American pet owners are probably all familiar with Chewy, an e-commerce pet food and products supplier that will quickly ship those heavy bags of dog or cat food right to your doorstep at competitive prices. No longer did one of the authors of this article have to walk 30 minutes round trip in the dog days of humid DC summers to pick up and carry a 30 pound bag of Taste of the Wild grain-free high prairie recipe to feed an English bulldog and a French bulldog. Leveraged finance attorneys, investors, lenders and borrowers should also be familiar with Chewy, though for reasons that highlight the complexities and risks associated with today’s leverage finance market. Continue Reading Chewing Through Baskets: The “Chewy Phantom Guarantee” and a Cautionary Tale of the Release of a Valuable Guarantee and Collateral Package

On 19 September 2019, Norris J handed down judgment in the challenge brought by six landlords against the Debenhams Retail Limited (Debenhams) company voluntary arrangement (CVA) which was approved by 94.71% of Debenham’s unsecured creditors on 9 May 2019. The challenge been watched with significant interest, particularly by the landlord community, which has for some time expressed increasing concerns regarding the use of CVAs as a mechanism to commute leasehold liabilities while other unsecured creditors’ rights remain unaffected. While CVAs have been the subject of legal challenges previously, the Debenhams challenge is the first time certain key elements of CVAs in play in the market have been tested before the court.  Norris J’s decision provide welcome clarification on a number of key issues concerning the treatment of leases in retail CVAs.

Continue Reading CVAs – retail’s flexible friendship continues

The development of new powertrain technology; challenges within established markets, such as diesel emissions issues; and falls in automotive production – production in the United Kingdom has fallen during the last 12 consecutive months – have all had a significant impact on the automotive and mobility industry.  The rapid increases in demand for connected, electric, and hybrid vehicles – together with the associated infrastructure – means that effective cooperation among OEMs, suppliers, regulators, and other stakeholders is now more important than ever. The cost of this new technology, aligned with shocks to production, such as the ongoing uncertainties around Brexit and China trade tariffs, means that more than ever, fortune will favor the innovative and the well prepared innovator.

Hogan Lovells partners Joe Bannister (UK), Heiko Tschauner (Germany), and Chris Donoho (U.S.) are part of the firm’s Business Restructuring and Insolvency practice. Bannister and his colleagues have a wealth of experience acting for original equipment manufacturers (OEMs) and suppliers in some of the most complex and intractable automotive cases of the past decade.  In this article they discuss the challenging issues that arise when an OEM is faced with a distressed supplier, and what can be done to mitigate the resultant risks.

 

Continue Reading Chain reaction: Managing financial risk and exposure in the automotive supply chain

Global law firm Hogan Lovells is pleased to announce the Honorable Kevin J. Carey will be joining the firm’s Business Restructuring and Insolvency Practice as a partner effective October 1. Judge Carey joins the firm following his retirement on August 31 from the United States Bankruptcy Court, District of Delaware, where he earned a reputation for being one of the nation’s top bankruptcy judges.“ Judge Carey’s superlative reputation is well earned—in his 18+ years on the bench, he presided over some of the largest and most significant Chapter 11 cases,” said Chris Donoho, Global Head of the Business Restructuring and Insolvency Practice. “He is a great resource for companies and creditors, and we expect that he will play key roles—as examiner or fiduciary—in bankruptcy cases and restructurings across the U.S. and internationally. He also has the cross-border experience needed to be a facilitator in multinational proceedings.”

Continue Reading Hogan Lovells adds renowned former Delaware Bankruptcy Court Judge Kevin Carey

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

CFIUS reviews and the effect on bankruptcy 363 salesThe 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.

Continue Reading CFIUS reviews and the effect on bankruptcy 363 sales

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.

Continue Reading Mission Product: Trademarks? Yes. Mootness? No

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