A common yet contentious liability management strategy is an “uptier” transaction, where lenders holding a majority of loans or notes under a financing agreement seek to elevate or “roll-up” the priority of their debt above the previously pari passu debt held by the non-participating minority lenders. In a recent decision in the Boardriders case, the minority lenders defeated a motion to dismiss various claims challenging an uptier transaction.
The Full Federal Court, overturning Flick’s J decision at first instance ([2020] FCA 1759), found that the bankrupt’s main purpose in transferring their property was, in substance, not to prevent, hinder or delay this property becoming divisible amongst his creditors in breach of s 121(1) of the Bankruptcy Act 1966 (Cth).
On 29 June 2022, the Federal Court of Australia made an order vesting an interest in a half share of land in Aaron Kevin Lucan in his capacity as trustee (the Trustee) of the bankrupt estate of Christopher Williams (the Bankrupt Estate).
In an important decision to private credit lenders, the Fifth Circuit Court of Appeals held that a make-whole premium for an unsecured creditor tied to future interest payments is the “functional equivalent of unmatured interest” and not recoverable under Section 502(b)(2) of the Bankruptcy Code. Ultra Petroleum Corp. v. Ad Hoc Committee of OpCo Unsecured Creditors (In re Ultra Petroleum Corp.), No. 21-20008 (5th Cir. Oct. 14, 2022) (“Ultra”). Ordinarily, the story ends here.
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Creditors of distressed businesses are often frustrated by shareholder-controlled boards when directors pursue strategies that appear to be designed to benefit shareholders at the creditors’ expense. In these circumstances, creditors might consider sending a letter to the board to convince the directors to pivot and adopt alternative strategies or face risk of liability for breaching fiduciary duties. The efficacy of this approach depends on many factors, including the company’s financial condition, the board’s composition and the underlying transactions at issue.
In Kellow, Re Advanced Building & Construction Ltd (In Liq) v Advanced Building & Construction Ltd (In Liq) (No 2) (Kellow) the Court considered whether an insolvency proceeding commenced in New Zealand should be recognised as a “foreign main proceeding” pursuant to the United Nations’ Commission on International Trade Law’s Model Law on International Trade Law (Model Law).
In a recent case involving a former financial services provider in liquidation, thousands of pending claims from former customers and a letter of comfort with a looming expiry date, the Liquidators appointed to wind up Forex Capital Trading Pty Limited successfully applied to the Federal Court of Australia for orders permitting them to conduct an expedited process for the adjudication and admission of claims.
Background
In Brooks, in the matter of Tease Hair & Spa Pty Ltd (in liquidation), the Federal Court made orders in favour of the Liquidator, pursuant to section 90-15 of Schedule 2 to the Corporations Act 2001 (Cth) (Insolvency Practice Schedule (Corporations)) and section 47 of the Trustee Act 1989 (Tas) allowing the Liquidator to realise trust property for the benefit of creditors.
Background
In a previous alert, we covered the Delaware Chancery Court’s decision in Stream TV Networks last year.