In 2023, we saw an increase in both voluntary administration and receivership appointments in Australia. In the context of Australia's economic climate this was unsurprising — debtor companies were grappling with volatile markets, supply chain disruptions and uncertain economic conditions, and secured lenders were invoking either or both of these regimes as a means of protecting their investments.
Investors in the Australian market are more sophisticated than ever and – unsurprisingly – so too are the restructuring transactions being promoted by these investors. One such transaction is the credit bid. While not a transaction structure that is formally recognised in Australia, a credit bid is a valuable tool in a financier's playbook that can be implemented to achieve a return where the original financing is unable to be repaid in accordance with its terms.
Credit Bidding
In today's globalised economy, local recognition of foreign insolvency proceedings can be essential for the successful implementation of cross-border restructurings. This is particularly relevant in Australia — a popular host for foreign investment and global corporate groups with local assets.
Despites its recent failure in case against an administrator in a phoenixing case, ASIC could snatch long-term victory from the jaws of defeat with clear regulatory guidance for insolvency practitioners.
On 14 September 2023, the Australian Securities and Investments Commission (ASIC) released Consultation Paper 372 "Guidance on insolvent trading safe harbour provisions: Update to RG 217".
In a recent decision, Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88, lenders to the Arrium Group, a company that collapsed, have lost their appeal regarding the personal liability of the Chief Financial Officer and Group Treasurer. The NSW Supreme Court had previously dismissed the lenders' claims, and the Court of Appeal has now affirmed that decision.
In the case of Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025 (Anchorage v Sparkes), the Supreme Court of NSW considered the obligations of company officers to sophisticated commercial lending entities, and whether company officers could be personally liable for making misleading statements.
Significance
Despites its recent failure in case against an administrator in a phoenixing case, ASIC could snatch long-term victory from the jaws of defeat with clear regulatory guidance for insolvency practitioners.
On 14 September 2023, the Australian Securities and Investments Commission (ASIC) released Consultation Paper 372 "Guidance on insolvent trading safe harbour provisions: Update to RG 217".
In a recent decision, Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88, lenders to the Arrium Group, a company that collapsed, have lost their appeal regarding the personal liability of the Chief Financial Officer and Group Treasurer. The NSW Supreme Court had previously dismissed the lenders' claims, and the Court of Appeal has now affirmed that decision.