1. Introduction

On 25 August 2010, the German government published a draft of an Act for the Restructuring and Orderly Liquidation of Credit Institutions, for the Establishment of Restructuring Fund for Credit Institutions and for the Extension of the Limitation Period of Corporate Law Management Liability (Restrukturierungsgesetz, the “German Restructuring Act”). It is anticipated that the German Restructuring Act will soon be introduced to the German parliament and be passed quickly.  

In light of recent reports released to the market, a lender in the leveraged loan market would be forgiven for indulging in some cautious optimism. New-issuance in July aggregated to €9.5 billion - a 13-month high. The year-to-date leveraged buy-out volume of €10 billion (38 deals) compares favourably with the €2.2 billion of volume (13 deals) for the same period in 2009. Against this backdrop, however, lenders should consider the recently released statistics from the Insolvency Service, and other economic data, which suggest that the economic outlook remains uncertain.

In the wake of recent bankruptcy filings by several prominent financial institutions, there’s a growing interest in changing standard credit documentation to address the risks of defaulting lenders and nonperforming administrative agents. Here are credit agreement provisions that financial institutions, acting as swingline lenders and letter of credit issuers, can require to protect themselves against the risk of a defaulting lender.

The Bankruptcy Code provides that a Chapter 11 plan of reorganization may be confirmed over the opposition of a class of secured creditors whose secured claims are not being paid in full only if it provides one of the following1--

Market participants involved in distressed exchange offers have become accustomed to grappling with the implications of Trust Indenture Act Section 316(b) in the context of potential exit consents, i.e., are the contemplated amendments to the indenture governing the securities subject to the exchange significant enough to impair or affect the right of a holder to receive payment of principal and interest on or after the due dates of the relevant note?

Virtually all public indentures contain provisions allowing the issuer to cure ambiguities and make other technical changes to the debt documentation without debtholder consent. When the purported ambiguities have substantive consequences, however, issuers may not be able to get away with an amendment that lacks debtholder approval. InGSO Coastline Credit Partners L.P. v. Global A&T Electronics Ltd. (NY App. Div. 1st Dept. May 3, 2016), a New York lower court bought into a “cure of ambiguity” argument and on that basis granted a motion to dismiss.

The Bottom Line:

This alert describes issues to consider when a derivatives dealer counterparty becomes insolvent.We address below issues involving termination of a master agreement, close-out netting of underlying trades and collateral. Even though this alert focuses on the bankruptcy of a dealer, many of the issues would also arise in connection with the bankruptcy of most non-dealer counterparties.

1. Existence of an Event of Default and Termination

a. Existence of an Event of Default

Although safeguard proceedings have been used successfully as a negotiation tool in a number of high-profile cases (such as the Eurotunnel case), they have represented just 1 per cent of all insolvency proceedings in France since the Business Safeguard Act 2005 introduced the safeguard procedure in January 2006. The main reason for this lack of success is the continuing stigma that is attached to insolvency proceedings in France.

Changes to Hungarian bankruptcy law mean that priority will be given to creditors who pledge property as security or collateral. Minor changes to Hungarian corporate legislation require companies to list specific court registration information on their official correspondence and websites.

Introduction