The French government has recently published a new regulation (ordonnance n°2014-326 dated March 12, 2014) amending France’s bankruptcy law. Its aim is to facilitate further restructurings of French companies, in particular with respect to pre-insolvency consensual restructurings, and to give creditors a greater say in the restructuring process.
PRE-INSOLVENCY CONSENSUAL RESTRUCTURINGS
On November 15, 2013, Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York held that original issue discount (“OID”) created in a prepetition “fair market value” debt exchange is not disallowable in bankruptcy.1 This noteworthy ruling provides important and long-awaited guidance for the investing community on the question left open by the Second Circuit’s 1992 ruling in LTV Corp. v. Valley Fidelity Bank & Trust Co. (In re Chateaugay Corp.).2
BACKGROUND
Parent company guarantees and performance bonds are typically used in the construction and engineering industries to provide a developer with some security in the event that the contractor breaches the building or engineering contract or, in some circumstances, upon the contractor's insolvency.
In the current economic climate, contractor default is, unfortunately, even more prevalent in the construction and engineering industries, and so the issues surrounding parent company guarantees and performance bonds are very much in focus for developers.