On 9 November 2017, in a rare example of a contested recognition hearing, His Honour Judge Paul Matthews granted recognition of Agrokor’s extraordinary administration (EA) as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006 (CBIR).

Agrokor d.d. is the holding company for a group of companies specialising in agriculture, food production and related activities in Croatia.  Before its financial difficulties, the group’s annual revenue was estimated to amount to around 15% of Croatia’s GDP.  On 6 April 2017, the Law on Extraordinary Administration Proceeding of Companies of Systemic Importance for the Republic of Croatia (the Law, also known as Lex Agrokor) became effective.  On 10 April 2017, following an application by Agrokor, an order for extraordinary administration (EA) was made in respect of Agrokor itself and 50 of its affiliates. In July 2017, Agrokor applied to the English court for recognition of the EA as a foreign proceeding under the CBIR.  A proceeding will be a foreign proceeding if it is “…a collective judicial or administrative proceeding in a foreign State…pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation”  The recognition application was challenged by one of Agrokor’s largest creditors, who had also brought arbitration proceedings in the English courts, on a number of grounds, all of which were dismissed by the court.

A Hogan Lovells team led by partner Tom Astle is acting for an adhoc committee of bondholders, and providers of a c€1bn super senior DIP facility to the Agrokor Group.

Continue Reading English recognition for Agrokor insolvency: not a tick-box exercise

In our previous blog post, we examined the decision of the New South Wales Court of Appeal to uphold the composition of classes of creditors in the Boart Longyear restructuring by way of scheme of arrangement.

Following an extensive second court hearing to approve the schemes of arrangement (which involved multiple days of hearings, several adjournments, and a court-ordered mediation), amended versions of the Boart Longyear schemes have now been approved by the Australian courts.

The decision emphasises the importance of the court’s overall “fairness” discretion in approving a scheme, irrespective of whether classes of creditors have been properly constituted. Importantly, differential treatment within a class of creditors that may not be sufficient to justify the creation of a separate class may nonetheless create sufficient unfairness to cause the scheme to ultimately fail. Significantly, the court was clear in its final judgment that the schemes as initially drafted would not have passed the “fairness” test and would have been rejected.

Continue Reading Update – Boart Longyear schemes of arrangement approved

This article first appeared in Without Prejudice in August 2017

What can the UK and South Africa learn from each other by comparing the business rescue regime with administration?

South Africa’s relatively recent business rescue regime (introduced in 2011) has exploded into a popular process for “affected persons” facing a company in financial distress. It shares some aspects with the administration procedure in England and Wales (UK). Lessons can be drawn from both the similarities and the differences between the two procedures that may benefit restructuring and insolvency practitioners both in the UK and South Africa.  Continue reading.

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 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

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

Across Europe, increased regulation, governmental reforms, higher capital requirements and new accounting standards on valuing non-performing loans (“NPLs”) continue to drive sales of non-core loan assets, including NPLs. That background, coupled with the fact that many investors across Europe have raised capital in order to acquire loan portfolios which now needs to be deployed, is likely to drive further transactions (as well as those in new markets and in relation to more complex asset classes).

The last half of 2016 saw considerable activity in Southern Europe in particular which is likely to continue in 2017 and spread to other jurisdictions in Europe. Equally, the rising trend in NPLs in South-East Asia indicates that deleveraging is likely to become more prevalent there as well in the short to medium term.

Our cross-group team has taken an in depth look at the market, brought together in a report on loan portfolio transactions and their related financings. The report highlights potential structuring and execution techniques and explains key initial considerations for potential investors in a number of key jurisdictions.  Click here for our Client note on loan portfolio transactions or alternatively click here to go to our interactive microsite where you can view country-specific analysis for the jurisdictions covered in our report.

Hogan Lovells’ U.S. Business Restructuring and Insolvency Practice head Chris Donoho and partner Ron Silverman, along with Jefferies’ Restructuring and Recapitalization Group co-head Richard Morgner, recently joined Debtwire legal analyst Richard Goldman to discuss current issues concerning cross-border restructurings.

During the discussion, the panel addressed the factors that prompt foreign-based companies to avail themselves of the U.S. Bankruptcy Code in lieu of local insolvency proceedings, the hurdles that such companies must overcome to secure a U.S. court’s administration of their Chapter 11 cases and pitfalls that foreign-based companies may encounter in the U.S.

The panel also reflected on some recent cross-border cases, including Abengoa, Hanjin Shipping, and Baha Mar.

Click here to listen to the podcast.

Over the past several years, the international financial community has witnessed a significant increase in cross-border restructurings of Chinese companies. These restructurings have involved large enterprises with billions of dollars of revenues and indebtedness. The increase in cross-border financings, and therefore restructurings, is tied to the huge debts that Chinese companies, banks and municipalities have been accumulating since the financial crisis of 2008-2009. As central banks have held interest rates at record lows and bought up government debt to stabilize the financial system, investors have increasingly turned to corporate debt issued in emerging markets as a source of higher returns. Chinese companies have capitalized on this appetite for foreign investment and have borrowed $377bn from 2010 to 2014, according to the Bank for International Settlements.

A new wave of foreign investment seems just over the horizon. A regulatory shift was promulgated by the People’s Republic of China’s National Development and Reform Commission (NDRC) circular on administration and filing of foreign debt, which came into effect on 14 September 2015. The NDRC rule is just the most recent in a series of changes that China’s regime has gone through over the last two years that facilitate cross-border Chinese financing and investment.

Continue Reading Restructuring foreign investments in Chinese companies