The Preventive Restructuring Frameworks Directive (EU) 2019/1023 is finally in force. Following its implementation into EU member states’ national law, the directive will hopefully prove an effective tool for Europe’s restructuring practitioners, just as the continent’s economic outlook darkens. Continue Reading Long-awaited EU Preventive Restructuring Frameworks Directive takes effect amidst warnings of a European recession
The recent Debtwire European Mid-Market Forum opened with a presentation from Paul Johnson of the Institute of Fiscal Studies. He warned the delegates of storm clouds gathering over the economy, suggesting that we may begin to see an increasing number of distressed credits – perhaps not as significant as in the aftermath of the financial crisis, but that the general mood suggests an imminent turning of the credit cycle.
This was the backdrop to the “When direct lending turns distressed” panel, moderated by Mariana Valle of Debtwire, in which Hogan Lovells restructuring partner, Tom Astle took part. The other panellists were Steve Morris from Beechbrook Capital, Tristan Nagler from Aurelius Investments and Ciara O’Neill from DC Advisory. Continue Reading When direct lending turns distressed
The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee established in 1975 that oversees foreign investment in the U.S. economy. In 1988 CFIUS granted the Executive Office of the President nonreviewable authority to block foreign investments that may present national security concerns. In 2018 the U.S. Congress passed the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). FIRRMA codified, among other things, CFIUS’ jurisdiction over transactions arising from bankruptcy proceedings, such as a bankruptcy 363 asset sale. In the year since FIRRMA, CFIUS reviews have become more common place and affect certain transactions that may have implications for companies who find themselves participating in a bankruptcy 363 sale.
Upstream guarantees and security by foreign subsidiaries of a U.S. corporate borrower may now be available without adverse U.S. federal income tax consequences to the U.S. parent. Continue Reading Will changes to US regulations make it easier to obtain upstream security from foreign subsidiaries?
In Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___ (2019), the Supreme Court held that a debtor’s rejection of a trademark license does not eliminate the licensee’s right to use the trademark through the completion of the contract, settling a split in the Circuits. The Supreme Court also ruled that the case was not moot, despite the bankruptcy estate’s distribution of all of its assets, which may have important implications for the developing jurisprudence on mootness in bankruptcy cases.
In In re 1141 Realty Owner LLC, et al. , No. 18-12341 (SMB), 2019 WL 1270818 (Bankr. S.D.N.Y. March 18, 2019), Bankruptcy Judge Stuart M. Bernstein of the U.S. Bankruptcy Court of the Southern District of New York reaffirmed that upon sufficient contractual language, “make whole” prepayment premiums are enforceable under New York law even after loan acceleration. The court emphasized that the language of the contract provided for such a result and that this was an enforceable liquidated damages clause under New York law. Continue Reading Make whole prepayment premium enforceable even after loan acceleration
In a recent decision, EMA GARP Fund v. Banro Corporation, No. 18 CIV. 1986 (KPF), 2019 WL 773988 (S.D.N.Y. 21 February 2019), District Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York enforced a foreign reorganization plan in the United States on the basis of international comity, notwithstanding that no application for recognition and enforcement had been made under Chapter 15 of the U.S. Bankruptcy Code. Banro Corp. Inc., a public corporation headquartered in Canada, underwent a restructuring proceeding in Ontario under the Companies’ Creditors Arrangement Act (CCAA). The approved reorganization plan extinguished the interests of the company’s equity holders (including stockholders’ securities law claims against the company) and provided releases for the company and its directors and officers. Stockholders of the company chose not to participate in the CCAA proceeding and instead brought securities law claims against the company and its CEO in New York.
In a unanimous 25 February panel decision, the Second Circuit Court of Appeals held that the trustee liquidating Bernard L. Madoff’s investment firm can claw back billions in Ponzi scheme proceeds from investors who received the proceeds indirectly through non-U.S. “feeder funds” (funds that aggregate investor capital to invest in funds such as Madoff’s).
The ruling is significant because it affirmed the power of U.S. bankruptcy trustees to pursue estate funds to their ultimate destination, even if the paper trail involved transactions between non-U.S. entities. The effect of the ruling is to revive 88 adversary cases against international investors by Irving Pickard, the trustee of Bernard L. Madoff Investment Securities LLC (Madoff Securities) who is seeking to recover roughly US$4 billion in funds on behalf of customers who lost money in the Madoff Ponzi scheme.
Recently finance partners Paul Mullen, Jo Robinson, and Tom Astle sat down with Joelle Jefferis, Debtwire to discuss what has happened so far in distressed direct lending scenarios and what can be expected in the future. The short podcast covers areas such as how many unitranches have already been at restructuring stage, to how distressed talks differ when there are just two lenders at the table and also the problems that can arise from poor planning in the intercreditor. Click here to listen to the podcast.
A cross-practice team led by partner Tom Astle has advised a syndicate of c.75 lenders under a bespoke €1.06bn super priority loan to distressed Croatian food producing and retail giant Agrokor (the “SPFA“) on an English law scheme of arrangement proposed by the company. The scheme of arrangement was approved by 97.92% in number of the lenders under the SPFA, representing 99.99% in value of scheme claims, at the creditors’ meeting earlier this week, and was sanctioned by Mr Justice Fancourt this morning.