On Monday 13 July 2015 the Eurozone Finance Ministers stated that they have entered into an understanding for further funds to be made available to Greece under the rules of ESM (combined with a more or less state controlled Greek trust fund for assets to be privatized) to avoid structuring a temporary Grexit. Such understanding is conditional upon the Greek parliament passing certain legislation on 15 July 2015.

Background

As things currently stand

The aim of the EC Regulation on Insolvency Proceedings (1346/2000) (Regulation) is to improve the efficiency of insolvency proceedings with cross border aspects. It provides, within the European Union (EU), rules for determining:

Insolvency Statistics

2014 was the first year in which the number of insolvency proceedings filed by Spanish companies fell each month since 2004, the year when the last bankruptcy reforms were enacted. Last year, a total of 6,508 insolvency proceedings were initiated in Spain, a reduction of 26.2% when compared to 2013, which was a record year when 8,823 cases were filed.  As a result, in 2014, the streak of consecutive years of increase in the number of insolvency filings ended.

Suppliers of good and services (“trade creditors”) generally have no duty to determine whether their customers are operating an illegal enterprise. However a recent Fifth Circuit opinion presents an unprecedented “claw-back” risk facing trade creditors who unknowingly provide goods and services to a “Ponzi-scheme” enterprise.

The Janvey Opinion

Illinois Governor Rauner presented his turnaround agenda in his “State of the State” address last week and called for, among other things, the state “to extend to municipalities bankruptcy protections.”  Mirroring the proposed legislation introduced by Representative Ron Sandack in January, and reported on in an earlier post, Illinois seems positioned to provide municipalities with clear and direct access to Chapter 9 bankruptcy and

Say what you will about Detroit’s bankruptcy case, but when it is all said and done, the value for each of its participants most likely lies in the learning experience.   And, experience is sometimes a painful teacher.   One of the many take-aways is a framework for what constitutes a workable or“feasible” plan of adjustment (“Plan” or “Plan of Adjustment”) while recognizing the significant risk of implementation and post bankruptcy performance.

Detroit Highlights

A claim filed by insolvency practitioners requesting the termination of contract of payment in kind, which was entered into between a party under insolvency proceedings and a third party, centred on the giving of a slicer machine in consideration of debt; whether the credit of the defendant was qualified as subordinated as a result of damages resulting from the company’s inability to operation, and for violating the principle of equality among creditors.

The recently-approved Royal Decree Law 4/2014 (RDL), dated March 7 and published March 8 in the Official State Gazette (BOE), has the main goal of addressing measures to ensure the feasible restructuring of corporate debt, encouraging a relief of financial burdens for companies which, despite high debt levels, are still feasible from an operational viewpoint.

Comment

Pension issues in the American Airlines (AMR) bankruptcy¹ have resulted in the Internal Revenue Service (IRS) issuing new final regulations, effective November 8, 2012 (Final Regulations), which broadly impact all debtors facing underfunded pension plan obligations. The Final Regulations provide chapter 11 bankruptcy debtors facing distress terminations of their tax-qualified defined benefit pension plans with the additional option of amending the plans to eliminate accelerated payment options.