The Distressed Download Newsletter is a roundup of recent news from Orrick's Distressed Download blog, a resource for the latest news and industry trends in the distressed debt and restructuring markets.
European Restructuring Developments
Debtwire European Distressed Debt Market Outlook 2016
By Stephen Phillips
Distressed investors did not witness the anticipated wave of European high yield restructurings in 2015, but with significant stock market declines and a growing sense of economic anxiety, participants in the 12th European Distressed Debt Market Outlook expect a marked increase in restructuring activity in 2016. Despite improved European growth and stronger U.S. economic data, falling commodity prices (particularly oil) and the higher number of high yield bonds trading at distressed levels suggest another year of volatility is in store.
Orrick partner and co-head of Europe Restructuring Stephen Phillips recently joined the Debtwire panel addressing these issues.
To access the full report, click here. To view the video of the panel, please click here.
U.S. Case Updates and Analysis
Oil & Gas Bankruptcy Issues: Video Series
By Raniero D'Aversa and Douglas Mintz
Part 1: Current Industry Situation and Background
In this first of five videos on the oil & gas industry, Orrick Restructuring Chair Ron D'Aversa and Restructuring Partner Doug Mintz discuss changes the industry has seen in recent months and how these changes are affecting oil & gas companies.
Part 2: Typical Deal Structures and Financings
In the second installment of this video series, Ron and Doug discuss oil & gas deal structures and oil & gas financings.
Part 3: Unique Structuring Issues
In this video, Ron and Doug explore the unique ways in which oil & gas interests are transferred, how these interests are treated in bankruptcy and offer clues as to what courts will look at when issues concerning carved-out interests arise.
Stay tuned for the remaining videos in the series, and feel free to reach out to Ron or Doug with any specific questions.
Seventh Circuit Holds Section 105(a) Permits Stay of Litigation Against Non-Debtor Affiliates
By Douglas Mintz and Monica Perrigino
Section 105(a) of the Bankruptcy Code provides that a bankruptcy court "may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). In the Caesars bankruptcy, the Seventh Circuit explored the breadth of a court's rights to take action under this section. The Seventh Circuit held that section 105(a) permits the Bankruptcy Court to issue an injunction with respect to litigation pending against the debtors' non-debtor parent. The Court of Appeals did not ultimately determine whether the stay should in fact be granted because "that's an issue for the bankruptcy judge to resolve in the first instance;" rather, it held that the Bankruptcy Court and District Court had erred in interpreting section 105(a) too narrowly in denying the stay sought by the debtors. In re Caesars Entm't Operating Co., Inc., No. 15-3259, 2015 WL 9311432 (7th Cir. Dec. 23, 2015). Read more.
Solus v. Perry: Case Update
By Raniero D'Aversa, Amy Pasacreta and Matthew Fechik
Since May, we've followed Solus v. Perry, a New York County Supreme Court case originally filed in July of 2012. The case centered around whether Perry entered into a binding oral agreement to sell Solus a participation interest in a $1.6 billion claim against Bernie Madoff's bankruptcy estate. The parties agreed on a price and some other material terms during a phone call in April of 2012 but never signed a written agreement. In its pleadings, Perry claimed that because its trader noted that the trade was "subject to documentation," no agreement was ever formed.
On December 14, 2015, the parties filed a stipulation discontinuing the case with prejudice. For the full update, click here.
Update on Puerto Rico
By Lorraine McGowen
Supreme Court to Determine Constitutionality of DERA
By order dated December 4, 2015, the US Supreme Court has agreed to consider the appeal by the Commonwealth and the Government Development Bank regarding the constitutionality of the Commonwealth's Debt Enforcement & Recovery Act (DERA). In requesting the Supreme Court to consider its appeal, the Commonwealth stated that this case "presents a question of extraordinary importance and urgency and that the lack of a bankruptcy framework is hindering negotiations to reach a restructuring agreement.
Supervisory Oversight Board
On November 17, 2015, the Puerto Rico legislatures sent to the Governor for signature an act to create an independent local supervisory board to be called the "Board for the Financial Supervision and Economic Recover of Puerto Rico" (Senate Bill 1513; House Bill 2718) (the "Act"). The Act represents a compromise amongst versions introduced by the Governor of Puerto Rico (that would have created a local fiscal control board) and what was passed by the each of the Puerto Rico legislative houses. The Act creates a five-member independent supervisory board which will be tasked with reviewing and endorsing a five-year consolidated fiscal and economic plan to be submitted by Governor Padilla's working group (described below).
The legislatures have identified that the goal of the Act is to reduce and eliminate the fiscal deficit, while promoting an economic growth which will guarantee the welfare of the Commonwealth residents and the payment of debt.
Read more updates, including on the exercise of constitutional clawback, congressional hearings and a special session for consideration of PREPA Bill, here.
Foreign Debtors' Access to U.S. Bankruptcy Courts: Expansion of "Property in the United States" Definition in Chapter 15 Cases
By Peter Amend and Monica Perrigino
When is a foreign entity eligible to file a chapter 15 petition? This question has been the subject of debate over the last few years, and Judge Martin Glenn's recent opinion in In re Berau Capital Resources Pte Ltd. will add to this debate. Although the debtor in the case was foreign and did not have a place of business in the United States, Judge Glenn concluded that the debtor had satisfied the eligibility provisions under section 109(a) of the Bankruptcy Code because the New York choice of law and forum selection clause in the underlying bond indenture rendered the bonds "property in the United States." No. 15-11804 (MG), 2015 WL 6507871 (Bankr. S.D.N.Y. Oct. 28, 2015). Read more.
Privacy Policies and the Sale of Corporate Assets: It pays to plan ahead to preserve the value of your data assets
By Amy Pasacreta, Matthew Fechik, Emily Tabatabai and Shea Gordon Leitch
Personal data is a valuable corporate asset. At times, the personal information collected from customers (such as email address, mailing address, phone number, etc.) can be a company's most valuable asset. Unfortunately, when a company attempts to sell this asset, it can find the value of the data significantly diminished due to promises made in a privacy policy the company implemented years before it ever contemplated such a sale. Read more
