Chapter 15 Answers that My Bankruptcy Teacher Never Told Me

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Lucas Garrett
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1 Chapter 15 Answers that My Bankruptcy Teacher Never Told Me CONCURRENT SESSION Ronald J. Silverman, Moderator Hogan Lovells; New York Hon. Leif M. Clark (ret.) San Antonio Hon. Mr. Justice Geoffrey B. Morawetz Superior Court of Justice - Toronto Region; Toronto R. Adam Swick Reid Collins & Tsai LLP; Austin, Texas Claudia R. Tobler Paul, Weiss, Rifkind, Wharton & Garrison LLP; Washington, D.C. 2015

2 Access circuit court opinion summaries From the Courts to You within 24 Hours! With Volo: Receive case summaries and view full decisions Automatically have opinions in your circuit delivered Search by circuit, case name or topic Access it free as an ABI member Be the First to Know with Volo volo.abi.org 66 Canal Center Plaza Suite 600 Alexandria, VA phone: abi.org Join our networks to expand yours: 2015 American Bankruptcy Institute All Rights Reserved.

3 AMERICAN BANKRUPTCY INSTITUTE 3/2/15 Washington, DC April 2015 SINO-FOREST CORPORATION (SFC): Canadian public holding company Subsidiaries owned forestry assets mainly located in China Common shares listed on Toronto Stock Exchange $1.8 billion unsecured notes

4 ANNUAL SPRING MEETING /2/15 INSOLVENCY Muddy Waters Report: June 2011 SFC is a near total fraud and a Ponzi scheme SFC obtains Initial Order under CCAA, which includes stay of proceedings against SFC and subsidiaries The black vertical line indicates the date Muddy Waters publicised its report and short position CLASS ACTIONS $9.2 billion in damages sought by shareholders and noteholders in proposed class action against SFC, underwriters and auditors Underwriters and auditors claim they are indemnified by SFC 2 248

5 AMERICAN BANKRUPTCY INSTITUTE 3/2/15 EQUITY CLAIMS Subordinate to debt claims under CCAA SFC sought declaration that: shareholder claims are equity claims auditor and underwriter indemnity claims against SFC, stemming from the shareholder claims, are equity claims EQUITY CLAIMS AS DEFINED IN S.2 OF THE CCAA equity claim means a claim that is in respect of an equity interest, including a claim for, among others, d) a monetary loss resulting from the ownership, purchase or sale of an equity interest or from the rescission of a purchase or sale of an equity interest, or e) contribution or indemnity in respect of a claim referred to in paragraphs (a) to (d); equity interest means a share in the company 3 249

6 ANNUAL SPRING MEETING /2/15 THIRD PARTY RELEASE & RECOGNITION $117 million settlement proposed between Ernst & Young and class action claimants Conditional on: Third-party releases which preclude any right to contribution or indemnity against E&Y. ú Granted in Ontario Chapter 15 recognition order in United States ú Granted in United Sates Bankruptcy Court for the Southern District of New York, 4 250

7 4/9/15 SCOPE OF SECTION 1521(a)(7) Context Recogni.on and Relief Automa.cally Available upon Recogni.on Sec.on 1520(a): Upon recogni.on of a foreign proceeding that is a foreign main proceeding 361 and , 549, and 552 SCOPE OF SECTION 1517(A)(7) Addi+onal Relief Sec.on 1521(a): Upon recogni.on of a foreign proceeding, whether main or nonmain... The court may, at the request of the foreign representa4ve, grant appropriate relief, including (1)- (3) stays (4) discovery (5) entrus.ng the administra.on or realiza.on of US assets (6) extending provisional relief... AND 1

8 4/9/15 SCOPE OF SECTION 1517(a)(7) (7) gran.ng any addi.onal relief that may be available to a trustee, except for relief available under sec.ons 522, 544, 545, 547, 548, 550, and 724(a) Does any really mean any? Sec.on 103 s impact SCOPE OF SECTION 1517(a)(7) Case Law Examples In re Condor, 601 F.3d 319 (5th Cir. 2010) Foreign avoidance law In re AJW Offshore, Ltd., 488 B.R. 551 (Bankr. E.D.N.Y. 2013) Turnover under Sec.on 542(e) In re Fairfield Sentry Ltd., 452 B.R. 52 (Bankr. S.D.N.Y. 2011) Sec.on 108 (not really addi.onal relief) 2

9 4/9/15 SCOPE OF SECTION 1517(a)(7) Limita+ons Statutory Sec.on 1521(a): relief may be granted where necessary to effectuate the purpose of this chapter and to protect the assets of the debtor or the interests of the creditors Sec.on 1522(a): relief under Sec.on 1521 may be granted, modified, or terminated only if the interests of the creditors and other interested en..es... are sufficiently protected Sec.on 1522(b): The court may subject relief granted under sec.on To condi.ons it considers appropriate, including the giving of security or filing of a bond. Court s power is broad and discre.onary, as opposed to with recogni.on 3

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Momentive: Revisiting Till and Secured Creditor Cramdown

Momentive: Revisiting Till and Secured Creditor Cramdown Andrew Scruton, Moderator FTI Consulting, Inc.; New York William Q. Derrough Moelis & Company; New York Dennis F. Dunne Milbank, Tweed, Hadley &