Pennsylvania Bar Institute Course

Recent trade publications have prophesized a wave of shipping bankruptcies. We have already seen several in the United States in 2011, such as Omega and Marco Polo. Trailer Bridge and General Maritime fi led in November. There will undoubtedly be more, despite the potential debtors having little or no connection to the United States. In this respect, non-U.S. listed shipowning companies considering restructuring and reorganization may not factor in the potential for a U.S. main proceeding under Chapter 11 reorganization on the assumption that they do not qualify to be U.S. debtors.

A recent decision of the Delaware bankruptcy court serves as a reminder of a key risk for lenders who finance leveraged transactions—namely, that a bankruptcy court may “collapse” the components of a leveraged transaction in order to avoid the lender’s liens and the debtor’s loan obligations as fraudulent transfers.