10 May Chapter 15 Round-Up: February – April 2009
The first four months of 2009 have been busy ones for Chapter 15 filings. Though New York has, to date, been and remains the focal point for a significant amount of cross-border work, the Bankruptcy Code’s newest chapter was pressed into service in a variety of cross-border insolvencies around the country. The following summary (culled from news reports and from the national dockets) highlights some of the more notable filings from February through April:
– Brazilian beef exporter, leather manufacturer, and logistics operator Independencia SA sought recognition on Febriary 27 from New York’s judge Stuart Bernstein with respect to its Brazilian “recuperação judicial” – the equivalent of a Chapter 11 reorganization – then pending in the Lower Civil Court of Cajamar in São Paulo. At the time of the filing, approximately $525 million of the company’s $1.2 billion in debt was in outstanding bonds priced at 9.875%. The Chapter 15 proceeding was commenced to protect US-based assets (primarily bank accounts and accounts receivable) and to stay US-based litigation.
– On February 10, PricewaterhouseCoopers AG, Zurich (“PwC”), in its role as the bankruptcy liquidator and putative foreign representative of Lehman Brothers Finance AG (also known as Lehman Brothers Finance SA) (“LBF”), filed a Chapter 15 proceeding and concurrently sought the dismissal of LBF’s Chapter 11 bankruptcy case on the grounds that, under Bankruptcy Code section 305, the wholly owned subsidiary of Lehman Brothers Holdings Inc. was to be liquidated – and, further, that “[g]iven LBF’s limited connections to the U.S. and the existence of [LBF’s] swiss bankruptcy, PwC believes that a chapter 15 case is the most efficient and appropriate vehicle to administer any assets LBF may have in the United States, and that dismissal of the Chapter 11 Case is in the best interests of LBF, its creditors and equity holders.” According to the liquidators, “PwC has access to the books and records of LBF and has already done an in-depth investigation into LBF’s assets and liabilities, and is already tasked with protecting the interests of LBF’s creditors world-wide. In addition, as most of LBF’s creditors and assets are outside the U.S., maintaining the Chapter 11 Case will require LBF to expend unnecessary time, money and effort to coordinate the Chapter 11 Case with the swiss bankruptcy, which will deplete the estate and reduce the recovery of all stakeholders.” PwC’s motion was granted on March 13. One pending adversary involving LBF was transferred to the Chapter 15 case, while a second remained pending under the jointly administered Chapter 11 cases of Lehman Brothers Holdings, Inc., et al.
– On March 11, South Korean bulk ocean carrier Samsun Logix Corp. sought recognition of its rehabilitation proceeding under Korea’s Act on Rehabilitation and Bankruptcy of Debtors, commenced approximately one month previously in in the 3rd Bankruptcy Division of the Seoul Central District Court. The dry bulk shipping carrier sought recognition of its Korean case to protect its US-based assets during the pendency of the rehabilitation proceeding.
– Road Town, British Virgin Islands-based private investment holding company Grand Prix Associates Inc. and 10 affiliates filed Chapter 15 petitions on March 18 in Newark. The filings were commenced after the debtors sought protection in the High Court of Justice of the Eastern Caribbean Supreme Court, and were allegedly triggered by disputes over obligations with Credit Suisse Strategic Partners. The New Jersey filings were commenced to protect the companies’ US-based assests.
– Brazilian Air cargo transporter Varig Logistica SA sought recognition in Miami for its São Paulo restructuring on March 31. By the filing (and concurrent request for an injunction), the company sought relief from litigation in Florida and New York over aircraft leasing agreements while the reorganization proceeds. Litigants Pegasus Aviation I Inc., Pegasus Aviation II Inc., Pegasus Aviation IV Inc. and Pegasus Aviation V Inc. have sought relief from the automatic stay. A hearing is scheduled for May 11.
– Bernard Madoff’s English business unit, Madoff Securities International Ltd., sought Chapter 15 protection in on April 14 before Bankruptcy Judge Paul Hyman Jr. in West Palm Beach, Florida. Its liquidators seek recover assets, including a vintage Aston Martin automobile, from Madoff’s brother, Peter.
– Renton, Washington-based Washington Gaming Inc. and its corporate parent Evergreen Gaming Corp. sought recognition on April 15 in the Western District of Washington for their proposed reorganization under the Canadian Companies’ Creditors Arrangement Act (CCAA). The sole need for the Evergreen group’s decision to seek protection under the CCAA stems from Evergreen’s default with respect to a $29 million obligation to the company’s primary secured creditor, New York-based Fortress Credit Corp. The Chapter 15 case was initiated to protect the companies’ US assets while the CCAA proceeding is ongoing.
– British offshore oil and gas exploration and production company Oilexco North Sea Ltd. sought and obtained interim protection from Judge Robert Drain in New York on April 28 in advance of recognition of the company’s voluntary arrangement (CVA), then pending in London. Its Canadian parent, Oilexco Inc. – which sought separate protection under Canada’s Companies’ Creditors Arrangement Act on Feb. 5 – was not involved in the filing. Oilexco North Sea’s CVA was approved on April 15 and will be implemented on May 13, if not challenged in the interim. The company’s US filing was initiated to protect it from several domestic lawsuits.
– Clico (Bahamas) Ltd.‘s liquidator sought recognition of its Bahamian winding-up proceeding from Bankruptcy Judge Jay Cristol in Miami on April 28. The Caribbean insurer made more than $70 million in loans to various real estate developments in Florida. Recognition in the US would protect these assets, as well as others, from creditors and permit them be liquidated through the Bahamian proceedings.