Why would a debtor with no assets in the United States seek cooperation from a U.S. bankruptcy court in cross-border insolvency proceedings?
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.
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.
Critics characterize activist fund investors as raiders and destroyers of value for the sake of selfish arbitrage. New research1 paints a much more nuanced portrait of hedge fund participation in Chapter 11 reorganization cases.
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."
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.
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.
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.
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.