Australian investors gain significant win against Standard & Poor’s

Investors in Australia, represented by Squire Patton Boggs in Sydney, have made history again with another big win over Standard & Poor’s (S&P). They were granted leave to pursue a “tort of deceit” claim, alleging that S&P intentionally altered its ratings methodology to achieve higher ratings in order to serve its business objectives. This is the first time that very technical and detailed allegations of fraud in S&P’s rating methodology have been pleaded worldwide. Continue Reading

Are You Breaking Up with Me? Termination Fees in Bankruptcy Called into Question.

U Turn SignIn a move that surprised bankruptcy practitioners and other observers, a Delaware bankruptcy court recently rescinded an order approving a $275 million break-up fee relating to a failed merger.  Judge Christopher Sontchi held that Debtor Energy Future Holdings could not pay the merger termination fee to NextEra Energy, the prospective buyer of nondebtor subsidiary, Oncor Electric Delivery Co., in part because the fee did not provide an actual benefit to the Debtors’ estate.

In justifying the “extraordinary step” of reversing his own year-old order approving the fee, Judge Sontchi found that he had previously relied on “imprecise and incorrect testimony by the Debtors’ witness.”  However, he also determined that, ultimately, the Court bore the blame for misunderstanding when the fee would be payable and when it would not be.  The ruling may cause some parties to reexamine how they structure bankruptcy sale procedures, particularly those including termination fees. Continue Reading

Shining a light on the GDPR – is the insolvency profession prepared?

Data ProtectionWhat is the GDPR?

The General Data Protection Regulation (GDPR) is an EU regulation designed to strengthen and harmonise data protection rules for processing data of all individuals within the EU and covers the transfer of such personal data outside the EU. One of the aims of the new legislation is to give control back to individuals over their personal data by establishing new rights for individuals in relation to their data and imposing more stringent obligations on companies that collect and process personal data.

Notwithstanding Brexit, the UK government intends to incorporate the GDPR into UK law, overriding the Data Protection Act 1998.  GDPR will become immediately effective in the UK on 25 May 2018. This blog looks at the GDPR from the perspective of the insolvency practitioner and what you may need to do to ensure compliance. Continue Reading

Arcapita Bank: The Bankruptcy Court Closes an Escape Valve for Foreign Defendants

Last Friday, October 13, Judge Sean H. Lane of the United States Bankruptcy Court for the Southern District of New York issued an opinion addressing the presumption against extraterritoriality of US law as well as the limits of the doctrine of international comity.  The opinion, issued in an adversary proceeding pending in the Arcapita Bank Chapter 11 bankruptcy case, is certain to have a dramatic impact in adversary proceedings involving foreign defendants.  Unfortunately for those foreign defendants, it may now be much more difficult to escape from those proceedings. Continue Reading

Hope for easier restructuring of SMEs: German Institute of Public Auditors propose new standard Restructuring Opinions

Urgency ConceptGerman insolvency laws are very strict. The management of an insolvent company is under strict obligations to file for insolvency, and failure to comply with such obligation may result in civil and criminal liability. Other stakeholders, like financing banks or suppliers, who are dealing with a distressed company, require documentation that their contract partner can be restructured, in order to avoid potential liability and claw back risk in case of a future insolvency. Shareholder loans which are granted as restructuring loans are exempted from the statutory subordination in insolvency under certain circumstances.

Consequently, there are many occasions where a distressed business needs to obtain a restructuring opinion. For many years, the standard for such restructuring opinions has been the “IDW S 6”, a standard set by the Institute of Public Auditors in Germany (“IDW”). This standard has successfully been used by many distressed companies to help their restructuring. However, restructuring opinions in accordance with IDW S 6 are usually large documents, in most cases with more than 100 pages of paper, which take several weeks to prepare, and the costs to obtain such an opinion often runs into six-digit Euro-sums. Therefore, small and medium sized enterprises (“SMEs”) have often not been able to finance the preparation of a restructuring opinion in accordance with IDW S 6. Continue Reading

UEFA’s Financial Fair Play Regulations: Neymar, Mbappe and PSG’s transfer policy – “Financial Doping” or Market Forces?

Football Manager in StadiumParis Saint Germain’s summer transfer activity came to an end in (Seine)sational style!

The facts speak for themselves:

  • The two largest football transfer fees in history – £366M combined spending on Neymar da Silva Santos Junior and Kylian Mbappe;
  • Combined wages of a reported £700k/week (both on 5 year contracts).

The signings of Neymar and Mbappe are an extraordinary statement for a club competing in Ligue 1; a league not considered to be the wealthiest of leagues comparative to its leading European competitors (Premier League, Bundesliga, La Liga, and Serie A).

This highlights the resources available to PSG’s Qatari owners and the expenditure that they are prepared to incur to put PSG at the head of European club football’s top table. PSG are owned by Oryx Qatar Sports Investments, an arm of Qatar’s sovereign wealth fund with access to £194 billion.  And the financial juggernaut shows no signs of easing up as recent reports suggest that PSG are lining up a £135M bid for Philippe Coutinho in the January transfer window.

But this has given some within football’s family reason for concern, particularly European football’s regulatory body, UEFA, who launched a formal investigation on 1 September 2017 into PSG over their compliance with UEFA’s break-even requirements. Continue Reading

First Circuit Holds Creditors Committees Always Have the Right to Intervene (Sort Of)

On September 22, 2017, the First Circuit Court of Appeals reversed the district court, and overruled its own prior guidance, to hold that a committee of unsecured creditors had the right to be heard in adversary proceedings related to the restructuring of Puerto Rico’s debt.  The Court’s decision in Assured Guar. Corp. v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R) places the First Circuit in the camp of federal circuits, which for now are the majority, that interpret Section 1109(b) of the Bankruptcy Code to provide committees an absolute right of intervention to be heard.

In June 2016, Congress enacted the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) to address Puerto Rico’s public debt crisis.  Among other things, PROMESA created a board (the “Board”) to oversee preparation of an annual fiscal plan designed to estimate the government’s revenues and expenditures.  PROMESA also gave the Board authority to commence “quasi-bankruptcy” restructuring proceedings, and incorporated all of the Federal Rules of Bankruptcy Procedure and many provisions of the Bankruptcy Code in such proceedings. Continue Reading

Declaration of debts by French debtors- creditor vigilance is still required!

Three years ago, the Commercial Code amended the procedure for declaring debts in France with the aim of simplifying the management of insolvency proceedings.

Before this reform, the only way for creditors (excluding employees) to declare their debts was to send their proof of debt to the receiver within 2 months (or 4 months for those living outside France) from the publication of the judgment opening the safeguard procedure, adminstration or liquidation – or be debarred.

In its new form, the Commercial Code still requires the creditor to declare its debts within the same timeframe as previously. In this regard, there are no changes – the novelty is elsewhere. Continue Reading

Employee Benefit Trusts and insolvency – the next big thing?

I will pay my taxes!Remuneration schemes involving Employee Benefit Trusts (EBTs) have become more prevalent over the last 20 years, often as a way of seeking to remunerate key employees without making pay as you earn or national insurance contributions. Given the developments highlighted below, insolvency practitioners are advised to investigate such schemes in matters coming across their desks to see whether funds can be clawed back for the benefit of creditors. Continue Reading