Asked how buyers can avoid known but latent risks in investments in financial products, law and business students often respond by suggesting contractual hedges of one sort or another. But they often overlook the meta-risk of insolvency.
Even though U.S. law theoretically allows some municipalities (that is, cities and other political subdivisions of a state, such as water reclamation and sewer districts) to seek bankruptcy relief, such cases have been rare, and in these cases, municipal bondholders have emerged all but unscathed.
At a recent hearing before the Grand Court, the Cayman Islands liquidators of BCCI Overseas applied for and received their discharge and the Court ordered the formal dissolution of all of the BCCI group companies in the Cayman Islands. This judicial procedure brought to an end an assignment that had run for nearly 22 years.
Would delaying the request until some months after their appointment affect the outcome? Two different answers emerged from two authoritative sources at precisely the same time in mid-April 2013.
Reorganisation plans frequently include releases of non-debtor third parties, but this is one area where informed hedge fund creditors have significant power to resist the destruction of an important alternate source of recovery.
Recent fireworks between tech giants Apple and Samsung illustrate the intensity of modern battles over intellectual property rights. Even for companies whose business does not so obviously hinge on patent and trademark rights, however, an intellectual property license can be a small but vital lynchpin holding together the non-tech aspects of a company’s traditional manufacturing or other operations.
It is an abuse of process for a party to use an application to court based on an unpaid debt to attempt to liquidate or bankrupt a debtor in order to try to compel payment of a debt which is genuinely disputed.
One of the last places a hedge fund manager or client wants to be is on the business end of a lawsuit by a US bankruptcy trustee or DIP. Suits by the trustees of fraudulent or failed investment schemes and collapsed LBO deals to recover pre-bankruptcy payments as “fraudulent conveyances” or “preferences” continue to captivate media attention.