In our recent note “Treatment of senior unsecured debt in European leveraged finance transactions: the need for an intercreditor agreement”, which can be viewed here, we addressed the increase in flexibility in European financings to incur senior unsecured debt and the risk that the lack of any agreed intercreditor arrangement may impair senior secured lenders’ ability to realise recoveries from a European Credit

The judgment of Snowden J. in the adjournment of the convening hearing relating to a scheme of arrangement (the “Scheme”) proposed by Indah Kiat International Finance Company B.V. (“Indah Kiat”) emphasises some important points that must be borne in mind by debtors, investors and advisers when preparing for a scheme, such as the importance of allowing sufficient time for preparation of all relevant supporting evidence and documentation, and allowing for a realistic notice period for creditors.

While fears of another downturn loom, the European financial markets have innovated, evolved and grown.

Following the collapse of Lehman Brothers and the period that followed, the markets have more understanding of the credit risk spectrum. This includes jurisdictional risk, available restructuring options and the complexity involved in any enforcement process.

Secured creditors should take note of Callidus,¹ wherein the Federal Court (the “Court”) held that the bankruptcy of a tax debtor rendered a statutory deemed trust under section 222 of the Excise Tax Act (the “ETA”) ineffective as against a secured creditor who, prior to the bankruptcy, received proceeds from the tax debtor’s assets.

Background

13 ноября 2015 года был подписан Закон РК «О внесении изменений и дополнений в некоторые законодательные акты Республики Казахстан по вопросам реабилитации и банкротства» (далее – «Закон»), положения которого введены в действие 29 ноября 2015 года. Закон предусматривает поправки в Гражданский процессуальный кодекс РК, Налоговый кодекс РК, Закон РК «О реабилитации и банкротстве» и Закон РК «Об исполнительном производстве и статусе судебных исполнителей».

On 13 November 2015, the Law of the Republic of Kazakhstan “On Introduction of Amendments and Supplements to Certain Legislative Acts of the Republic of Kazakhstan on the Issues of Rehabilitation and Bankruptcy” (the “Law”) was signed and its provisions were put into effect on 29 November 2015.

In Aventura², a recent decision of the Ontario Superior Court of Justice (Commercial List) (the “Court”), the Honourable Justice Penny confirmed that a bankruptcy trustee does not have the authority, pursuant to section 30(1)(k) of the Bankruptcy and Insolvency Act (the “BIA”), to disclaim a lease on behalf of a bankrupt landlord. Rather, a trustee’s authority to disclaim a lease is limited to situations where the bankrupt is the tenant.

On October 13, 2015, the Court of Appeal for Ontario (the “Court”) dismissed the so-called “interest stops rule” appeal in the Nortel matter,^[1] thereby confirming that the rule applies in proceedings under the Companies’ Creditors Arrangement Act (the “CCAA”). The Court’s decision also appears to eliminate any suggestion that the rule only applies to so-called “liquidating” CCAA proceedings.

Introduction

Over the last few years, the European leveraged finance market has seen rapid growth of senior secured high yield notes (“SSN”) and senior secured covenant-lite term loan  B (“TLB”) financings. A common feature of both SSNs and TLBs (together “Senior Secured Debt”) is that their terms typically permit the incurrence of senior unsecured debt by a borrower and its restricted subsidiaries (a “Credit Group”) subject to either satisfaction of a  financial ratio or through various permitted debt baskets.

It cannot have escaped the attention of anyone involved in the aviation finance industry that the UK is currently in the process of ratifying the Cape Town Convention (being the Convention on International Interests in Mobile Equipment and related Protocol on Matters Specific to Aircraft Equipment). Here, we will look at that ratification process and consider the principal legal and practical implications for our clients.

Ratification Process