Marblegate’s Lost Marbles and Why Bondholders and Indenture Trustees Should Care

Old Glass MarblesThis week the U.S. Court of Appeals for the Second Circuit issued its highly-anticipated ruling in Marblegate Asset Management, LLC v. Education Management Corp. (“Marblegate”).  At issue in Marblegate was whether Education Management Corp. (“EDMC”) violated the Trust Indenture Act when it implemented a restructuring that impaired the rights of Marblegate Asset Management, LLC (“MAM”).  The Second Circuit reversed the District Court’s decision in favor of MAM, and held that EDMC’s restructuring did not violate the TIA.  The Second Circuit’s majority opinion is narrow and finds that the TIA “prohibits only non-consensual amendments to an indenture’s core payment terms.”  The dissenting opinion views the facts from a completely different perspective and states that Section 316(b) should protect bondholders from “collusively engineered” restructurings. Continue Reading

Bradford Bulls arise from the ashes?

rugby-postsFollowing the liquidation of Bradford Bulls earlier this month, the Rugby Football League have agreed a deal for a new rugby league team based in Bradford to commence life in the Kingstone Press Championship for the start of the 2017 season on 5th February 2017.

After a brief bidding process for the rights to incorporate the new club, former New Zealand Rugby League chairman Andrew Chalmers and ex-Wigan coach Graham Lowe have been announced as the owners of the newly formed club. A company named Bradford Bulls 2017 Limited was incorporated on 13 January 2017 and it is anticipated that this entity will be the operating company for the new team.  The newly formed company is wholly owned by the New Zealand registered company The Orcas Rugby League Limited, which is associated with Chalmers and Lowe. Continue Reading

Are Structured Dismissals on Hold Pending the Supreme Court’s Decision in Jevic?

Access denied signAmerican Apparel, the struggling clothing manufacturer and retailer, found itself in chapter 11 this past November after failing to implement its turnaround plan amid a challenging retail environment.  Last week, Judge Shannon in the District of Delaware approved a largely consensual sale of American Apparel’s assets to Gildan Activewear.  While the hearing transcript is not yet available, several sources are reporting that, when discussing next steps in the case, Judge Shannon indicated that he is not likely to entertain a structured dismissal.  In fact, one source quoted Judge Shannon as saying he “is not likely going out on that limb now” and that “to the extent [he is] the structured dismissal guy, [he is] on hiatus.” Continue Reading

The Road Ahead for 2017 – Restructuring & Insolvency in Australia

Road to 2017

It is anticipated that, by the middle of the year, Australia will see the most significant reform to the corporate and personal insolvency environment in two decades. The reforms, which appear likely to be supported by all sides of government, are designed to promote business preservation and allow greater flexibility in order to ‘turnaround’ distressed companies. Continue Reading

The Road Ahead for 2017 – Restructuring & Insolvency in US

Road to 2017Slide Rules and Hula Hoops – Business Obsolescence and Bankruptcy

One of the functions that bankruptcy proceedings can serve is to encourage entrepreneurship by allowing people to pursue bold innovations while still allowing them to recover if their new ideas don’t prove successful. Another equally important function is to provide a structure for restructuring or liquidation of businesses that have become obsolete.  There are several ways in which a business can become distressed by obsolescence.  The slide rule business was left in the dust as technology developed and the slide rule was permanently replaced by more advanced devices. Similarly, typewriters have all but disappeared following the development of computers and keyboards. Continue Reading

The Road Ahead for 2017– Restructuring & Insolvency in the UK

Road to 2017The uncertainties of the UK’s Brexit negotiations with the remaining 27 EU member states are weighing heavily on the UK economy. The 2 years of negotiations will not even begin until notice is served under Article 50 and the procedure as to how Article 50 can be triggered will be the subject of a Supreme Court decision expected later this month.

In the Financial Times’ annual survey of 120 economists published on 2 January 2017 (“FT Survey”), the majority of economists expect UK growth will slow markedly in 2017, household incomes will be squeezed by higher inflation and businesses will hold back on investment decisions because of uncertainty about Brexit. The depreciation of sterling is likely to lead to inflation and whilst it is good news for British exporters, imported goods will become more expensive. As wages are likely to rise more slowly, most economists predict this will hold back consumer spending (which has fuelled UK growth in 2016) and will detrimentally affect retailers.

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The Road Ahead for 2017 – Restructuring & Insolvency in Germany and the EU

Road to 2017

While the number of corporate insolvencies in Germany has declined over the last couple of years, the general market perception is that the number of insolvencies may increase again in 2017. Also, as more larger companies are facing distressed situations, the overall value of distressed debt is therefore expected to rise as well.

The legal framework for restructuring & insolvency in Germany will also change in 2017, not only based on domestic legislation, but also because of developments on the EU level.

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A TUPE sting in the tail – Project Viva Limited (In Administration)

An employment tribunal has recently confirmed that employees who have been unfairly dismissed from an insolvent employer can bring an action against a connected successor company.Cartoon-Businessman-Running-From-Bees

The tribunal held that there was a ‘commonality of ownership’ between the original and successor companies and that it was correct as a matter of public policy that employees should be able to sue the newco born from the ashes of the insolvent company.

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Serial Filers: Lenders And Lessors Given A New Remedy

Try-Again-Computer-Monitor-ButtonWhat can a lender do about successive bankruptcy filings by a borrower? What can lessors do when their tenants file successive bankruptcy petitions?  A recent decision by a bankruptcy court in the Eastern District of New York gives guidance on these questions.

Readers of this blog know that immediately upon the filing of a bankruptcy petition, section 362(a) of the Bankruptcy Code imposes a stay on a variety of creditor activities. It freezes all actions to collect prepetition debts, as well as many other actions that could be taken by creditors against the debtor or property of the estate.  The automatic stay is an integral part of the bankruptcy process, as it gives the debtor immediate relief from its creditors and an opportunity to deal with the creditors as permitted by the Bankruptcy Code.

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New Year; New Personal Insolvency Regime for Slovakia

Map of Slovakia

The Slovak personal insolvency regime will change on March 1, 2017. The new system is aimed at opening personal insolvency to a wider debtor audience, while keeping it simple and cost effective. Today, only those individuals with assets over EUR 1,659.70 could seek a declaration of bankruptcy. Otherwise, the proceedings would be stopped and the doors to a “fresh start” would be closed for “poor” debtors (also called No Income No Asset debtors (NINAs)).

It is important to understand the motivation behind the new rules as one may find the new proceeding too open and accessible, leaving a lot of room for abuse and little protection for the creditors.  The new insolvency proceedings could have been made more complicated, with lots of pre-opening scrutiny, much bigger involvement of a court, but that would obviously have raised the costs of such proceedings to much higher figures.

So what is changing? Continue Reading