt’.
Not only was 4 May Star Wars Day this year, it was also the day The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (referred to in this article as the ‘debt respite regulations’) came into force.
The High Court dismissed landlords’ challenges to the terms of New Look’s company voluntary arrangement (CVA) last week in a ruling that has sparked lively debate within both the landlord and restructuring sectors.
The landlords challenged the CVA by way of three main limbs:
It is unfortunately a common story for anyone who has been in business for any length of time: the unscrupulous director who, rather than confront creditors in an insolvency process, simply disappears as if by magic by dissolving the company and re-appearing elsewhere moments later, leaving creditors clasping nothing but smoke. This loophole has frustrated creditors for many years as it means their only remaining option is a commercially unattractive application to restore the company to the register in order to petition to place the company into compulsory liquidation.
The United States Bankruptcy Court for the Southern District of Texas recently clarified the administrative expense standard applicable to indenture trustees by holding that they can recover fees and expenses as administrative expenses only when they make a “substantial contribution.” This standard requires a greater showing than “benefit to the estate,” which is the general administrative expense standard. In re Sanchez Energy Corp., No. 19-34508 (Bankr. S.D. Tex. May 3, 2021).
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