News
Friday, February 10, 2012
MF Global’s UK arm made a first interim payment of 26 cents in the dollar to agreed client money claimants on Friday 10 February.
Richard Heis, joint administrator from KPMG, said that the first wave of settlements will benefit up to 600 clients with estimated claims of US$12 million, with a second wave of settlements starting from next week, affecting another 1,300 clients with estimated claims of US$19 million.
The ultimate payout total will depend on how many people eventually come forward and what balances are agreed, says Heis. While unproved claims have totalled around US$1 billion so far he doesn’t expect the final number to be anything like that big.
Heis said this was the first time he was aware of client moneys being the subject of an interim dividend from administrators. “In contrast, at Lehman Brothers, no client moneys have been repaid so far in the three and a quarter years since it went into administration,” said Heis.
The administrators have worked with their legal team from Weil Gotshal, led by Adam Plainer in London, to develop innovative solutions in what is the first ever use of the Special Administration Regime (SAR) introduced by the British Government to tackle problems thrown up by the Lehman Brothers collapse.
A large amount of litigation has emerged from the Lehman case, and one particular case concerning the treatment of client money has gone all the way to the UK Supreme Court.
Heis said: “While we await the outcome of the Lehman case in the Supreme Court, and a number of other legal uncertainties to be resolved, the least risky approach would be to hold back the payment process until the full picture of all claims is known.
“However, we want to start returning client money as soon as possible and have therefore constructed an interim distribution model, which has allowed us to start making partial repayments to clients with agreed claims,” said the UK joint administrator.
“Our interim payment plan is uncharted territory and will be updated to provide further distributions as events progress.
“Clearly in a situation where we are paying clients without having complete certainty as to the extent of claims, we must take a conservative approach to payments.
“Where both the client and ourselves have agreed the claim, the first tranche of payments is made to clients with cash only positions and those who traded in a single product line where close out information is available (eg spread betters).
“There are still many issues regarding the validity and classification of claims but this first payment marks an important milestone in returning client money,” said Heis.
To receive an interim distribution payment, he said, clients must agree the balance represents their entire claim against MF Global UK and must enter into a settlement agreement, which provides an indemnity to repay any amounts received in excess of the client’s entitlement.
Heis said the special administrators are urging clients who meet the interim distribution requirements to complete the bank confirmation form without which they are unable to transfer money.
More detailed information on making claims is available at:
www.kpmg.co.uk/mfglobaluk.
The special administrators will continue to make interim payments of 26 cents in the dollar as and when client money claims are agreed, he concluded.
US Judge agrees legal hiring MF Global Holdings Ltd.’s bankruptcy judge, Martin Glenn, granted permission to the debtor to hire six law firms in his Manhattan court on 9 February. He also requested further information about a seventh, Freeh Group International Solutions.
Judge Glenn wants to avoid duplication and urged the debtor’s lead legal counsel Morrison & Foerster, to make sure they all liaised with each other.
The judge also gave the green light to the retention of two other law firms for the parent company’s brokerage, which is being wound up in different proceedings; George Seligman’s Slaughter & May has been hired by MF Global Inc as advisor in the UK, while it has also hired Haynes & Boon.
As for MF Global Holdings, the judge approved the hiring of: • Freeh Sporkin & Sullivan • FTI Consulting as a financial adviser • Kasowitz, Benson, Torres & Freidman as conflicts counsel • Morrison & Foerster as lead counsel for the Chapter 11 trustee, • Pepper Hamilton as special counsel to the trustee • Skadden, Arps, Slate, Meagher & Flom as bankruptcy counsel. • He also approved the hiring of Capstone Advisory Group as a consultant for creditors
Friday, February 03, 2012
Compulsory liquidations in the UK rose by 14.1 per cent in the period October to December 2011 as British businesses were hit by a ‘double whammy’ of falling consumer demand and the drying up of the hi yield refinancing market.
Meanwhile banks may find 2012 to be the year when they can no longer ‘kick the can down the road,’ according to commentators, prompting more insolvencies and restructurings.
Other types of corporate insolvencies, including administrations (658), receiverships (324) and company voluntary arrangements (191) made up another 1,173 corporate insolvencies in the fourth quarter of last year, an increase of 5.3 per cent on the same period a year ago.
Tony Bugg, global head of Linklaters’ restructuring and insolvency group, commented on the UK figures:
“The Insolvency Service figures published today show a continued increase in overall corporate insolvency filings. With the most recent GDP data showing a fall of 0.2 per cent for Q4 2011 and consumer confidence remaining low, the outlook for the UK economy looks challenging.”
Bugg continued: “What businesses fear is reduced demand coupled with creditor pressure.
“When compared to the first three quarters of 2011, the last quarter saw a dramatic fall in the volume of leveraged refinancings and today’s insolvency statistics may provide evidence of a reduced appetite of creditors to continue supporting distressed corporates.
“We will need to pay careful attention to this and the next quarter’s insolvency statistics to get a better picture, but the state of the economy in general will continue to expose those enterprises currently in difficulty. And referring to the continued drive by banks to rebuild their balance sheets, Bugg added a ray of hope for struggling UK insolvency practices, many of which are operating way below capacity at the moment:
“It’s important to remember that many lenders are under pressure themselves. The apparent reluctance of some to crystallise their losses may cease to be sustainable and we may therefore see a continuing increase in corporate insolvencies in 2012.”
Alan Hudson, head of Ernst & Young’s restructuring team in the UK and Ireland, agreed that restructurings are set to rise this year as creditors lose patience with ‘zombie companies’:
“Many businesses are still expanding profitably, but others, the zombie companies, remain moribund by debt or defunct business models, are unable to build value or gain momentum in these challenging economic conditions.
“Creditor patience cannot last forever, and as growth becomes increasingly elusive, we expect further rounds of restructuring in the year ahead.”
Hudson added: “UK companies showed relative resilience in 2011 – with only a small increase in the number of insolvencies - but life will get tougher in 2012 as the UK economy barely moves out of first gear and the eurozone crisis continues to create uncertainty.
“Retail administrations spread across Christmas and the New Year demonstrate the continuing pressure on consumer sectors. Meanwhile, the economic uncertainties are lengthening the sales cycles for other service and manufacturing sectors, as procurement teams’ confidence to invest ebbs away in light of the current volatility.”
Aedamar Comiskey, head of the retail sector group at Linklaters, agreed that the Christmas season had been ‘mixed’ for the UK high street:
“We saw a number of large retailers file for administration; Peacocks, Barratts Priceless and La Senza among them; as well as a significant increase in profit warnings. The retail sector is likely to contract further this year if consumers continue to face squeezes in real income, although interest rates look likely to remain low for the foreseeable future.”
Bugg concluded: “The insolvency figures support the view that the UK may enter into a double dip recession.
“Irrespective of how long it lasts, the economy will be in serious difficulty for a significant period of time. UK businesses are having to negotiate a slalom course at the moment, with subdued lending levels and a fragile Eurozone forming major obstacles to any recovery.
“Not only that, but there is an avalanche of debt fast approaching from behind which will need to be refinanced over the next couple of years.”
Bryan Green, President, Turnaround Management Association UK (TMA UK), said: "We have seen a rise in corporate insolvencies, and there are many more companies teetering on a precipice.
"Rather than freezing like a rabbit in the headlights, a struggling business needs to understand that there are plenty of people willing to offer support.
"Going under has a knock on effect on a company's entire stakeholder base, so customers might be prepared to pay earlier, landlords may be willing to renegotiate rents and unions could even be prepared to compromise on salaries. There are always options."
Thursday, January 26, 2012
The British Government has scrapped proposals for a three-day delay to pre-packaged administrations, a measure which the insolvency profession had bitterly opposed.
The British Government has scrapped proposals for a three-day moratorium for pre-packaged administrations, in a major victory for the UK insolvency profession.
Ed Davey, the Minister for the Department of Business, Innovation and Skills (BIS),announced the Government no longer saw any point in continuing with reforms to pre-packs, as it was satisfied with the safeguards contained in SIP 16.
Pre-packs have been criticised in the worst cases for allowing directors to dump creditors and sell back the business to interested parties, with the collusion of administrators.
More generally pre-packs have been criticised for not allowing the business to be offered on the open market, and therefore of not getting an adequate market valuation.
Insolvency professionals have countered that pre-packs have become an invaluable part of their rescue 'toolbox' and that its speed and certainty are its main strengths. Any delay, even of only three days, would destroy its effectiveness.
Richard Fleming, UK head of restructuring at KPMG, welcomed the statement from Ed Davey, the Minister for the Department of Business, Innovation and Skills (BIS), on the proposed ‘pre-pack’ administration reform:
“In the last month alone, we have used the pre-pack administration tool to rescue three well known retailers: Blacks, Bonmarché and La Senza.
"Without the pre-pack mechanism, it is likely that more stores would have had to close and more staff would have lost their jobs. Importantly, the use of a pre-pack, rather than selling the businesses out of a trading administration, minimised the disruption to operations.
"At a time when many more businesses face collapse, today’s statement from the minister is an important acknowledgement of the role pre-packs have to play in the country’s corporate recovery.
"At the same time, the statement has focussed on the importance of tackling so-called ‘phoenix’ pre-packs, where the mechanism is abused by unscrupulous directors to escape mounting debt liabilities.
"While phoenix pre-packs are most prevalent amongst small businesses, abuse of the system tarnishes the name of legitimate pre-packs which should be viewed positively by both the business community and the many stakeholders who rely on its health.
"We are particularly pleased that the efficacy of the Statement of Insolvency Practice (SIP) 16 report, which articulates the rationale of the administrator in selling the business via pre-pack, has also been acknowledged.
"We will support efforts to improve its adoption across the insolvency practitioner community, which should go some way to bolstering confidence in, what we believe, is a world class system.”
Landlords criticise Government U-Turn
British landlords had been the loudest critics of pre-packs, following a series of administrations of high street retail chains which saw rents slashed and contracts voided.
The British Property Federation (BPF) criticised government for scrapping proposed new legislation that would have tightened the rules on so-called pre-pack administrations.
In response to the u-turn, the BPF called for immediate action to increase protection for the creditors of businesses which use pre-packs, which have been subject to abuse and have left creditors out of pocket.
The rejected package of reforms, first mooted 18 months ago by Business Innovation and Skills minister Ed Davey, required insolvency practitioners to notify creditors in advance of a pre-pack and allow them three days to scrutinize the proposals to ensure they represent the best deal for creditors, and to give them time object if they wish.
The BPF had argued that three days would be insufficient and called on ministers to extend this notice period, but instead, following the 26 January announcement the delay has been scrapped completely. Ed Davey announced on 26 January that the reform would not go ahead due to an long-standing Government moratorium on new regulations affecting ‘micro-businesses’, despite the fact that this would have been obvious when consultation started 18 months ago.
A so-called ‘pre-pack’ is a fast-track administration that avoids a failing business being sold on the open market. An insolvency practitioner instead lines up an advance purchaser to take over the profitable parts of the business, with the company going into administration simultaneously. Most recently Bonmarche, Peacocks and Blacks Leisure were snapped up in this manner.
Pre-pack sales to connected parties – so-called ‘Phoenix Pre-packs’ – are often done at great speed and presented to creditors as a fait accompli, leaving them particularly open to abuse.
Ian Fletcher, director of policy at the British Property Federation, said: “The Government has wasted 18 months reaching a conclusion that was obvious at the start of this process; that the policy being pursued would potentially breach the moratorium on regulations affecting micro-business.
“This decision leaves creditors as exposed to sharp practice as when this debate started 18 months ago. Whether by legislative or non-legislative means creditors now expect the Government to move swiftly to provide increased protection. The Government recognises there is an issue to be resolved, and having wasted so much time anything less than swift action would be deeply unsatisfactory.”
Tuesday, January 24, 2012
Swiss-based refinery business Petroplus filed for administration in the UK on 24 January, and in Germany the following day.
On 25 January Michael Jaffe of Munich-based law firm Jaffe Rechtsanwaelte Insolvenzverwalter was appointed administrator of three out of five Petroplus German affiliates, including the Ingolstadt refinery.
The day before, Steven Pearson and Stephen Oldfield partners of PwC were appointed joint administrators of Petroplus Refining and Marketing Limited on 24 January 2012. The law firm advising the UK administrators is Linklaters, led by Tony Bugg, Chris Howard and Bruce Bell. Petroplus Refining and Marketing Limited, a subsidiary of Petroplus Holdings AG, a company listed on the Swiss SIX exchange, owns and operates the 586 acre Coryton oil refinery in Essex where it has approximately 500 employees and 350 contractors. It is an integrated atmospheric-vacuum distillation, fluid catalytic cracking refinery with a total throughput capacity of 220,000 barrels per day. Steven Pearson and Ian Green of PwC have been appointed to a sister company, Petroplus Refining Teesside Limited which operates an oil storage site on Teesside and a Research & Development site in Swansea. Petroplus Refining Teesside Limited has approximately 60 employees. The Petroplus group has faced well documented refinancing challenges and suffered as a result of low refining margins and high restructuring costs. During December 2011 Petroplus Holdings AG announced that it was in discussions with its lenders to restructure its various financing arrangements. Petroplus Holdings AG was unable to reach agreement with its lenders and is unable to continue to fund its subsidiaries. Steven Pearson, joint administrator and PwC partner said: "Our immediate priority is to continue to operate the Coryton refinery and the Teesside storage business, without disruption while the financial position is clarified and restructuring options are explored. Over coming days we intend to commence discussions with a number of parties including customers, employees, the creditors and the Government to secure the future of the Coryton and Teesside sites."Friday, October 14, 2011
The UK Court of Appeal has confirmed that the costs of complying with financial support directions (FSDs) proposed to be imposed on certain Nortel and Lehman companies by The Pensions Regulator (TPR) are administration expenses, payable in priority to unsecured creditors, floating charge holders and the administrator's own remuneration. By Devi Shah, Mayer Brown
The case is Nortel GMBH (in administration) and other Companies [2011] EWCA Cv 1124.
TPR's powers and the ruling in the High Court TPR has the power to require companies connected to sponsoring employers in relation to defined benefit pension schemes to provide reasonable financial support for such schemes, by issuing an FSD. If a target of an FSD fails to provide support, TPR may then require it to contribute to the pension scheme by making a specified payment to the pension trustees, by issuing a non-compliance Contribution Notice (CN). TPR determined that FSDs should be issued against various companies in the Lehman and Nortel group, after they had entered administration. In December 2010, Mr Justice Briggs ruled that the costs of complying with an FSD, or a subsequent CN, imposed once a company is in administration or liquidation falls to be an expense of the administration or liquidation. He did so having found that the authorities which bound him did not support a conclusion that such obligations were provable, unsecured debts and that the only other alternative, that such claims would fall down a ‘black hole’, could not be what Parliament intended. The appeal The appeal was heard in July this year and judgment was handed down on 14 October 2011. Essentially for the same reasons relied upon by Briggs J, Lord Justice Lloyd, with whom Lord Justices Rimer and Laws agreed, dismissed the Nortel and Lehman administrators' appeal. The administrators sought to argue that the liability to comply with an FSD was a contingent debt at the time when the companies went into administration. To be a provable, contingent debt, that liability would have to be referable to an obligation incurred by the relevant company prior to the administration. A key conclusion reached by Lloyd LJ was that although the events upon which the decision to impose an FSD had occurred by the time the companies went into administration, it could not be said that, given the complexity of the process and that TPR has to exercise his discretion in imposing an FSD, an obligation on the part of the relevant Nortel and Lehman companies had already arisen pre-administration. Comment Both in evidence before the High Court, and subsequently, the insolvency and restructuring community has expressed grave concerns about this additional inroad into the rescue culture. Lenders are more reluctant now to lend to groups with defined benefit pension schemes and some are understood to be seeking to withdraw from existing arrangements with such groups. Private equity and distressed debt investors will continue to be cautious about getting into situations where through a pre pack administration they would ordinarily seek to maximise recoveries or take control of an ailing business, if the priority costs of complying with potential FSDs are in the mix. It is expected that permission to appeal to the Supreme Court will be sought. No swift resolution of this matter looks likely in the meantime.Devi Shah is a partner in the restructuring and insolvency group at Mayer Brown in London.
Wednesday, October 12, 2011
Advisers involved in the restructuring of Irish utility Eircom have considered using an Irish Examinership or English Scheme of Arrangement, amongst other options. One of the factors shaping the talks is the lack of a key clause in Eircom’s inter-creditor agreement documents, meaning junior creditors could argue for a greater slice of the pie than otherwise expected. The lack of the clause has been known about since at least the beginning of the year. The telecom utility is in talks with its senior lenders in an effort to restructure its unsustainable 3.75 billion euro debt burden. The first-lien lenders are owed 2.36 billion euro and are the only lenders with a seat at the talks. Significantly, contracts which were put in place when Eircom borrowed the money in 2007 do not include a key clause to set out rules for cancelling the claims of some junior creditors in the event of any restructuring. This could make it harder for seniors to reach a deal with the company without having to offer the other lenders a share in the proceeds.
Security release clause A 'security release' clause is normally part of the inter-creditor loan agreement that sets out the relationship between each class of lender. It includes conditions to be met before any lenders' claim can be cancelled, but also acts as a key protection for senior lenders because it features tools to make sure that they are last in line to suffer a loss if a company cannot repay all of its debt. (pull out quote) The Eircom loan contracts do not include such a clause. It means Eircom's first-lien loans and a group of second-lien lenders who are owed 350 million euro both have claims that are secured on the company and its assets. One possible route that has been discussed is the use of Irish Examinership. Jim Luby of Dublin insolvency boutique McStay Luby, and current President of Insol Europe, has been sounded out as possible Examiner of Eircom. A UK Scheme of Arrangement has also been talked about. Senior lenders to Eircom are confident that they will get most of what they are owed, even if the case ends up in court. Most of those who are involved still think juniors representing 1.3 billion euro will have to take most of the pain in the restructuring. Eircom's owners will only be able to retain control if they can come up with around 300 million euro to support the company. STT still owns half of the equity.
Monday, October 10, 2011
The last thing the world needs just now, you may have thought, would be the potential trigger for yet another systemic financial crisis. And the last thing the turnaround and rescue profession would want, you may surmise, would be for that trigger to be located in its own backyard.
But that is indeed the case, according to Unidroit, the international body that promotes the harmonisation of the principles of commercial law, although not the actual laws themselves. The Rome-based organisation fears that the next big crisis could erupt out of the blameless, indeed praiseworthy, practice of 'close-out netting'.
This is a practice used widely in cases where a bank or other financial institution has become insolvent, and its use has spread to non-financial corporations.
On the surface, this concept seems to require little elucidation. Bank A does business with Bank B, and a huge bundle of mutual contracts and other obligations is continually in existence.
Then Bank B becomes insolvent. Because the two banks had in place a close-out netting agreement, all these contracts and obligations are deemed to be due at once. Those for which a cash price is not immediately available are given a money value under a pre-determined formula.
It is then that the contracts and obligations are ‘netted off’, to arrive at a single net payment from one to the other, either Bank A to Bank B or vice versa.
As Unidroit points out, this resembles the classic set-off arrangements that have been around since Roman times to make easier figuring out who owes what to whom during an insolvency. But, as a paper for Unidroit from Philipp Paech of the London School of Economics points out, netting “encompasses important additional elements”.
Netting is, critically, dependent on an agreement between the two parties concerned and it covers all the outstanding obligations between them.
For solvent companies, netting has emerged during the last 20 years as a tool for managing credit risk, alongside traditional collateral arrangements. As Unidroit notes: “Regulatory and supervisory authorities encourage the use of both techniques, which represent a major pillar of every financial institution’s risk management. As these techniques are capable of reducing counterparty risk, both collateral and netting are also taken into account to determine a financial institution’s capital ratio under the Basel II accord.”
So far, so good. It seems everyone is wholeheartedly in favour of netting. Indeed, as Unidroit adds in its background paper: “Netting as a new concept initially faced obstacles in a number of jurisdictions. In particular it used to conflict with the ‘cherry picking’ powers of insolvency practitioners.” However, “since the 1990s, some 40 jurisdictions, amongst them nearly all important financial markets, have recognised the positive effect of netting on the stability of the market and changed their legal framework so as to accommodate this new legal concept.”
All’s well that end well? Far from it.
Unidroit identifies two big threats to netting. One is the increasingly international dimension of financial markets. ‘Consequently, the two parties to a netting agreement are often located in different jurisdictions. In the event of insolvency of one of the parties it might be unclear whether the netting agreement remains enforceable.’
Linked to this is the second threat, identified in Paech’s paper; the rapid growth since the 2008 financial crisis of so-called 'bank resolution regimes' in developed countries. These emergency mechanisms are designed swiftly to deal with troubled financial institutions.
As Paech points out: “Relevant measures include, in particular, the transfer of the assets of a troubled financial institution to a solvent financial institution and a simultaneous moratorium on netting arrangements.”
Paech adds: “It is obvious that these powers are closely intertwined with the issue of enforceability of netting agreements.” In other words, to what was already a mixed legal landscape across the world in terms of the recognition of netting has been added a new area of uncertainty, the post-crisis ‘special regimes’ for troubled financial institutions.
To Unidroit, these problems add up to a potentially alarming state of affairs. ‘This doubt as to the enforceability of netting agreements in a cross-jurisdictional context has negative repercussions on the risk assessment of financial institutions. “If a netting agreement were to be held to be unenforceable by a court, the other party might face severe financial losses and fall insolvent itself. If the same type of netting agreement is used in a wider market, such effects can even become systemic.” Unidroit has established a study group that is now working on “the preparation of an international convention or model law on netting”, with the work being given “the highest level of priority”. Even before the credit crunch, there had been big variations in legal recognition of netting, according to Paech, and Unidroit sees this as a chance to sort out potentially-dangerous differences. The study group will meet in February next year to review progress.
UNIDROIT, the International Institute for the Unification of Private Law, is one of the oldest international bodies in the world.
It was set up in 1926 as an adjunct to the League of Nations and re-established in 1940. It has 63 members. Unlike the European Union, is has no power to make countries re-write their laws. Its purpose is purpose ‘to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between states and groups of states and to formulate uniform law instruments, principles and rules to achieve those objectives’.
Ends….
Tuesday, September 21, 2010
Truvo is latest European company to file for Chapter 11.
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Wednesday, June 30, 2010
Vantis goes through pre-pack Administration. To read more click on Resources
Thursday, June 24, 2010
OFT recommends sweeping reforms to UK insolvency system.
The British insolvency system will get a new independent complaints body, a revamped regulatory system, increased transparency and an increased status for unsecured creditors under sweeping reforms recommended today.
The Office of Fair Trading (OFT) prepared a wide-ranging market study after extensive consultations starting last year, in response to complaints that the system favours banks over unsecured creditors, allows insolvency practitioners (IPs) to charge excessive fees and allows them to abuse ‘pre-packaged administrations’.
The report can be found at:
http://www.globalturnaround.com/resources.php
The OFT said that “while the market often works well, it may not work in the best interests of all creditors in over a third of administrations and creditors' voluntary liquidations (CVLs), procedures which together account for 75 per cent of income earned by IPs.
“Secured creditors such as banks, who in effect appoint IPs, have a strong incentive to control fees and direct the activities of IPs in the 63 per cent of cases where there are insufficient funds for secured creditors to recover all their debts.
“In the other 37 per cent of cases, secured creditors are paid in full, and their interest in IP fees and actions ceases. In these cases, the OFT found that the remaining, unsecured creditors - such as HMRC, small businesses and customers - are often unable to exert influence on the IP whose actions are then mainly constrained only by regulation and ethics
The OFT said that it found evidence that “IPs charge around nine per cent more, like-for-like, when it is the unsecured creditor who pays, rather than the secured creditor.
“While the OFT has received numerous complaints, it has not been possible to quantify how widespread or damaging such practices may be. To address the concerns, increase trust in the system, and deter insolvency practitioners from sharp practices, the OFT recommends fundamental changes to the regulatory system, which is currently unable to effectively protect the interests of small creditors. These include:
an industry-funded independent complaints handling body with broad powers to review IP fees and actions, impose fines, and return overcharged fees to creditors
reform of the regulatory system by repositioning the Insolvency Service (IS) as the dedicated oversight regulator of the Recognised Professional Bodies (RPBs) and withdrawing its role as a direct regulator of IPs providing objectives for the regulatory regime against which its performance can be measured streamlining the currently inefficient way in which the regulatory regime makes decisions.
“The OFT also suggests changes to the regulations to increase transparency and enhance the ability of unsecured creditors to oversee IP fees and actions.”
Tuesday, May 25, 2010
Germany's central bank governor Axel Weber has hit on a novel way to solve the Greek soverign debt crisis: put the debt-ridden country into administration.
Germany's central bank governor Axel Weber has hit on a novel way to solve the Greek soverign debt crisis: put the debt-ridden country into administration. Weber, a member of the European Central Bank governing council, stressed on 19 May the urgency of reforming eurozone institutions, including finding a way for member countries to declare insolvency.
Thursday, March 04, 2010
As soverign debt problems in Greece and other western countries dominate the headlines, the UK has an extra challenge to grapple with; a General Election, which must be held in June.
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Thursday, October 29, 2009
In one of the last cases to be heard in the UK’s House of Lords, a previous ruling on the Sigma structured investment vehicle (SIV) was overturned today, with huge implications for recoveries for many investment banks, hedge funds and other secured creditors of the largest ever SIV.
In one of the last cases to be heard in the UK’s House of Lords, a previous ruling on the Sigma structured investment vehicle (SIV) was overturned today, with huge implications for recoveries for many investment banks, hedge funds and other secured creditors of the largest ever SIV. The case concerned the interpretation of the security trust deed in Sigma Finance Corporation, the first SIV to be launched, whose assets were worth US$27 billion before the credit crunch. Today’s ruling is the first ever UK Supreme Court judgment on appeal. Today’s judgment overturns a Court of Appeal ruling that Sigma’s receivers were obliged to distribute assets to certain creditors holding early maturing notes following an event of default, a ruling which would have lead to no return for all other secured creditors who held notes maturing at a later date. The appeal was formulated on the basis that the Sigma assets should instead be distributed proportionally on a pari passu basis among all secured creditors irrespective of the dates their notes matured, a construction favoured by the Supreme Court. Sigma was established to invest in certain types of asset backed securities and other financial instruments. It transacted business with a limited pool of investors mainly comprising of holders of instruments issued or guaranteed by Sigma. When the market collapsed, Sigma became insolvent with total liabilities in excess of US$9 billion. Its assets, once valued at US$27 billion, realised just US$306 million at auction, crystallising an enormous loss for its secured creditors who totalled in excess of US$6 billion. Adam Plainer, London head of business restructuring and reorganisation at Jones Day, and his colleague of counsel Linton Bloomberg, acted on behalf of the lead appellant in all three courts over the past 12 months. The lead appellant was owed US$500 million. Plainer said today: “We are delighted to have overturned the Court of Appeal and make a substantial recovery on behalf of our client. It is fundamental that investors have some certainty as to how any courts are likely to interpret conflicting provisions in an insolvency”. Bloomberg added: “The judgment is notable, not just for the values at stake, but also because it may have an impact on the legal interpretation of waterfall clauses in other cases where asset values have plummeted beyond the contemplation of the lawyers drafting the original documentation. “Pari passu has always been a fundamental principle of insolvency law and this case shows that the Courts will be reluctant to find in favour of any other distribution regime unless the documentation is expressly clear and unambiguous.”
Thursday, July 16, 2009
Von Bismarck joins Linklaters.
Kolja von Bismarck, one of the most high-profile insolvency and restructuring lawyers in Germany, has left Clifford Chance to joins Linklaters.
His exact start date as a Linklaters partner in Berlin has yet to be confirmed.
Linklaters said in a statement today that Bismarck “will be a very significant addition to Linklaters’ German restructuring & insolvency team, which has been developed over recent years by Sven Schelo into a leading practice advising on numerous high profile and complex matters, such as the insolvency of Rosenthal, the sale of TMD Group out of insolvency, and the refinancing of Premiere.”
Tony Bugg, global head of restructuring and insolvency at Linklaters, said: “Kolja is an exceptionally talented and established lawyer in the restructuring and insolvency field. His expertise and background will strengthen our capabilities both in Germany and globally, and will further enhance Linklaters’ position as the leading legal adviser on complex and international restructurings.”
Bugg is leading the team advising the London administrators of Lehman Brothers, one of the largest and most complicated international insolvencies in history.
Kolja von Bismarck, 50, said: “I am looking forward to joining a very dynamic and successful restructuring practice, with its focus on the most complex, cross-border work and its integrated global team."
He has spent twelve years as a partner at Clifford Chance and its predecessor firm Pünder Volhard Weber & Axster. He recently advised GM Europe on the rescue of its German arm Opel, the banking committee on the restructuring of French roofing company Monier and Metro on its rumoured bid for Karstadt.
He has also played a leading role in insolvency law reform in Germany, using the local chapter of the Turnaround Management Association (TMA) as a lobbying vehicle. Earlier this year he presented proposals to various political parties, together with Lars Westpfahl of Freshfields Bruckhaus Deringer, for a rapid solution to Germany’s insolvency crisis.
Thursday, May 21, 2009
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Wednesday, December 03, 2008
Jamie Sprayregen returns to Kirkland & Ellis after just two years with Goldman Sachs.
Read about Sprayregen's reasons for his move in the next issue of Global Turnaround.
Friday, November 14, 2008
Senior partners at Kroll’s European restructuring and insolvency practice based in London have completed long-awaited MBOs from parent Marsh & McLennan Companies (MMC) to create two separate new boutiques, Talbot Hughes McKillop and Zolfo Cooper.
The second MBO has been completed in tandem with New York based Kroll Zolfo Cooper, led by Joff Mitchell, to form two separate partnerships trading under the global brand of Zolfo Cooper. The New York deal was announced earlier this week. Zolfo Cooper will continue the practice’s partnerships and continued affiliations in Asia, Australia, and the Caribbean. Simon Freakley will act as chief executive of Zolfo Cooper Europe. The London-based practice also includes Simon Appell, Alastair Beveridge, Gary Squires and Peter Saville. Zolfo Cooper Europe is strong in insolvency work as well as restructuring. Talbot Hughes McKillop meanwhile is keen to emphasise that it is focussed on restructuring, and it will not be doing insolvency work. Paul Horn will act as managing partner of Talbot Hughes McKillop. The Talbot Hughes McKillop restructuring practice was bought by Kroll in 2005 and the business is reverting back to its original name. The original founders of the business, Chris Hughes, Murdoch McKillop and John Talbot, will continue their involvement with the business; Hughes and McKillop as partners and Talbot as special adviser. The firm will have 24 people initially, and is about to announce a clutch of junior hires. Other partners include Julian Gething and Dean Merritt. Paul Horn, managing partner, commented: “Our team has worked together for many years and we all share a passion for delivering outstanding services to our clients. We will continue to develop the business as the first choice provider of hands‑on solutions to complex restructuring issues. “Our independent status will also bring greater clarity to the market’s understanding of our proposition,” Horn said. Since its inception, the Talbot Hughes McKillop practice has handled some of the highest profile UK and European restructuring projects, including: Four Seasons Health Care, Johnson Service Group, Teesside Power, Danoptra, TMD Friction, Le Meridien Hotels and Marconi. Meanwhile Simon Freakley, chief executive of Zolfo Cooper Europe, said: "This is a very exciting development for our business and our people. We have enjoyed a strong year to date with our team of corporate advisory and restructuring experts being appointed on many high profile and complex assignments. “This excellent track-record and experience coupled with the continued close working relationships we will enjoy with our US colleagues and affiliates worldwide gives me great confidence for the long-term success of the newly independent Zolfo Cooper business,” said Freakley. In recent months, the Zolfo Cooper Europe team has worked on high profile assignments including the administration of XL Leisure Group plc, MFI Retail Ltd, The Laurel Pub Company, Celebrations Group Ltd, and the cross border restructuring of Sea Containers.
Thursday, October 02, 2008
Is the rescue culture facing its own global crisis?
We have all just experienced a couple of months of economic crisis unprecedented in living memory. This has included the biggest bankruptcy in history, that of Lehman Brothers. It is difficult to see through the fog of the current chaos to discern any trends. Even the idea that the global financial crisis has been averted and trouble is now migrating to the 'real economy' may prove outdated by the time you read this.
Thursday, July 31, 2008
One of Spain's biggest property developers Martinsa-Fadesa became one of the country's biggest ever insolvencies on 15 July, prompting fears of more collapses.
The market was shocked that Martinsa was forced to file, considering that so much effort had gone in to a restructuring which the company had agreed with its banks in May.
Thursday, June 26, 2008
The chief executive of the International Air Transport Association (IATA) Giovaanni Bisignni, told its annual conference on 2 June that:
The chief executive of the International Air Transport Association (IATA) Giovaanni Bisignni, told its annual conference on 2 June that: "Twenty-four airlines have gone bust in the last six months and US$130 per barrel oil is reshaping the industry even as we speak. In the next 12 months we could face US$99 billion in extra costs from oil."
Monday, May 19, 2008
The Turnaround Management Association(TMA) held its first ever pan-European conference in Paris in April....
The Turnaround Management Association(TMA) held its first ever pan-European conference in Paris in April to drum up support for a new Chapter that would unite Germany, France, the UK and other jurisdictions in a single high-profile body. To find out more go to www.tma-uk.org or www.turnaround.org
Tuesday, March 04, 2008
Litigation Funding Conference 12/13 March 2008 London
The market for litigation funding is growing and it is a new big sectors of interest for corporate clients, lawyers, corporates, insolvency practitioners and, crucially, funding institutions. For the first time, this conference brings together all of the key players in London in March 2008. As well as examining the legal and technical basis for the development of the the litigation funding market, this conference offers delegates an opportunity to understand the pace of change in the litigation funding space, as well as to meet and network among important players in the litigation funding market. For more information go to Event brochure
Wednesday, November 21, 2007
Ernst & Young and KPMG are returning to the US restructuring market, after being forced out three years ago by conflict-of-interest concerns in the Sarbanes-Oxley era.
The Big Four rivals are set to announce new restructuring practices in the US for two reasons; the expiration of non-compete clauses with the respective American firms they sold their US restructuring practices to; and a softening of opposition by the American authorities to acountancy firms offering non-audit sevices to audit clients.
Friday, October 19, 2007
US accused of 'judicial xenophobia'
The question of how to restructure or liquidate offshore-registered hedge funds was thrown into disarray when a New York bankruptcy judge rejected Chaper 15 protection for two Bear Stearns funds. Judge Burton Lifland's decision to deny the Cayman liquidation eiter 'main' or'non-main' recognition has ignited a storm of debate, not lest becasue he was one of the authors of Chapter 15.
Monday, September 03, 2007
The crisis in the capital markets provoked by the US subprime mortgage meltdown will cause restructurings to rise, but not yet, according to bankruptcy professionals.
Bankers are waiting for the uncertainty surrounding the valuation of mortgage-based securties to clear. Distressed investors are waiting for debt prices to fall further. Meanwhile private equity deals and refinancings at the higher end of the market are on hold. This may lead to a 'return to normal', after several years when restructurings have been replaced by refinancings. A numer of subprime mortgage lenders and hedge funds have gone bust, with more expected to follow. 'Covenant lite' is dead,. Risk analysis is back in fashion.
Wednesday, August 01, 2007
On 18 July Alan Bloom, Maggie Mills, Roy Bailey and Stephen Harris of Ernst & Young (E&Y) were appointed administrators to Metronet, the contractor responsible for maintaining two thirds of London's Underground network. The case is one of the three largest administrations in British history, and comes against a background of a flat market for big restructurings, despite the current upheavals in the credit markets.
Wednesday, November 02, 2005
The longest and most expensive trial in British history collapsed on 2 November when the liquidators of Bank of Credit and Commerce International (BCCI) unexpectedly dropped their case against the Bank of England.
The liquidators from Deloitte said their legal costs for the 256-day case were about UK£38 million (US$65 million). They face a hearing on Friday 11 November where the Bank has declared it will pursue them for its own costs of about UK£70 million (US$120 million).
The Judge Mr Justice Tomlinson said on Wednesday he may also make a further statement at that hearing about the way the liquidators pursued the case.
After hearing of the liquidators' shock decision on Wednesday morning, Mr Justice Tomlinson said the documentary evidence and witness statements from former Bank officials had "left me in no doubt that the very serious allegations of impropriety and dishonesty ... are wholly without foundation".
The Judge added that he had been surprised throughout the year of the trial that it had continued so long.
BCCI was shut by regulators led by the Bank of England in 1991 following decades of corruption and hidden losses, which left it owing creditors over UK£10 billion (US$17 billion).
Deloitte pointed out this week that even with this week’s set-back, the liquidation has been a spectacular success. So far, Deloitte has paid out 75 per cent of the £4.1 billion
(US$7 billion) it has recovered to creditors and will pay back another 6 per cent by December. It estimated in 1991 that it would recover about 10 per cent of BCCI’s
losses, whereas now it is set to pay creditors about 80 per cent.
In dramatic scenes at the High Court in London on Wednesday, Nicholas Stadlen QC,
for the Bank, described the news of the liquidators’ withdrawal as a "the most
remarkable and humiliating climb-down in the history of England litigation" and
declared triumphantly: "This is unconditional surrender."
The allegations centred on 22 Bank officials who the liquidators claimed knew BCCI was in a bad state long before its crash and failed to take steps to prevent what has been described as the largest banking collapse in modern history. They also alleged the Bank knew it should never have granted a licence to BCCI in 1980.
Regulators the world over cannot be sued for negligence, so the liquidators were forced to sue for the much more serious allegation of misfeasance in public office –
that is, acting in a knowingly dishonest manner in order to deceive the public.
The Governor of the Bank, Mervyn King, who was coincidentally sitting at the back of the court on Wednesday, said he was "delighted" at the outcome. He said: "There has never been a shred of evidence to support these disgraceful allegations, and the case has collapsed as we always said it would.”
"The foolish determination to pursue a hopeless case for so long has also led to a huge waste of creditors' and taxpayers' money, and I hope everyone concerned will take a close look at how and why such a very weak case took 12 years to come to an end.
The Bank will be seeking the largest possible compensation for its costs," said King.
You can read the the full transcript of the sensational last day in court, as well as the
liquidator’s subsequent press statement,
Download this article, including BCCI Trial Firms and Faces.
Thursday, January 01, 1970
In one of the last cases to be heard in the UK’s House of Lords, a previous ruling on the Sigma structured investment vehicle (SIV) was overturned today, with huge implications for recoveries for many investment banks, hedge funds and other secured creditors of the largest ever SIV.
In one of the last cases to be heard in the UK’s House of Lords, a previous ruling on the Sigma structured investment vehicle (SIV) was overturned today, with huge implications for recoveries for many investment banks, hedge funds and other secured creditors of the largest ever SIV. The case concerned the interpretation of the security trust deed in Sigma Finance Corporation, the first SIV to be launched, whose assets were worth US$27 billion before the credit crunch. Today’s ruling is the first ever UK Supreme Court judgment on appeal. Today’s judgment overturns a Court of Appeal ruling that Sigma’s receivers were obliged to distribute assets to certain creditors holding early maturing notes following an event of default, a ruling which would have lead to no return for all other secured creditors who held notes maturing at a later date. The appeal was formulated on the basis that the Sigma assets should instead be distributed proportionally on a pari passu basis among all secured creditors irrespective of the dates their notes matured, a construction favoured by the Supreme Court. Sigma was established to invest in certain types of asset backed securities and other financial instruments. It transacted business with a limited pool of investors mainly comprising of holders of instruments issued or guaranteed by Sigma. When the market collapsed, Sigma became insolvent with total liabilities in excess of US$9 billion. Its assets, once valued at US$27 billion, realised just US$306 million at auction, crystallising an enormous loss for its secured creditors who totalled in excess of US$6 billion. Adam Plainer, London head of business restructuring and reorganisation at Jones Day, and his colleague of counsel Linton Bloomberg, acted on behalf of the lead appellant in all three courts over the past 12 months. The lead appellant was owed US$500 million. Plainer said today: “We are delighted to have overturned the Court of Appeal and make a substantial recovery on behalf of our client. It is fundamental that investors have some certainty as to how any courts are likely to interpret conflicting provisions in an insolvency”. Bloomberg added: “The judgment is notable, not just for the values at stake, but also because it may have an impact on the legal interpretation of waterfall clauses in other cases where asset values have plummeted beyond the contemplation of the lawyers drafting the original documentation. “Pari passu has always been a fundamental principle of insolvency law and this case shows that the Courts will be reluctant to find in favour of any other distribution regime unless the documentation is expressly clear and unambiguous.”