In Short

The Situation: Jones Day recently represented a group of secured term loan and revolver lenders in the global restructuring of syncreon Group B.V. ("syncreon")—a leading provider of logistics services with over 14,000 employees across more than 100 facilities located in 20 countries around the world.

The ability of a bankruptcy trustee to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when an otherwise avoidable transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee—as is increasingly common in the global economy—courts disagree as to whether the Bankruptcy Code’s avoidance provisions apply extraterritorially to avoid the transfer and recover the transferred assets. Several bankruptcy and appellate courts have addressed this issue in recent years, with inconsistent results.

On September 18, 2018, the United Nations Commission on International Trade Law ("UNCITRAL") published its final version of the new Model Law on the Recognition and Enforcement of Insolvency-Related Judgments (the "IRJ Model Law"). The IRJ Model Law creates a framework for the recognition and enforcement of judgments in foreign bankruptcy and insolvency proceedings. It is intended to supplement and complement the 1997 UNCITRAL Model Law on Cross-Border Insolvency (the "CBI Model Law").

In In re Avanti Commc'ns Grp. PLC, 582 B.R. 603 (Bankr. S.D.N.Y. 2018), Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York entered an order under chapter 15 of the Bankruptcy Code enforcing a scheme of arrangement sanctioned by a court in England that included nonconsensual third-party releases. Judge Glenn determined that such releases should be recognized and enforced consistent with principles of "comity" and cooperation with foreign courts inherent under chapter 15.

In In re Millennium Lab Holdings II, LLC, 2017 BL 354864 (Bankr. D. Del. Oct. 3, 2017), the U.S. Bankruptcy Court for the District of Delaware ruled that it had the constitutional authority to grant nonconsensual third-party releases in an order confirming the chapter 11 plan of laboratory testing company Millennium Lab Holdings II, LLC ("Millennium"). In so ruling, the court rejected an argument made by a group of creditors that a provision in Millennium’s plan releasing racketeering claims against the debtor’s former shareholders was prohibited by the U.S.

The Federal Court of Australia has provided judicial guidance about what constitutes taking possession by seizure under the Personal Property Securities Act 2009 (Cth) ("PPSA"). Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866 indicates that a receiver taking possession of personal property in accordance with a valid security agreement will not perfect a security interest by way of possession.

Background

In bankruptcy cases under chapter 11, debtors sometimes opt for a "structured dismissal" when a consensual plan of reorganization or liquidation cannot be reached or conversion to chapter 7 would be too costly. In Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 2017 BL 89680 (U.S. Mar. 27, 2017), the U.S. Supreme Court held that the Bankruptcy Code does not allow bankruptcy courts to approve distributions in structured dismissals which violate the Bankruptcy Code's ordinary priority rules.

The ability to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when a transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee—as is increasingly common in the global economy—courts disagree as to whether the Bankruptcy Code’s avoidance provisions can apply extraterritorially to avoid the transfer and recover the transferred assets. A ruling recently handed down by the U.S. Bankruptcy Court for the Southern District of New York widens a rift among the courts on this issue. In Spizz v. Goldfarb Seligman & Co.

In Weisfelner v. Hofmann (In re Lyondell Chem. Co.), 2016 BL 241310 (S.D.N.Y. July 27, 2016), the U.S. District Court for the Southern District of New York reversed a 2015 ruling by the bankruptcy court presiding over the chapter 11 case of Lyondell Chemical Company ("Lyondell"). By that ruling, the bankruptcy court dismissed claims asserted by a chapter 11 plan litigation trustee seeking to avoid as actual fraudulent transfers $6.3 billion in payments made to the former stockholders of Lyondell in connection with its 2007 leveraged buyout ("LBO") by Basell AF S.C.A.

On June 13, 2016, the U.S. Supreme Court upheld lower court rulings declaring unconstitutional a 2014 Puerto Rico law, portions of which mirrored chapter 9 of the Bankruptcy Code, that would have allowed the commonwealth’s public instrumentalities to restructure a significant portion of Puerto Rico’s bond debt (widely reported to be as much as $72 billion). In Commonwealth v. Franklin Cal. Tax-Free Tr., 2016 BL 187308 (U.S.