Welcome back to Distressed Debt Legal Insights, Ropes & Gray’s source of timely insights for professionals navigating the complex world of liability management and special situations finance. In this issue we will provide a summary of certain aspects of the noteholder litigation in Wesco that culminated in the recent district court decision approving the 2022 uptier transaction and reversing the bankruptcy court’s decision.
The Original Transaction
In this issue, we spotlight the unfolding litigation between the UCC and Oaktree in TPI Composites’ ongoing bankruptcy, which appears to be headed for a settlement. This case is unusual in that the uptier transformed former equity holders into senior creditors rather than elevating existing lenders.
The Unsecured Creditors Committee Challenge
Welcome back to Distressed Debt Legal Insights, Ropes & Gray’s new source of timely insights for professionals navigating the complex world of liability management. In this edition, we’re looking at how Anthology resolved an objection to its proposed non-pro rata DIP rollup.
Background
Anthology filed for Chapter 11 on Sept. 29 in the Southern District of Texas with a restructuring support agreement signed by 87% of first out lenders and 68% of second out lenders.
In Bolwell & Anor v NWC Finance Pty Ltd & Ors [2024] VSC 30, the Supreme Court of Victoria clarified that a lawyer will not be a "controller" of property within the meaning of section 9 of the Corporations Act 2001 (Cth) (the Act) simply because it was retained to act for a mortgagee exercising their power of sale.
This judgment provides comfort to lawyers as it confirms that they will not assume the obligations of a "controller" under the Act solely by reason of them acting in connection with the sale of real property in an insolvency context.
The England and Wales Court of Appeal recently handed down its first judgment relating to a restructuring plan under Part 26A of the UK Companies Act 2006: Re AGPS Bondco Plc [2024] EWCA Civ 24. Restructuring plans were a 2020 innovation in UK insolvency law, as described in our earlier alert.
On 19 July 2023, the parliament of the Grand Duchy of Luxembourg (Luxembourg) passed bill no. 6539A into law (the New Insolvency Law), marking a significant milestone in the movement to modernise and enhance the competitiveness of Luxembourg’s insolvency framework. The bill has been under discussion for a number of years and aims to curtail the use of bankruptcy as an insolvency solution in favour of the preemptive preservation or reorganisation of financially distressed companies.
After a 10-month inquiry process, on 12 July 2023 the Parliamentary Joint Committee on Corporations and Financial Services (PJC) delivered its final report on the effectiveness of Australia’s corporate insolvency laws.
In this alert, we distil some of the key findings from the almost 400-page report and consider what future law reforms might look like.
A COMPLEX AND INEFFICIENT SYSTEM
The High Court of Australia in Metal Manufactures Pty Limited v Morton [2023] HCA 1 has confirmed the view of the Full Court of the Federal Court of Australia that the "set off" defence under section 553C of the Corporations Act 2001 (Cth) (Act) is no longer available to claims by liquidators for an unfair preference claim made under section 588FA of the Act.
This decision brings finality to claims brought by Creditor Defendants to such claims and no doubt brings much joy to liquidators across Australia.
Background
Delaware has seen a significant uptick in the number of assignment for the benefit of creditors (ABC) filings. Through recent decisions, the Court of Chancery has sent a strong message that it expects parties pursuing this bankruptcy alternative to do a better job of justifying the relief they seek. This will require significantly more frequent and robust disclosures to the court and public.
From 15 February 2022, the UK Insolvency Service is granted new powers to investigate and disqualify or prosecute directors of dissolved UK companies. The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act (the Act) extends the Insolvency Service’s powers, on behalf of the UK Business Secretary, to deal with company directors who abuse the company dissolution process.