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Editor's Note Obtaining rescue finance is an essential preliminary step where a company restructuring is proposed. In the current climate, raising rescue finance often presents a significant challenge, wherever the company is based. Mindful of this, the UK Government through the recent Budget speech of Alistair Darling, the Chancellor of the Exchequer, has announced that the UK Insolvency Service will carry out an urgent consultation on rescue funding. The consultation will look at ‘providing for new funding lent to companies in Company Voluntary Arrangements (CVA) or administration to have absolute priority status’ with a view to facilitating companies in difficulty to access the funding they need to get them back on track. When the UK government last carried out significant substantive reforms to UK insolvency legislation in the 1990s, leading to the introduction of a more streamlined administration process in 2003, the issue of super-priority finance was ducked as being a step too far. Many considered this then to have been a lost opportunity. Time will tell whether the UK government’s announcement will result in reform, and, if so, as to its timing. Looking at the headline US $8 million DIP finance facility agreed by the US courts earlier this spring for the giant petro-chemical group, Lyondell Basell, however, it is noteworthy that such funding could not have been provided in Europe, where the group’s ultimate parent company and much of its business is based. This all adds weight to the view that urgent funding reform is required. The highlight article in this edition of the Electronic Newsletter continues on the theme of funding and asks the timely question of whether DIP loans under US chapter 11 provide opportunities for hedge funds and other new lenders. Sally Willcock |
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Are DIP Loans Worth the Investment? A debtor-in-possession loan (commonly referred to as a “DIP” loan) is a loan extended to a company in chapter 11. Obtaining a DIP loan (or getting the court’s permission to use cash collateral pledged to existing lenders) is an essential first step to enable the reorganizing company to continue its operations. As the default rate for leveraged loans continues to increase (with the March 3 , 2009 S&P/LSTA Leveraged Loan Index at a record 8.02% by amount outstanding), DIP loans have been attracting a great deal of attention, both among companies contemplating commencing chapter 11 cases and investors looking for opportunities to employ capital. At the same time, many “traditional” sources of DIP capital have announced that they are reducing exposure to, or exiting entirely from, the DIP market. This lack of liquidity has increased yields on DIP loans to historic highs and made DIP loans attractive investments from a purely economic perspective. But do DIP loans provide opportunities for hedge funds and other non-incumbent investors, and are they worth the risk? This article covers interesting and important topics such as priming issues — a barrier to entry? advantages of DIP investments for hedge funds, and risks and other considerations. For more details please click here. By |
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Bell Creditors Get $1.5 Billion The Bell Group Ltd (in Liq) -V- Westpac Banking Corporation [No 10] [2009] WASC 107 Creditors of Alan Bond's former Bell Group of companies have been awarded more than $1.5 billion following one of Australia's longest running legal sagas. West Australian Supreme Court Justice Neville Owen has ordered a syndicate of 20 banks, including Westpac, National Australia Bank and the Commonwealth Bank, to pay Bell Group creditors around $350 million, as well as an estimated $1.2 billion in compound interest. The liquidators claimed banks took advantage of Bell Group in its dying days, securing lucrative assets in return for refinancing. They alleged the banks knew the group's stable of more than 80 companies was close to insolvency. Justice Owen has already found that the banks did not engage in any "conscious wrongdoing" or dishonesty in their handling of the matter. In his final judgment however, he said "as a matter of principle" the plaintiffs appeared to be entitled to "compensation calculated on the full amount of primary monetary relief". The syndicate of banks said an application for appeal would be lodged in the West Australian Supreme Court. For more details of this news item please click here. | ||||||||||||||||||||
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Insolvency Law - Change is Coming... This briefing considers the statement on proposed insolvency law reforms included in the Chancellor’s Budget Report of 22 April 2009. Please see a breifing from Freshfields Bruckhause Deringer, April 2009. Americas Section 4 of the Argentine Insolvency Act and Multinational Proceedings Argentine Insolvency Act sets forth effective conflict of law rules applicable to insolvency proceedings held in Argentina that have multinational elements. The international regime for insolvency proceedings is stated in Section 4 of the effective insolvency proceedings law, which includes a number of private international law principles on the matter. These principles govern those insolvency proceedings with international elements that do not fall within the scope of international treaties ratified by Argentina. The article also discusses in detail the current statutory provision relating to cross-border insolvency, the relevant case law and provides an overview of the cross-border legal frame work. For the full article please see article by Prof. Dr. Hector José Miguens, INSOL Scholar. TALF for New-Issue CMBS: New York Fed Releases Terms and Conditions, FAQs and Revised TALF FAQs On 1st May 2009 the Federal Reserve Board announced that, beginning in late June 2009, new-issue commercial mortgage-backed securities will be eligible collateral under the Term Asset-Backed Securities Loan Facility. At the same time, the Federal Reserve Bank of New York released the terms and conditions for this program, including the criteria for TALF-eligible CMBS and underlying assets and the required terms of the TALF loans. This memorandum summarizes the eligibility criteria for CMBS used to obtain TALF financing, as well as the expected terms of TALF financing secured by CMBS. For more details please see Clients & Friends Memo, Cadwalader Wickersham & Taft LLP, 2 May 2009. |
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The Convergence and Harmonisation of Insolvency Laws In this article, the author discusses the impact of harmonisation on a European and wider global scale. He suggests that the mere comprehension of the higher efficiency of certain legislative models would probably not suffice to achieve the degree of convergence that we now see on an almost global level. What has to come with this insight is the political will to converge and to harmonise. Surprisingly, such combination of comprehension and political will occurred twice within a few years during the last decade or so – firstly on a global level, and secondly on the European level. For the full article please see Eurofenix, Spring 2009, P. 16 | ||||||||||||||||||||
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Australia Annual Review on Corporate Insolvency & Restructuring The Review brings together the most important cases and developments in insolvency and restructuring during the past 12 months in Australia and the region. Of particular note is the commencement of the Cross-Border Insolvency Act 2008 in Australia which came into effect on 1 July 2008 which implements the Model Law on Cross-Border Insolvency as well as other international cross-border insolvency decisions. | ||||||||||||||||||||
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INSOL 2009 - Eighth World Congress Vancouver, 21st-24th June 2009 Main Congress Program With only one month until the Quadrennial Congress, now is the time to guarantee your booking by registering to ensure your place at INSOL 2009. INSOL Conferences are becoming must attends in everyone's diaries and the Quadrennial is defiantly the meeting not to miss in 2009. It is a truly international Congress - a meeting of minds of those interested in what's happening in the world of the turnaround and insolvency profession. For the main registration brochure please click here. INSOL 2009 - Ancillary Meetings Whilst booking for the main Congress make a note to register for our ancillary meetings that you may like to attend. Delegate places are limited and you are encouraged to register early to avoid disappointment. Please click on the links below for further details. |
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This issue was kindly sponsored by:
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INSOL Contacts If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Manager, Sonali Abeyratne at sonali@insol.ision.co.uk If you would like to introduce a new member to INSOL International please contact, Jelena Sisko at jelena@insol.ision.co.uk |
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