THE LAW AND PRACTICE OF RESTRUCTURING IN THE UK AND US

Transcription

1 THE LAW AND PRACTICE OF RESTRUCTURING IN THE UK AND US Edited by CHRISTOPHER MALLON AND SHAI Y. WAISMAN OXPORD UNIVERSITY PRESS

2 CONTENTS List of Contributors Table of Cases Table of Legislation xv xxiii xxxvii 1. Introduction 1 Christopher Mallon, Skadden, Arps, Slate, Meagher &Flom LLPand Shai Y. Waisman, Weil, Gotshal andmanges LLP 2. Emergency Sales in the US and the UK, 7 Scott Simpson and Jay M. Goffman, Skadden, Arps* Slate, Meagher &Flom LLP 2.1 Introduction Emergency sales in the US Distressed sales in the US Distressed sales in the US outside bankruptcy Distressed sales in the US in bankruptcy Emergency sales in the UK Introduction Key features Sale process ' Importance of valuation Consideration Due diligence Limited contractual protection Transitional services Sale structure Purchaser perspective Seller perspective Hive-downs Directors'duties Wrongful trading Vulnerable transactions Preferences Protective measures Role of stakeholders Shadow directorship issue 2.84 vn

3 Bondholders Shareholders Listed company shareholders Employees Pensions Regulators and competition authorities Sales within insolvency proceedings US and UK Tender Offers, Exchange Offers and Other Out-of-Court Restructurings 43 Nick P. Saggese, Casey T. Fleck, Glenn Walter, Nikolas K. Colbridge and Ryan Chen, Skadden, Arps, Slate, Meagher &Flom LLP 3.1 Introduction US restructurings General issues and considerations Cash repurchases of outstanding securities and tender offers Registered, section 3(a)(9), and section 4(2) exchange offers Amendments of outstanding debt securities Prepackaged plans of reorganization Bankruptcy Code provisions and rules relating to prepackaged chapter 11 plans UK bond repurchases and amendments General issues and considerations Repurchase of publicly listed debt Cramming down using debt tender offers and covenant strips Conclusion Loan Buybacks 87 Peter]. Coulton, Skadden, Arps, Slate, Meagher &Flom LLP, Douglas R. Urquhart, and Hoyoon Nam, Weil, Gotshal and Manges LLP 4.1 Introduction UK and US perspectives on buyback Common buyback structures Documentation issues Other legal and practical considerations Buyback methods Alternatives to buybacks Market trends Industry group developments Recent cases 4.58 vin

4 5. Duties of Directors and Management of Distressed Companies 109 Harvey R. Miller, Weil, Gotshal and Manges LLP, and Christopher Mallon, Skadden, Arps, Slate, Meagher &Flom LLP 5.1 Introduction Fiduciary duties of corporate directors within the context of insolvency in the UK Who owes the general duties? Determining when duties may be owed to creditors Directors'duties at common law Directors'statutory duties under the Companies Act Directors'statutory duties under the Insolvency Act Antecedent transactions Disqualification of directors Fiduciary duties of directors in management of distressed corporations in the US -^ Duty of loyalty Duty of care Duty of disclosure Alternate entities The business judgment rule Fiduciary duties in the zone of insolvency Conclusion Waivers, Amendments, and Standstills 149 Andrew Shutter and Duane McLaughlin, Cleary Gottlieb Steen & Hamilton LLP 6.1 Introduction Waivers temporary fixes Amendments short-or long-term fixes Standstills contractual or mandatory eg chapter 11/administration Legal considerations Voting requirements Unanimous/super majority matters Majority lender/holder matters Negative control Disenfranchisement of certain debt holders Dealing with hold outs Snooze and lose 6.33

5 6.3.2 Yank the bank Forward starts Process How to obtain waivers and amendments Syndicated loans UK/US Bonds Fees Giving Effect to Debt Compromise Arrangements Binding the Minority or Out of the Money Classes of Creditors 163 Gabriel Moss QC, Daniel Bay field, andadam Al-Attar, 3-4 South Square, andhowardseife and Seven Rivera, Chadbourne &Park LLP 1A Introduction English law Contractual compromise Voluntary arrangements., Schemes of arrangement US law Introduction Out of court agreements between borrower and creditor(s) Prepackaged bankruptcies Chapter 15, section 304 and schemes of arrangement Conclusion Restructuring Through US Chapter 11 and UK Prepack Administration 213 Ben Larkin, Berwin, Leighton, Paisner, andjoseph Smolinsky, Weil, Gotshal and Manges LLP 8.1 Introduction US chapter Why use a formal insolvency process? An overview of chapter The plan confirmation process Prepackaged, prenegotiated, and free-fall chapter 11 cases UK prepack administration What is a prepackaged insolvency sale or'prepack'? Who drives the strategy in a restructuring? Formal insolvency process Considerations for the office holder Particular considerations for secured lenders Why do stakeholders use pre packs? 8.74

6 8.3.7 What is the purpose of a pre pack? What are the disadvantages of a pre pack? Issues arising in the retail sector Tax and pre packs Employee issues Regulation of pre packs Sip 16 consultation and reporting Conclusion Tax Issues in Restructuring 247 Philip Ridgway, Temple Tax Chamber, and Stuart J. Goldringand Max A. Goodman, Weil, Gotshal and Manges LLP 9.1 Introduction US tax \ Debt-for-debt exchanges, and significant modifications ofdebt l Debt repurchases and related party acquisitions ofdebt Debt-for-equity exchanges Cancellation of debt income exceptions Change in ownership limitations on tax attributes Additional planning considerations UK tax Debt restructuring general Loan relationships Debt restructuring specific cases Debt repurchases Tax consequences of a change in control Conclusion Restructuring of Structured Finance Transactions 285 Adrian Harris andalper Deniz, Chadbourne &Park LLP, and Paula S. Greenman, Skadden, Arps, Slate, Meagher &Flom LLP 10.1 Introduction Upheaval in the global capital markets Structured finance restructurings are opportunistic Factors that enable a restructuring to occur Issues in restructuring Practical issues Legal issues XI

7 10.3 Transaction types The rise and fall of structured investment vehicles Collateralized debt obligations Commercial mortgage-backed securities Conclusions Compromising Shareholder Claims both Generally and in Listed Companies 325 Philip Hertz, Daniel Kossoff, and Gabrielle Ruiz, Clifford Chance, and Shai Y. Waisman, Weil, Gotshal and Manges LLP Introduction US 11.3 UK Who are the shareholders? '' l Economic interest Valuation Situations requiring a compromise of shareholder rights Funding issues Balance sheet restructuring Implementation techniques Shareholder rights Conclusion Employees and Trade Unions 351 Michael Sippitt and Nick Huffer, Clerkslegal LLP, and Eric Ivester andmatt Kriegel, Skadden, Arps, Slate, Meagher &Flom LLP 12.1 Introduction Employees and trade unions in the US Bildisco and section Standards for rejection of collective bargaining agreements Effects of rejection Conclusion Employees and trade unions in the UK Advantages ofa strategic approach Insolvency TUPE Regulations Employment relations and consultation xn

8 13. Pension Scheme Trustees and Regulators 391 Alastair Meeks, Pinsent Masons, and Michael K. Kam, Weil, Gotshal and Manges LLP 13.1 Introduction UK Introduction Pensions legislation affecting insolvency and restructuring Apportionment arrangements and withdrawal arrangements The Pension Protection Fund The Pensions Regulator Pension scheme restructuring US,, Pensions legislation affecting insolvency and restructuring Pension termination insurance program Termination of single employer plans involuntary or distress termination Rights of the PBGC following any plan termination Sale ofassets by debtor Termination in violation of a collective bargaining agreement is not allowed PBGC premiums payable by reorganized debtors Restoration of terminated plans Conclusion Cross-Border Issues 431 Christopher Mallon, Skadden, Arps, Slate, Meagher &Flom LLP and Shai Y, Waisman, Weil, Gotshal and Manges LLP 14.1 Introduction Cross-border insolvency in the UK EC Regulation on insolvency proceedings Implementation of the UNCITRAL Model Law on Cross Border Insolvency Proceedings (the 'Model Law') in Great Britain Cross-border jurisdiction under the Insolvency Act English common law Cross-border insolvency in the US Cross-border insolvencies prior to the Bankruptcy Reform Act of xni

9 Section 304 of the Bankruptcy Code Chapter 15 ofthe US Bankruptcy Code Conclusion Index 475 xiv