For the past decade, shipping companies in every sector have faced continuing challenges from, among other things, declining demand, low charter rates, and an oversupply of new and more modern vessels. These factors have eroded second-hand vessel values and caused financial distress and insolvency for many shipping companies, requiring out of court financial restructurings and, in some cases, U.S. bankruptcy filings.
One of the recent hot topics in the European restructuring market has been whether the UK Courts would sanction a scheme of arrangement in relation to a foreign company, with no previous connection to the UK whatsoever, where the sole basis for establishing jurisdiction to undertake the scheme would be amending the governing law and jurisdiction clauses of the company’s principal finance documents to English law.
The recent ruling by the Bankruptcy Court for the District of Montana in the Chapter 11 case of In re Yellowstone Mountain Club LLC 1 (“Yellowstone”), which found that a senior secured lender had engaged in “overreaching and predatory lending practices”, suggests an application of lender liability theory from today’s perspective to a transaction that took place before the credit crisis.
With US Circuit Courts split on the issue of whether bankruptcy courts have the power to release third parties from creditors’ claims without the creditors’ consent, a move known as non-consensual third-party release, the Seventh Circuit recently weighed in the affirmative in In re Airadigm Communications, Inc.1 With the split widening between the circuits on this matter, it seems more likely than ever that the Supreme Court could weigh in on and decide this critical issue to lenders and others.2
In re Adelphia Communications Corp.,1 the United States Bankruptcy Court for the Southern District of New York recently held that neither a creditor’s aggressive litigation tactics resulting in the creditor’s prospective receipt under a proposed plan of special consideration for voting in favor of the plan, which special consideration other members of the same class that voted against the plan would not obtain, nor the creditor’s ownership of claims in several debtors, in a multi-debtor Chapter 11 case, was a sufficient basis for the “draconian sanction” of disallowing such creditor’s votes
In Re PT MNC Investama TBK [2020] SGHC 149, the Singapore High Court provided guidance as to what is sufficient for a foreign company to establish standing to avail itself to the Singapore restructuring regime. Specifically, the factors expressed in the "substantial connection" test under the IRDA1 are non-exhaustive and courts will consider other factors involving "some permanence" to permit foreign companies to restructure in Singapore.
Establishing a "substantial connection"
Investors in non-performing loans ("NPLs") continue to look for new jurisdictions and opportunities to achieve attractive returns on capital. Much of the European NPL market is now in a relatively advanced state (particularly in the more mature parts of the market such as UK, Ireland, the Netherlands, Spain and, to a lesser extent, Italy). Funds are, therefore, looking further afield for NPL opportunities. One interesting jurisdiction, given the 1.71 trillion yuan (c.US $270 billion) of NPLs held by commercial banks, is China.
On September 1, 2016, a rehabilitation procedure was commenced in the Seoul Central District Court in respect of Hanjin Shipping Co., Ltd (Hanjin). This action followed many months of discussions between Hanjin and its creditors (both local and international) designed to reach a consensual restructuring, as a result of which various creditors had voluntarily agreed to postpone exercising claims. Such agreement was eventually suspended on August 30, 2016 following notice to Hanjin that such creditors were unable to continue their support.
Background
This issue considers the most important provisions of the resolution adopted at the Plenary Session of the Supreme Commercial Court of the Russian Federation (the “SCC”) No. 88, dated 6 December 2013, “On Accrual and Payment of Interest on Creditors’ Claims in Insolvency” (the “Resolution”)1. The Resolution resolves a number of important practical issues and creates new regulations governing, in particular:
On May 14, 2009, Judge Allan Gropper of the US Bankruptcy Court, Southern District of New York, approved a US$400 million DIP financing package in the US$27 billion General Growth Properties, Inc. (“GGP”) Chapter 11 case. Judge Gropper’s ruling also included approval of GGP’s proposal to use cash flow generated by shopping centers, structured by GGP as bankruptcy remote, special purpose entities, to fund GGP’s ongoing central operations while in bankruptcy.