A typical bond indenture provides that prior to the incurrence of an event of default, a trustee’s obligations are limited to those specifically set forth in the indenture. It is only following the occurrence of an event of default that the trustee’s duties of prudent conduct seem to ripen. This often leaves trustees and bondholders in a state of uncertainty over what actions, if any, a trustee may be obligated to take as the financial condition of an issuer worsens but has not yet crossed the default line. A recent case from the Eastern District of Pennsylvania, Becker v.
Bottom Line:
The United States Bankruptcy Court for the District of South Carolina in In re Barnwell County Hospital, No. 11-06207 (Bankr. D.S.C. Oct. 27, 2011) held that anad hoc community group of citizens formed for the purpose of attempting to keep the Barnwell County hospital open and operating in its current location (the “Community Group”) was not a party-in-interest in the hospital’s bankruptcy case and so lacked standing to challenge the debtor’s eligibility for relief under chapter 9 of the Bankruptcy Code.
The Bottom Line:
The Bottom Line:
On January 25, 2010, the U.S. Bankruptcy Judge Peck struck down a provision that used the bankruptcy of Lehman Brothers Holdings, Inc. (“LBHI”) to trigger subordination of a Lehman subsidiary’s swap claim against a securitization vehicle in the United Kingdom.1
While many amendments to bond indentures can be made without consent from all bondholders, “non-impairment” clauses provide that the indenture may not be amended or restructured in any way that will affect or impair a bondholder’s right to receive principal and interest when due without unanimous consent.
Over the last several weeks, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York has issued two rulings in the Northwest Airlines case that threaten to alter significantly the consequences to distressed investors of serving on ad hoc committees in bankruptcy cases.
Several recent cases in the United States District Court for the Southern District of New York have created ambiguity about when distressed exchange offers violate Section 316(b) of the 1939 Trust Indenture Act (the “TIA”). It appears that plaintiffs’ lawyers are using this ambiguity to challenge distressed exchange offers. The threat of litigation may give minority bondholders a powerful tool to hinder less than fully consensual out-of-court restructurings and provide them with increased leverage in negotiations.
Summary
Providing financial support to related parties that are in financial distress may be in the interest of the group as a whole, but is not necessarily in the direct interest of the individual group company providing such support. This client briefing discusses that issue from a Dutch corporate law and tax law perspective, including the potential consequences if there is a material difference between the financial risks assumed by the Dutch company and the benefits of entering into such a transaction.
Introduction
Summary
This briefing sets out the key French corporate income tax issues in respect of debt restructurings. In summary, debtors and creditors may be faced with material tax consequences in case of a debt waiver, debt transfer, conversion of debt into equity or debt buy-back, so that such operations may require an appropriate structuring in order to mitigate potential tax issues.
Introduction
This briefing summarises key French tax points relating to restructuring of indebtedness.