These days, the threat of counterparty insolvency looms over the energy sector: whether it is a natural disaster or precipitous decline in the price of oil, perhaps no industry is more susceptible to the financial decline and potential default of contracting parties. Continue Reading Energy disputes: Countering counterparty insolvency
In order to promote a “rescue culture”, the Transfer of Undertakings (Protection of Employment) Regulations 2006 – better known as TUPE – says that where the transferring business is the subject of bankruptcy or insolvency proceedings instituted “with a view to the liquidation of the assets of the transferor”, the employees will not transfer and any dismissals connected with the transfer are not automatically unfair.
The wording of this insolvency exemption is contained in the European Acquired Rights Directive from which TUPE is derived. In Federatie Nederlandse Vakvereniging v Smallsteps BV the European Court was asked to decide if a pre-pack sale – designed to prepare the business transfer in advance so as to allow a swift re-launch once the insolvency had been declared – fell within this exemption. The decision was published on 22 June, click here to read our note on the case.
The Singapore Companies Act (Amendment) Act 2017 (the ”Act”) significantly overhauls Singapore’s corporate rescue and restructuring framework. In doing so, Singapore has adopted a number of key features from Chapter 11 of the US Bankruptcy Code. This client alert highlights the main amendments of the Act that corporate debtors, lenders and distressed investors should be aware of. In particular the Act now provides:
1. better accessibility to Singapore’s corporate rescue and restructuring framework for foreign companies;
2. US Chapter 11 style rescue/DIP financing;
3. enhanced moratoriums with extra territorial effect;
4. increased disclosure, cram-downs and prepacks; and
5. for the adoption of UNCITRAL Model Law.
There is no doubt that the introduction of this Act greatly improves the legal framework for debt restructurings in Singapore. We envisage that this Act will put Singapore firmly on the map as a key centre for international debt restructurings providing debtors, lenders, alternative capital providers and distressed investors access to internationally recognised and highly familiar restructuring tools and techniques. The amendments discussed in this client alert came into effect on 23 May 2017. Read our alert, Singapore Insolvency and Restructuring Reforms
In one of the most significant decisions relating to schemes of arrangement in Australia in recent years, the New South Wales Court of Appeal has dismissed an appeal challenging the composition of classes of creditors in the Boart Longyear restructuring.
The decision significantly widens the extent to which creditors within the same voting class may be treated differently, both in terms of their existing rights and their rights under the proposed scheme. As a result, the decision may lead to greater flexibility for stakeholders and distressed companies seeking to devise restructuring plans via scheme of arrangement. Continue Reading New South Wales Court of Appeal upholds Boart Longyear scheme classes decision
Bond indentures and loan agreements often include make-whole provisions to provide protection to lenders and investors in the event of debt repayment prior to maturity. Make-whole provisions work to compensate the investor/lender for any future interest lost when the issuer/borrower repays the note prior to a specific date.
The make-whole premium is based on a present value calculation that discounts the payments that would have been received had the debt not been repaid, and is intended to make the investor/lender whole for the payments remaining on the bond/note. A recent Third Circuit decision suggests that the way make-whole provisions are drafted in debt instruments can be crucial in determining the applicability and enforceability of make-whole premiums.
The Singapore parliament recently passed a bill bringing in U.S. Chapter 11-inspired changes to its debt-restructuring framework, including provisions allowing (i) courts to approve financing with priority ahead of existing senior secured facilities; (ii) courts to approve a scheme even if there are dissenting creditor classes; and (iii) international assistance proceedings.
These provisions borrow heavily from the existing provisions in the U.S. Bankruptcy Code.
In light of these changes and the impact on future restructurings, we hosted a webinar on the current and coming use of U.S. Chapter 11 and Chapter 15 proceedings in Asian restructurings.
Some of the topics discussed included:
- Why Asian debtors might look to a Chapter 11 solution over other procedures such as Schemes of Arrangements;
- How the equivalent provisions in the U.S. Bankruptcy Code are applied and the key concepts parties will need to be familiar with; and
- The likely need for U.S. counsel to provide expert testimony in Singapore proceedings regarding the application and interpretation of the new U.S.-based provisions.
Considerations when Changing the Trustee on a Debt Transaction
In recent times there has been an increase in instances of trustees being changed on debt deals. As this phenomenon becomes more widespread, we look at some of the issues and processes that need to be taken into account when issuers, investors or trustees themselves are considering making a change. Continue reading
Chris Donoho, head of the U.S. Business Restructuring and Insolvency (BRI) practice for Hogan Lovells, shares his insights and perspective on global and U.S. restructuring trends.
On 9 March 2017, Hogan Lovells hosted a panel discussion looking at the opportunities and challenges involved in direct lending in Italy. The speakers included experts with knowledge of the Italian market, who put forward their thoughts and shared their own recent practical experiences of doing deals in Italy. This article – Direct lending in Italy – provides a summary of what was discussed in the session as well as some further background on the market.