Cayman hedge fund liquidators welcome

Forum shopping, or to put it more diplomatically, careful forum selection, is absolutely essential to the effective pursuit of remedies in US Bankruptcy Courts. Another recent decision regarding a Cayman hedge fund seeking – and this time receiving – cooperation from a US Bankruptcy Court illustrates ...

Easing pension and healthcare burdens in Chapter 11

Recent headlines have once again drawn attention to pitched battles over companies’ attempts to ease staggering pension and health care burdens through Chapter 11 reorganisation.

Timing is everything:

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.  

 

Shifting sources of law on recharacterizing debt as equity

Since debt enjoys priority of payment in insolvency proceedings, demoting a debt claim to the lower rank of an equity interest likely means a total loss for the distressed investor. 

 

Leveraging confusion over power allocation in the US bankruptcy system

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.  


  

 

Heads I win, tails you lose:

Two recent cases, however, suggest that US Bankruptcy Courts are still battling with parochialism. In an odd coincidence, these two cases from distant courts conclude that the unique US approach to information “discovery” trumps European approaches, both offensively and defensively.

Perversion of securities safe harbours

In September 2011, the District Court for the Southern District of New York applied these safe harbours to eviscerate the Madoff trustee’s effort to recover $1 billion from the owners of the New York Mets baseball team. 

Sui generis maximus: Power over UK persons for “special” US bankruptcy claims

Lawyers often seem too clever in arguing legal niceties to help clients avoid responsibility. Sometimes, though, a lawyer is hoisted with his own petard as a court fashions new super-niceties to reflect modern developments and undercut long-established rules.

Pitfalls and promises of pre-pack restructuring

In December 2010, the supermarket giant Controladora Comercial Mexicana became the first major Mexican company to achieve a pre-pack arrangement, for $2 billion of debt, under new pre-pack-friendly concurso provisions.

Vitro: A roadmap for resisting third-party releases in cross-border insolvency cases

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.

 

 

The alternative to bankruptcy is not payment, but waste, uncertainty and chaos

The only people who complain about insolvency proceedings more bitterly than creditors . . . are creditors’ lawyers. The recent case of the developer Al-Murjan points to a revival of the bankruptcy law in the United Arab Emirates, and even though that law is not known to be “debtor-friendly”...

Commercial debt buyers risks

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.   

 

Appreciating the remaining risks of bankruptcy strip-off of home mortgages

Investments in mortgage-backed debts carry reduced risk in light of the special protections afforded to collateralized claims. Second-lien investing, however, is subject to enhanced risk due to the greater likelihood of collateral value insufficiency.   

 

Extraterritorial limits of the long arm of US bankruptcy law

The international reach of U.S. bankruptcy law might well be regarded as imperialistic. As to any debtor who satisfies the broad eligibility qualifications, a U.S. bankruptcy proceeding encompasses all rights in property of the debtor, “wherever located and by whomever held."

 

Delaware decisively ousts New York as friendliest US cross-border insolvency venue

Why would a debtor with no assets in the United States seek cooperation from a U.S. bankruptcy court in cross-border insolvency proceedings?  

 

Increasing volatility at the intersection of intellectual property and restructuring law

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.