In July 2017, we wrote about the case of Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liquidation) (receivers and managers appointed)[1], in which the Western Australian Supreme Court held that rights of set off enjoyed by an insolvent company’s contractual counterparties would not apply if the company had granted a security interest over the relevant contractual rights under the Personal Property Securities Act 2009 (PPSA).

The decision has been overturned by the Court of Appeal of the Supreme Court of Western Australia[2], such that the existence of a security interest will not necessarily of itself preclude the operation of statutory or contractual set off rights in favour of third parties.

The decision is significant because it potentially has a dramatic impact on the competing rights of secured and unsecured creditors in liquidation, and may prevent secured creditors from enjoying a windfall at the expense of unsecured creditors. It also places the emphasis firmly on the terms of the relevant security interest and underlying contract, which will now need to be considered in detail each time there is a claim for set off by the insolvent company’s contractual counterparties.

[1]               [2017] WASC (2 June 2017)

[2]               Hamersley Iron Pty Ltd v Forge Power Group Pty Ltd (in liquidation) (receivers and managers appointed) [2018] WASC 163

 

Continue Reading Court of Appeal overturns Hamersley Iron v. Forge Group Power – set off rights in liquidation restored

Hogan Lovells’ London restructuring team led by partner Alex Kay has acted as lead transaction counsel and advisor to the ad hoc committee of Noteholders in the successful, landmark US$1 billion restructuring of Mriya Ago, the Ukrainian agricultural conglomerate.

Completion of the restructuring is the culmination of a multiyear process which has resulted in the first example of creditors taking control of a Ukrainian corporate. Continue Reading Successful completion of financial and corporate restructuring of Mriya Agro

Hogan Lovells’ London restructuring team led by partner Tom Astle assisted our clients, lenders of a €1.06bn priority funding loan, with distressed Croatian retail giant Agrokor’s proposed restructuring settlement plan which was voted for unanimously at a meeting of key creditors in Zagreb this week on 19 June 2018.

Having an agreed settlement plan is a breakthrough stage in the process and paves the way for one of the biggest restructurings in the world so far this year. The settlement plan will now be put to the wider creditor vote, requiring 66⅔ by value to approve, before being submitted to the Commercial Court of Zagreb for approval prior to 10 July 2018.

Continue Reading Distressed Croatian retail giant Agrokor d.d moves step closer to restructuring

Continue Reading Shaun Langhorne: 40 under 40

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

We have advised the Single Resolution Board, the banking resolution authority of the Eurozone, with respect to the two Italian banks Banca Popolare di Vicenza S.p.A. and Veneto Banca S.p.A.

Following the decision taken by the European Central Bank on 23 June 2017 to declare Banca Popolare di Vicenza S.p.A. and Veneto Banca S.p.A. as ‘failing or likely to fail’, the Single Resolution Board has decided that resolution action by the Single Resolution Board is not warranted for these banks. As a consequence, the winding up of the banks will take place under national Italian proceedings. With the approval of the European Commission the Italian government has subsequently decided to grant aid to facilitate the liquidation of Banca Popolare di Vicenza S.p.A. and Veneto Banca S.p.A. under national Italian insolvency law.

The Single Resolution Board has been supported in this process by a cross-border team of Hogan Lovells supervised by the Frankfurt based partner Dr. Tim Oliver Brandi and Italian Partners Jeffrey Greenbaum, Luca Picone, Francesco Stella, Federico Del Monte, Fulvia Astolfi,  Filippo Chiaves and Vittorio Moresco.

 

Despite a modest uptick in recent years, it is still a relatively rare occasion for the Supreme Court of the United States to tackle issues involving bankruptcy. This term, however, the Supreme Court has granted certiorari in two bankruptcy appeals that could have important consequences for the financial community. In FTI Consulting, Inc. v. Merit Management Group, LP, the Court will define the parameters of the safe harbor of Bankruptcy Code section 546(e), which excludes certain financial transactions from the debtor’s avoidance powers. In PEM Entities LLC v. Levin, the Court will also determine whether federal or state law should apply when analyzing whether debt should be recharacterized as equity. Both cases could alter how financial transactions are structured and documented.

Continue Reading Dabbling in distress: U.S. Supreme Court to hear two important bankruptcy issues next term

In the recent case of Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liquidation) (receivers and managers appointed)[1], the Western Australian Supreme Court has confirmed that the grant of a security interest under the Personal Property Securities Act 2009 (PPSA) by a company to a third party will likely render any rights of set-off enjoyed by the company’s contractual counterparties worthless where the company subsequently enters liquidation.

The PPSA is a relatively new legislative regime in Australia, and applies to a wide range of “in substance” security interests over most types of property other than land. The decision is significant, because it represents the first time an Australian Court has conducted a detailed analysis as to the interplay between security interests granted under the PPSA and statutory rights of set-off applicable in insolvency.

[1] [2017] WASC (2 June 2017)

Continue Reading The limitation of set-off rights in liquidation