Securing support from principal creditors makes all the difference between a chapter 11 restructuring that saves a troubled shipping company and one that sinks it.
When a shipping company's financial distress is extreme, it must work fast to preserve value and stem losses. The use of chapter 11 by shipping companies to coerce principal creditors to support an unfavorable restructuring where ownership refuses to share risk is costly, value destructive and generally fruitless.
On 17 March, in Hambleton v Finn [2017] QDC 61, McGill SC DCJ of the District Court of Queensland applied the section 553C(1) setoff under the Corporations Act 2001 to a liquidator’s insolvent trading claim against a director.
His Honour followed the earlier decision of the District Court of Queensland in Morton v Rexel Electrical Supplies Pty Ltd. In that case, the set-off provision was applied where the liquidator was seeking the recovery of unfair preference payments.
In Russian insolvency procedures, it is quite common for third parties to try to exclude property from a debtor’s insolvent estate (konkursnaya massa) by claiming title to its real property in the absence of the registered title. These third parties may refer to the agreements that had been made prior to the commencement of the insolvency procedure as well as to the actual transfer of property to them.
When a lessee fails to comply with a notice to remedy a non-payment or other lease default, the lessor may be entitled to terminate the lease and retake possession of the property. This is commonly done by changing the locks.
However, a lessee who wants to save itself from being evicted can apply to court to prevent the lessor from retaking possession. In Queensland this application is made under section 124 of the Property Law Act 1974 (Qld) and is known as an application for relief against forfeiture.
When is relief against forfeiture granted?
A recent judgment of the German Federal Fiscal Court (FFC) will have significant impact on the restructuring tool kit afforded under German law. The FFC has found that the existing practice of permitting a tax liability arising from restructuring gains to be deferred and (eventually) waived violates fundamental principles of German law. The ruling has created uncertainty regarding the proper tax treatment of restructuring gains, which may have the effect of diminishing the prospect of success of a restructuring for a company in financial distress.
Last week the Supreme Court of New South Wales provided another timely reminder to ensure that all security interests are correctly registered on the Personal Property and Securities Register (PPSR) through the decision In the matter of OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21.
The facts
Alleasing Pty Ltd leased a crushing and screening plant (for approximately $4 million annually in rent) and spare parts for the crusher to OneSteel Manufacturing Pty Limited.
Overview
In IBRC v Camden[1], the Court of Appeal held that a lender's express contractual power to market a loan was not subject to an implied limitation that doing so should not interfere with the borrower's ability to obtain the best price for the assets securing the loan. In so doing, the Court of Appeal reaffirmed the "cardinal rule" that an implied term must not contradict any express term of the agreement.
Background
On January 17, 2017, the US Court of Appeals for the Second Circuit ruled in favor of the defendant in Marblegate Asset Management, LLC v. Education Management Finance Corp.1, by vacating the decision of the District Court for the Southern District of New York (the "District Court") and finding that "Section 316(b) [of the Trust Indenture Act] prohibits only non-consensual amendments to an indenture’s core payment terms." This decision, combined with the recent ruling of the District Court in granting a motion to dismiss in Waxman v. Cliffs Natural Resources Inc.
Indentures governing high yield and investment grade notes typically provide for a make-whole or other premium to be paid if the issuer redeems the underlying notes prior to maturity. The premiums are intended to compensate the investor for the loss of the bargained-for stream of income over a fixed period of time.[1] Generally, though, under New York law, a make-whole or other premium is not payable upon acceleration of notes after an event of default absent specific indenture language to the contrary.
Failing to register a lessor’s security interest on the PPSR over plant and equipment at leased premises can result in the lessor’s unperfected security interest passing to the administrator of the lessee.
In the recent decision of Flown Pty Ltd v Goldrange Pty Ltd [2016] WASC 419, a lessee’s administrator successfully retained ownership of plant and equipment (which were not fixtures) in the leased premises.
Background