Building on emerging trends, 2024 has seen a continued rise in the use of equity-linked debtor-in-possession (DIP) financing in Chapter 11 cases.
Recent examples from WeWork and Enviva illustrate how stakeholders are leveraging this innovative tool to drive broader reorganization strategies and outcomes rather than as a mechanism solely providing interim financing to fund a debtor’s operations during the pendency of its bankruptcy case.
WeWork
In a significant recent judgment, the ADGM Court has clarified that it has jurisdiction to hear an action for fraudulent trading against the former directors of an onshore UAE company.
By way of background, NMC Healthcare LTD (NMC), and its various subsidiaries, were incorporated in onshore UAE. On 17 September 2020, NMC was redomiciled as an ADGM company. Shortly thereafter, on 27 September 2020, NMC was put into administration pursuant to the ADGM Insolvency Regulations 2015 and joint administrators (the Joint Administrators) appointed.
Building on emerging trends, 2024 has seen a continued rise in the use of equity-linked debtor-in-possession (DIP) financing in Chapter 11 cases.
Recent examples from WeWork and Enviva illustrate how stakeholders are leveraging this innovative tool to drive broader reorganization strategies and outcomes rather than as a mechanism solely providing interim financing to fund a debtor’s operations during the pendency of its bankruptcy case.
WeWork
On May 31, 2024, the chief judge of the U.S. Bankruptcy Court for the Southern District of New York (SDNY) entered General Order M-634, adopting guidelines for combining the processes for Chapter 11 plan confirmation under Section 1129 of the Bankruptcy Code and disclosure statement approval under Section 1125 of the Bankruptcy Code.
Since the pandemic, during which insolvency rates were low due to Government measures, there has been a considerable rise in insolvencies in the UK and many other jurisdictions. High interest rates have significantly increased the cost of borrowing and many companies are saddled with mountains of debt that was taken out in better times and which are now difficult to repay. In addition, high inflation and energy costs, lower consumer confidence and volatile supply chains have all contributed to making the last few years very difficult for businesses.
The adage ‘there is no such thing as a free lunch’ rings true for the 831 company directors disqualified in 2023/24 for abusing the Covid financial support scheme.
The Superior Court of Quebec rules in favor of Export Development Canada (“EDC”) and enforces a "[unequivocal]" Waiver against the surety who signed it in the context of a loan guarantee granted to the RBC.
Relevant Facts
On January 22, 2024, the chief judge of the U.S. Bankruptcy Court for the Southern District of New York entered General Order M-621 adopting amended procedural guidelines governing prepackaged Chapter 11 cases.
The guidelines provide a comprehensive framework for the administration of prepackaged Chapter 11 cases in the district. Among other things, they recognize and address “Rapid Prepackaged Chapter 11 Case[s],” defined as cases “where the Debtor seeks confirmation of the plan to be granted between one (1) and fourteen (14) days after the petition date.”
The Kingdom introduced its first ever bankruptcy law in 2018 which has created a foundation for a business rescue culture in Saudi Arabia. Companies undergoing financial difficulties are equipped with the tools that allow them to either trade out of a difficult period or liquidate the business in a manner which does not leave creditors out of pocket. More recently, to complement the existing insolvency regime, rules of cross-border bankruptcy proceedings came into effect on 16 December 2022 (“Rules”).