The government has indicated that it will raise the financial threshold for creditors petitioning for an individual's bankruptcy through an amendment to the Insolvency Act 1986. From 1 October 2015 a creditor will need to be owed at least £5,000, rather than £750 as at present. This change, coming very shortly after the recent abolition of the remedy of distress, will inevitably serve to further limit landlords' armouries when attempting to recover arrears from tenants.
Re Christophorus 3 Limited [2014] EWHC 1162 (Ch)
An investigation is to be carried out into the causes of the bankruptcy of OW Bunker (“OWB”), the largest ship fuel supplier in the world. Investigators from two Danish law firms and Ernst & Young will try to establish the reasons for the failure of OWB less than a year after it was listed at a value of $1 billion. OWB has blamed its failure on hedging losses of $150 million, attributable to the falling price of oil and on a credit line estimated at between $120 and $130 million given by OWB’s subsidiary in Singapore, Dynamic Oil Trading (“DOT
An important battle about the place of secured lending in the United States economy is set to begin. When the battle ends, fundamental assumptions about the expected recovery rates for defaulted secured loans may change.
D & D Wines was a leading distributor of wines, which went into administration. One of its clients was an Australian wine producer called Angove. Two of Angove’s customers, who dealt through D & D, paid the company shortly after it had gone into administration and after Angove had terminated the agency agreement. Despite this, the Court of Appeal ruled that the money belonged to the company in administration for the benefit of all its creditors and was not held on trust for Angove.
Re Christophorus 3 Limited [2014] EWHC 1162 (Ch)
It has not taken long for another bankruptcy court to question the propriety of allowing secured creditors to credit bid their loans. You may recall that in the case of Fisker Automotive Holdings, Inc., et al. a Delaware bankruptcy court limited a creditor’s ability to credit bid based on self-serving testimony from a competing bidder that it would not participate in an auction absent the court capping the secured creditor’s credit bid.
In a recent decision that has captured the attention of the U.S. secondary loan market, the United States District Court for the Western District of Washington starkly concluded that hedge funds “that acquire distressed debt and engage in predatory lending” were not eligible buyers of a loan under a loan agreement because they were not “financial institutions” within the Court’s understanding of the phrase.
Commercial landlords will be familiar with the practice that has grown up since the 2010 case of Goldacre of putting companies into administration immediately following a quarter day. By adopting this tactic, administrators have been able to avoid paying rent as an administration expense until the next quarter day while continuing to use the premises for the benefit of the administration.
A recent decision in the bankruptcy case of Fisker Automotive Holdings, Inc., et al. has called into question a long-held belief that secured creditors hold dear: that debt purchased at a discount can nonetheless be credit bid at its full face amount at a collateral sale. While it remains to be seen how other courts will interpret Fisker, this decision has the potential to restrict participation in Bankruptcy Code section 363 sales and dampen liquidity in the robust secondary markets.