Globalization is a hot topic these days. It should come as no surprise, then, that the challenges that come with having a global enterprise in financial distress can be complex. The panelists at the INSOL breakout session, Group next (or not): continuing challenges in the treatment of enterprise groups in insolvency, explored what happens when a global organization with businesses in multiple jurisdictions around the world tries to implement a cohesive and coordinated restructuring.

Recent Development

Bloom Lake General Partner Limited, Wabush Resources Inc. and related entities (Bloom Lake) received Court protection under the Companies’ Creditors Arrangement Act (CCAA) in 2015 and subsequently virtually all of its assets were liquidated. The remaining assets included preference claims valued at approximately $173 million.

Saudi Arabia finally adopted a modern bankruptcy law on Wednesday 14/02/2018G by virtue of a Royal Decree No. M/50 dated 28/05/1439H (corresponding to 14/02/2018G) (the “BL”). The BL is based on bankruptcy protection laws around the globe, and it replaces the existing outdated framework on bankruptcy which was embedded within the Commercial Court Law and the Bankruptcy Protective Settlement Law.

If a debtor seeks to sell, pursuant to a 363 sale, real property as to which it is the landlord under an unexpired prepetition lease, can such property be sold “free and clear” of the non-debtor tenant’s leasehold interest?

Summary

The United States Court of Appeals for the Ninth Circuit recently held in Mastan v. Salamon (In re Salamon) that an undersecured creditor with a nonrecourse claim lost the right to assert a deficiency claim under section 1111(b) of the Bankruptcy Code when a senior secured creditor foreclosed on and sold its collateral during the bankruptcy case.

Introduction

More than ten (10) years after the enactment of Brazilian Bankruptcy Law, a uniform understanding by the Brazilian courts of several matters remains unresolved, being the application of substantive consolidation one of the most troubling.

Consolidation (procedural and material)

With its judgment of 28 November 2016, the German Supreme Tax Court (Bundesfinanzhof; BFH) dismissed the application of the tax administration's so-called restructuring decree (Sanierungserlass). The restructuring decree allowed, subject to certain conditions, a suspension and abatement of taxes on so-called cancellation of debt income (COD Income) otherwise resulting from certain recapitalization measures such as the waiver of debt and debt-to-equity swaps.

Liquidators of insolvent Australian companies often pursue directors of the failed company in recovery proceedings for the benefit of creditors. Following a High Court of Australia decision in April 2016, it is now clear that a liquidator can join liability insurers of defendant directors in such proceedings, even when the insurer has denied liability under a policy. The liquidator, even though not a party to the contract, may then seek a declaration in the same proceedings that the insurer is liable to indemnify the insured defendant.