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 March 1, 2012 a number of important changes to the insolvency regime in Germany came into force.¹ The main objective of the reforms is to facilitate the restructuring of companies and to enhance creditor’s involvement. The German government believes – in light of the recent financial crisis – that these reforms are necessary to facilitate complex restructurings.

NEW PRELIMINARY CREDITORS’ COMMITTEE

Recently, the English High Court considered¹ how to interpret a material adverse change (“MAC”) clause which is a provision that routinely appears, in various forms, in loan agreements but on which there is limited case law. The court found in this case that there had been no MAC in the financial condition of a borrower.

In two recent decisions, the United States District Court for the Southern District of New York adopted an interpretation of Section 316(b) of the Trust Indenture Act of 1939 (the “TIA”) that may complicate future exchange offers and, in some cases, force bond restructurings that might otherwise have been completed out-of-court to be effectuated through a bankruptcy filing.1  In Marblegate Asset Management v.

In another major development in a case that continues to redefine the standard procedures in asbestos-related bankruptcy proceedings, on January 13, 2015, Garlock Sealing Technologies LLC announced that it had reached an agreement with the representative for future asbestos claimants that would settle all present and future asbestos claims for $358 million. The current net present value of the settlement is reportedly $205 million – considerably higher than the bankruptcy court’s liability estimate of $125 million, but well below the $1.3 billion plaintiffs had been seeking.

In In re BGI, Inc. f/k/a/ Borders Group, Inc.,1 the Second Circuit recently held that the doctrine of equitable mootness — a doctrine that permits appellate courts to refrain from hearing bankruptcy appeals relating to plan confirmation when it would be “inequitable” to do so – applies in liquidations under Chapter 11 of the Bankruptcy Code. This ruling extends the doctrine from Chapter 11 reorganizations, in which it has traditionally been applied in the Second Circuit, to liquidations.

On September 29, 2014, the United States District Court for the District of Delaware affirmed an earlier decision of the Delaware Bankruptcy Court in In re Jevic Holding Corp.1 holding that a private equity sponsor was not liable for its portfolio company’s alleged violations of the WARN Act. The District Court ruling is good news for private equity funds and other investors with portfolio companies in distress.

On Monday, the Supreme Court confirmed¹ that bankruptcy courts may hear “Stern-type” matters (such as tortious interference counterclaims) that relate to bankruptcy proceedings, so long as a district court reviews the bankruptcy court’s proposed findings and renders the final decision. Other questions left in the wake of Stern v. Marshall,² however, remain unanswered and will continue to occupy the attention of parties to bankruptcy matters and courts alike.

BACKGROUND: IN THE WAKE OF STERN V. MARSHALL

A recent appellate decision in the Western District of Washington prohibited hedge fund creditors from voting on a debtor’s chapter 11 plan on the basis that the funds did not qualify as “financial institutions” for purposes of the definition of “Eligible Assignee” under the applicable loan agreement.¹ While this counter-intuitive result seems driven by the specific facts of that case, this decision serves as a useful reminder of the importance of carefully reviewing assignment restrictions when purchasing loans in the secondary market.

Chapter 11 has long been used by companies to obtain relief from legacy tort liabilities. There has been a lingering question, however, as to whether chapter 11 can bar claims by tort litigants who were exposed to a hazardous material or defective product before bankruptcy but do not develop injuries until after the case is over. Some debtors have set up trusts and appointed representatives for so-called “future claimants”: this approach can be effective, but may add months or years to a bankruptcy case along with significant cost, business disruption and litigation.