Brazilian Chapter 15s (PART I)

Brazilian insolvencies have increased in recent years as a result of the economic recession, political instability, and corruption. Nine Brazilian debtors filed chapter 15 petitions in 2014 and 2015 combined compared with only nine in total prior to 2014.[1] Below are examples of how Brazilian debtors have used chapter 15 as a way to effectuate their overall restructuring.

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Most Mexican securitizations involve the use of a trust as the special-purpose vehicle. This has tax advantages because the sale of the asset may be tax exempt and, at the same time, it is generally considered a true sale.  Additionally collateral trusts (fideicomisos de garantía) or payment-source trusts (fideicomisos de fuente de pago) are often in Mexican financings to segregate collateral from the debtor. Almost any project-finance involves transferring assets (in particular cash-flow generating assets) to a trust in order for such trust to be the payment vehicle of the transaction. The rationale behind these transfers is to avoid consolidation of the transferred asset with the estate of the originator.

A federal collegiate circuit court put these structures at risk

On September 2, 2016 a resolution by a federal collegiate circuit court was published in the Mexican Judiciary Newspaper (Semanario Judicial de la Federación). The court resolved that transfers of future receivables under executory contracts (contratos de tracto sucesivo) are generally valid and should be upheld. However, these transfers may be clawed back in the context of an insolvency proceeding against the transferor even outside the traditional “look up” period.  Continue reading