The Brazilian Restructuring and Bankruptcy Law (Law Nr. 11.101 of 2005) is expected to be amended within the year. Supporters of the amendments hope to accelerate the insolvency process and equalize the bargaining power between equity and debt holders. The idea is to create a bankruptcy regime that will lead to a more efficient credit market and promote enterprise rehabilitation. The proposed amendments are likely to create sharp differences of opinion between debtor and creditor interests and for now they are just that – proposals.

These are some of the potential amendments currently under discussion:

Wider Scope of the Bankruptcy Law


Judicial recovery would be extended to cover any “economic agent”. This would include any state-owned company (sociedade de economia mista) such as Petrobras or Eletrobras.

Included Credits

Credits secured by alienação fiduciária (a type of in rem financing widely used in real estate and automobile finance) and currency exchange contract advances (adiantamento de contrato de câmbio(ACC) – an important source of financing for exporters) would be subject to judicial restructuring, whereas they are exempt under present law. In the event of  liquidation, credits secured by alienação fiduciária would, like other secured debt, enjoy second rank right of payment (after essential bankruptcy administration expenses) and ACC´s would be considered unsecured debt.

Tax credits would become the only credits not subject to judicial restructuring.

Labor liabilities (i.e., credit rights arising from labor laws or indemnities owed due to labor accidents) could also be negotiated in extrajudicial restructurings. Under present law they may only be addressed in in-court proceedings.

DIP Financing

DIP financing could be used to finance debtor operations, restructuring costs or to preserve the value of debtor assets.  Credits arising from DIP financing would gain elevated repayment priority (after secured debt), though there are no provisions for cross-collateralization or roll-ups and DIP loan priming would only be available with the express consent of secured creditors.

Once a public notice of a DIP financing proposal has been issued, the proposal would be presented to a Creditors’ Meeting for approval only if, within five days after such public notice, at least five percent of creditors call for such a Creditors’ Meeting, failing which the proposal would be deemed automatically approved.   A DIP lender would also be allowed to advance up to ten percent of the proposed financing prior to the Creditors’ Meeting.  DIP loan advances would have repayment preference in the event of liquidation.


The debtor would now have 90 (instead of 60) days to present a Judicial Recovery Plan (“JRP”), counted from the date the court allows the judicial restructuring to proceed.  This time extension would allow the debtor the opportunity to design a more commercially viable reorganization that would be more likely to obtain approval at the Creditors’ Meeting.   On the other hand, the Creditors’ Meeting would need to be held 120 (rather than 150) days after such date.  Furthermore, the judicial restructuring would be deemed closed once the judge ratifies the duly approved JRP. The two year judicial monitoring period following ratification would be abolished and debtors that fail to comply with the JRP will face liquidation.

Successor Liability

There would be no successor liability for any goods or rights of any kind sold by the debtor pursuant to a duly approved JRP, including branches and isolated productive units.  This would extend to any debtor liabilities for taxes, labor claims or criminal fines and sanctions.  Such sales could also be made by capitalizing new entities with debtor assets and selling the newly-created entities.

Substantive and Procedural Consolidation


Subject to new cram-down provisions, substantive consolidation of separate debtors could be granted if approved at the Creditors’ Meetings of each separate debtor. As a result, the assets and liabilities of the entire economic group would be consolidated into a single proceeding. Judges could also order substantive consolidation in instances of fraud or where assets and liabilities have been co-mingled.


One Judicial Administrator could be appointed to manage separate but related proceedings even where each debtor has its own JRP and there is no consolidation of assets and liabilities.

Creditor Classes

The debtor would be free to establish the makeup of each creditor class in the JRP, though labor claims would need to remain in a separate class.  The current Restructuring and Bankruptcy Law mandates that creditors vote in four, specifically defined classes: (1) labor claims, (2) secured creditors, (3) unsecured creditors and (4) micro-business creditors.

Subject to new cram-down provisions, each of the creditor classes would need to approve the JRP.  Approval would require the favorable vote of creditors representing more than half of the value of the credit of the class and a simple majority of the creditors present at the meeting.


Judicial Restructuring Plan

Even if the JRP is not approved by all of the creditor classes, it could be ratified by the presiding judge if it were approved by at least one class and the JRP would not subject the creditors of the dissenting classes to a greater loss than what they would suffer in the event of liquidation and the JRP provides for “reasonable economic treatment” of the dissenting classes.

Substantive Consolidation

A judge could also order substantive consolidation even when it is not approved at the Creditors’ Meeting of each separate debtor if it is approved by at least one of the Creditors’ Meetings by creditors representing at least two thirds of the total credits present at the meeting and substantive consolidation was approved by creditors representing at least one fifth of the credits present at each of the Creditors’ Meetings that rejected substantive consolidation.

Creditors’ Meetings and Voting Procedures

Call notices for Creditors’ Meetings could be published electronically by the presiding judge and on the website of the judicial administrator.

A number of new creditor voting procedures could be implemented, including (1) voting by written resolution, (2) electronic voting, and (3) the possibility of individual bondholders voting directly and not via indenture trustee (a codification of a practice that has already been permitted in some cases).

Cross-Border Insolvency

With certain modifications, Brazil would adopt the UNCITRAL Model Law on Cross-Border Insolvency and non-Brazilian creditors would be treated equally with Brazilian creditors.


Allen Moreland, Brazil based U.S. attorney specializing in cross-border financing transactions. Graduate of Columbia University School of Law


From Linkedin

Banks and NPL investors beware: summary of key EU level actions with imminent impact on NPL strategies and the secondary distressed debt market

Various authorities with the highest relevance in the European banking sector have been extremely active with respect to the non-performing loans topic, in a crescendo which culminated over the last few months:

1. In September 2016, ECB published its first Stocktake of national supervisory practices and legal frameworks related to NPLs

2. In March 2017, ECB published its “Guidance to banks on non-performing loans”.

The guidance deserves (at least) a couple of legal comments:

Non binding…or is it?

  • ECB’s NPL guidance is supposed to be non-binding in nature. However, this should not mean that it is to be taken lightly, since…
  • Banks should explain and substantiate any deviations upon supervisory request, and
  • ECB’s NPL guidance is taken into consideration in the SSM regular Supervisory Review and Evaluation Process and non-compliance may trigger supervisory measures (so much with the non-binding nature…?)

So, while stated to be non-binding, if not taken into consideration it may trigger supervisory measures. May sound like nice food for thought for lawyers, but before taking this any further into legal interpretation, it seems unlikely that many banks would dare to rely on the guidance’s “non-binding nature” give the aforementioned potential consequences. From here may derive, for some, the temptation of a direct strict compliance with the guidance (“better safe than sorry” they say).

On the flip side, an ad literam compliance approach vis a vis the guidance might also not be the best option, since ECB was also clear in stating that the guidance “does not intend to substitute or supersede any applicable regulatory or accounting requirement or guidance from existing EU regulations or directives and their national transpositions or equivalent, or guidelines issued by the EBA”. On the same note, ECB goes even further in warning the banks that “where binding laws, accounting rules and national regulations on the same topic exist, banks should comply with those.”

All common sense, one could say, then again, not simple regulatory / legal waters for the banks to navigate in this respect (i.e., prior to implementing ECB’s guidance, banks may want to first make sure that, by doing so, they would not be in breach of any local or EU laws/directives/regulations).

3. Recently, June 2017, ECB published its second Stocktake of national supervisory practices and legal frameworks related to non-performing loans (NPLs) in the euro area. 

In July, things accelerated decisively:

4. On 5 July 2017, Vítor Constâncio, Vice-President of the ECB, stated: We need a coordinated European NPL strategy.

To select only a few of the views expressed in Mr. Constâncio’s opinion piece:

  • The prices that investors are prepared to pay for NPLs are much lower than the prices banks would be prepared to sell them for, and this is caused, inter alia, by structural inefficiencies in debt and collateral enforcement, high uncertainty around recoveries and their timing, and barriers to entry such as licensing requirements.
  • In ECB’s Vice-President’s opinion, “these symptoms of market failure, aggravated by legal constraints, call for a public policy response. European and national authorities should launch a comprehensive strategy that combines a range of suitable tools to deal effectively with Europe’s NPL problems.”
  • A key aspect of that strategy will be aligning incentives between the parties involved: banks, investors and the authorities.

5. On 10 July 2017, EU Commission launched a public consultation document, on the Development of secondary markets for non-performing loans and distressed assets and protection of secured creditors from borrowers’ default, inviting interested parties to provide feedback by no later than 20 October 2017 

6. On 11 July 2017, EU’s Economic and Financial Affairs Council (EcoFin) published its conclusions on Action plan to tackle non-performing loans in Europe

7. On 11 July 2017, the European Systemic Risk Board (ESRB) has published a report on policy proposals on the same topic. The title of the report says it all in terms of urgency: Resolving Non-Performing Loans in Europe.

ESRB’s report starts by acknowledging that…size matters: “The stock of NPLs in the EU banking sectors was around €1.0 trillion at end-2016, which amounted to 5.1% of total loans. The banking systems in ten EU countries have average NPL ratios of over 10% and a large number of banks have even higher ratios.

In terms of solutions envisaged by ESRB’s report, all options are explored:

  • On-balance sheet solutions (typically internal workout, but also more complex asset protection schemes (APSs) – potentially state backed),
  • Potentially partial off-balance sheet true sale/synthetic securitisation, up to creation of asset management companies (AMCs) – again reference is made to potential state support.
  • Where market liquidity permits, direct sale to investors is preferred and here it is expected that the supervisors will push for addressing the “market failure” causes as referred to above, aiming to increase the NPL purchases prices. Will surely be interesting to see the market’s reaction to the expected correlation between regulation and market prices.


From Bloomberg

The new head of Indian Overseas Bank says he plans to get a grip on the bank’s bad-loan problems as he embarks on a series of cost-cutting measures.

The Chennai-based lender, which has the country’s highest bad-debt ratio, has closed more than 20 of its 3,000-plus branches this year and has identified more to be shut, Chief Executive Officer R Subramaniakumar said in an interview last week, about two months after taking office.

He signaled his intention to restore the fortunes of a state-owned bank that was left without a CEO for almost a year after former head R. Koteeswaran retired on June 30, 2016, a period during which bad debt soared and loan growth sputtered. The government only named Subramaniakumar as CEO in May, after various legal processes delayed the appointment, for a term that ends in June 2019.

“You will see a much stronger bank before I step down,” the 58-year-old said, noting he has about two years before his retirement.

Indian Overseas Bank’s shares have dropped 11 percent in the past year, while the S&P BSE 500 Index gained 20 percent. It closed 1.4 percent lower at 24.95 rupees on Thursday.

Souring corporate loans drove the firm’s bad-debt ratio to 22.4 percent as of March 31, versus 17.4 percent a year earlier and an average of 9.6 percent for the banking system, central bank data show. Indian Overseas Bank reported five straight quarters of losses through March as its outstanding loans fell to 1.57 trillion rupees ($24 billion) from 1.7 trillion rupees a year earlier, exchange filings show.

In another cost-saving measure, the bank has automated the entire loan process for its retail customers from application through to the disbursal of the funds, the CEO said. The firm is building up its portfolio of housing credit and loans made with gold as collateral at a fast pace, according to Subramaniakumar.

To resolve bad loans, the new chief said he’s deployed more than 720 bank officials in 48 groups across the country to focus fully on recoveries. Technology will play a role as the bank develops a smartphone app that provides officers with daily prompts to take action against delinquent borrowers, he said.

The bank is also trying to get the tax department to share details of defaulters’ income and assets so that it can be verified against disclosures by delinquent borrowers. This allows the lender to move at a quicker pace to assess their ability to repay and to liquidate the account if necessary.

Subramaniakumar’s moves will be scrutinized closely by the Reserve Bank of India, which has placed Indian Overseas Bank in a so-called Prompt Corrective Action plan. That allows the central bank to take remedial measures including requiring the lender’s owners to bring in fresh capital, curbing branch openings, limiting management compensation and freezing hires. Under the plan, Indian Overseas Bank is trying to make better use of available resources, Subramaniakumar said, without providing further details.

The lender intends to take advantage of the RBI’s directive to use insolvency courts to resolve the outstanding 2 trillion rupees of loans held by 12 big delinquent borrowers. Moving these accounts, which represent more than a fifth of Indian Overseas Bank’s 345 billion rupees of soured debt, into the bankruptcy courts will help to improve asset quality, Subramaniakumar said.

The bad-loan woes faced by the 80-year-old bank is an illustration of the nationwide problem curbing credit growth at Indian lenders and the expansion of Asia’s third-largest economy. Getting rid of the soured credit is crucial to Prime Minister Narendra Modi’s plans to revive investment in the country and add jobs before elections in 2019.



From SeaTrade Maritime News

Embattled Malaysian offshore vessels builder Nam Cheong has decided to temporarily cease repayment on all borrowings as the company is reviewing its options to restructure its businesses and operations.

Based on the financial statements of Nam Cheong for the quarter ended 31 March 2017, the amount of outstanding under bank loans and the notes by the group is approximately MYR1.84bn ($435.16m).

With the temporary cease on all repayments, the company will accordingly not be making payment of the next series of notes due on 23 July, under the company’s SGD600m ($438m) multicurrency medium term note programme.

“The company has appointed PricewaterhouseCoopers Advisory Services as its financial advisor to advise and assist the group, as appropriate, on suitable restructuring options for the group,” Singapore-listed Nam Cheong stated.

“The company has started discussions with the group’s bank lenders with a view to restructure the group’s bank facilities. The company will also continue to engage in discussions with all stakeholders, including the holders of the notes and trustee of the notes (…),” it said.

Nam Cheong pointed out that no definitive agreements in relation to the restructuring have been entered into by the company to-date, and if a restructuring is not favourably completed in a timely manner, the group will be faced with a going concern issue.

The proposed restructuring entails a scheme of arrangement that requires approval by 75% in value of all of the company’s creditors. Nam Cheong believes that the scheme of arrangement will offer significantly higher recovery for lenders and noteholders compared to a liquidation scenario.

Nam Cheong’s troubles unfolded as the offshore marine market suffers a protracted recession, due mainly to a severe oversupply of assets amid dwindling demand on the back of soft oil prices.

The Malaysian firm has been hit hard with build-to-stock OSV assets unable to secure buyers in a market flooded with too many vessels. In 2016, the shipyard delivered just two vessels and incurred an annual loss of $9.5m, compared to 11 vessels delivered in 2015 on profit of $6.2m, and 24 vessels delivered in 2014 on profit of $67.1m.

Last month, Nam Cheong received a writ of summons and statement of claims for a sum of around $10m from Overseas-Chinese Bank of Corporation (OCBC).


From Reuters

WILMINGTON, Del./NEW YORK (Reuters) – The global recall of Takata Corp’s defective air bags widened last week and the number of confirmed deaths rose, but legal experts said the bigger worry for car companies caught in the fallout is playing out in a Delaware bankruptcy courtroom.

Earlier this month, people injured by the air bags, which degrade over time and can inflate with excessive force, were appointed to their own official committee in the Japanese company’s U.S. bankruptcy, giving them a powerful voice in the proceedings.

This unusual committee, which includes people whose cars lost value due to the recall, will be pitted against Honda Motor Co, Toyota Motor Corp , and other automakers.

The car companies have been trying to use the bankruptcy to limit their liability for installing the faulty air bags, said Kevin Dean, a Motley Rice attorney who represents injured drivers on the committee.

Because the committee has official status, Takata must provide it with funds which can be used to investigate the automakers’ liability or to challenge financial assumptions. Without a committee, plaintiffs’ lawyers would typically have to pay for that themselves.

“If I were a plaintiffs’ lawyer, this would be a golden goose for me,” said John Pottow, a professor at the University of Michigan Law School, of the appointment of the special committee.

Takata, Honda, Toyota and General Motors Co declined to comment. Other carmakers did not return requests for comment.

Bankruptcies typically only have one official creditors committee. In the Takata case, the committee of injured drivers will sit alongside another made up of suppliers and vendors, who are likely more interested in the future of the business than compensation disputes, according to bankruptcy attorneys who are not involved in the case.

Both committees were appointed by the U.S. Trustee’s Office, the arm of the U.S. Department of Justice that acts as a bankruptcy watchdog.

Seventeen fatalities, including one confirmed last week, and at least 180 injuries have been tied to Takata’s air bags since at least 2009.

Last week, the National Highway Traffic Safety Administration widened a global recall of the airbags, which regulators expect to ultimately cover 69 million cars and 125 million inflators. Most defective air bags have not been replaced.

In January, Takata entered a settlement with the U.S. Department of Justice, setting aside $125 million to compensate consumers and $850 million in restitution for automakers.

Compensation Fund

Facing up to $50 billion in liability, Takata filed for bankruptcy in June in Japan and the United States with a plan to sell its non-air bag operations for $1.6 billion to Key Safety Systems, which is owned by China’s Ningbo Joyson Electronic Corp. Its air bag business would continue to make replacements for the 125 million recalled inflators.

Takata said in its Chapter 11 filings that it will create a fund to compensate future injuries stemming from the air bags.

Companies that wind up bankrupt due to faulty products often set up such funds, and gather contributions from insurers and other potentially liable parties, who in return get shielded from ongoing litigation.

Similar funds were set up in and the 1985 bankruptcy of A.H. Robins Co, which sold Dalkon Shield contraceptive devices and the 1995 bankruptcy of Dow Corning, the maker of silicone breast implants.

A $161 million fund in the 2012 bankruptcy of Blitz U.S.A. Inc, which made red plastic gas containers, included $23 million from Wal-Mart Stores Inc. In return, the retailer was protected from lawsuits that alleged it knowingly sold defective gas cans.

Automakers would likely demand similar legal protections in return for contributing to a Takata fund, and the committee will likely hire experts to challenge those proposals, bankruptcy experts said.

The committee’s lawyers will probably also want to investigate what car companies knew about the air bags to help determine their liability and their contributions, the experts said.

“If I were an injured person, I wouldn’t want Takata or the carmakers to decide on the size of the fund,” said Steven Todd Brown, a professor at the University at Buffalo School of Law who specializes in compensation funds.

Some experts said they expected the parties to avoid protracted legal battles which have marred other product liability bankruptcies like those involving asbestos.

Pottow, at the University of Michigan Law School, cautioned that may not be so simple.

“We’re in pretty novel terrain here, given the amount of parties and the recall involved.”


From Business Insider

LONDON (Reuters) – Dutch shipowner Vroon is finding talks with banks tough going as it tries to navigate a way out of a long slump in the shipping industry. But it is not an easy time for the lenders either.

Vroon, a 127-year-old family-owned group which operates about 200 vessels and transports livestock, oil and other commodities, wants to extend its credit lines and adjust repayment schedules.

But European banks that lent heavily to the sector when it boomed more than a decade ago have a heavy toxic debt burden following the 2008-09 global financial crisis and a shipping markets crash in 2010.

Shipping firms and banks are caught in a vicious circle of debt, causing a credit crunch that is hindering the industry’s recovery. Overcapacity — a glut of available ships for hire — is a big concern, and another is a lack of profitability caused by problems such as slower demand and global economic turmoil.

One of the major companies, South Korean container line Hanjin Shipping Co Ltd, has gone under.

“We have difficulty in meeting all repayment obligations that we have and that is what we are in discussion with our banks about. Those discussions are constructive but are not easy — not for us, or the banks,” Herman Marks, the chief financial officer at Vroon, told Reuters.

“It is the lack of profitability for the industry that is causing the lack of availability of finance.”

Marks said Vroon was confident of reaching agreements with its financiers soon.

Shipping finance sources say the shipping industry, which transports 90 percent of the world’s goods including oil, food and industrial products such as coal and iron ore, has an estimated capital shortfall of $30 billion this year.

Some banks are being driven out of shipping and those that remain are now more conservative in their financing, Marks said.

“It is an industry that requires consolidation,” he added.

That consolidation has begun, especially in container shipping. Denmark’s Maersk Line, the global leader in the sector, is acquiring German rival Hamburg Sud and China’s COSCO Shipping Holdings Co Ltd has bid $6.3 billion for Hong Kong peer Orient Overseas International Ltd.

Germany’s Rickmers filed for insolvency in June, and firms that have filed for Chapter 11 bankruptcy protection since March include Singapore’s Ezra Holdings Ltd and U.S.-based firms Tidewater, GulfMark Offshore and Montco Offshore.


Banks were happy to lend to the shipping industry when it boomed after the surge in trade that accompanied globalization.

Even the 2008-09 crisis did not deter all creditors. Expectations that China’s fast economic growth would revive the industry prompted a brief new wave of lending before many shipping markets crashed again.

This left European banks with a debt burden of more than $100 billion and the value of at least 70 percent of those loans has fallen, according to industry estimates. Banks are struggling to find ways to recoup their mounting losses.

“There is probably about $150 billion of distressed bank debt stuck with mainly European banks — mainly German — that has still got to be de-gorged from the system,” said Michael Parker, global industry head for shipping with Citigroup.

Large banks that once had a big role in the industry, such as Britain’s Royal Bank of Scotland (RBS), are pulling out. Some more specialist lenders, such as Germany’s HSH Nordbank, are still working through their legacy loans.

Ratings agency Moody’s said in June it expected further losses as problem shipping loans continue to mount, possibly affecting banks’ profitability and capital in 2017 and potentially beyond.

The European Central Bank said in May it would be carrying out on-site inspections at banks with a view to possible “remedial actions”.

Regulators want banks to shore up their balance sheets and comply with stress tests, which assess whether a bank has enough capital to cope with adverse developments.

“The belief that the regulators will allow the banks to go back to creating the disaster they created five, 10 years ago — I think is highly unlikely,” Citi’s Parker told a Capital Link shipping conference in March.

German state-controlled lenders known as landesbanken, including HSH and NordLB, are among the hardest hit.

HSH was forced to take a second bailout from its public-sector owners because of provisions for bad shipping loans, and has to be privatized under European state-aid rules by the end of February 2018.

HSH had reduced its total shipping portfolio to 16.6 billion euros ($19.36 billion) by the end of the first quarter of 2017, from more than 30 billion euros nearly a decade ago.

By the end of the first quarter of 2017, HSH had 9.9 billion euros in its so-called ‘bad bank’ that it is running down, and the remaining 6.7 billion euros in its core bank.

“We have learned a lot of lessons from the past. We are conservative, we are cautious,” Christian Nieswandt, global head of shipping at HSH, told Reuters. “I do not think people would do the same things now that they did in the past.”

Loss Piled Up

NordLB set aside 2.94 billion euros in 2016 in provisions for bad shipping loans.

NordLB is preparing a sale of its property lender Deutsche Hypothekenbank as it seeks to repair its balance sheet following heavy writedowns related to its exposure to bad shipping loans, people close to the matter told Reuters.

Banks in Germany were exposed when a number of closed shipping investment funds known as KG houses were forced into insolvency, leaving the banks carrying the risks.

The banks were also exposed when the container shipping sector, which traditionally accounted for a large segment of Germany’s shipping industry, ran into trouble.

Dagfinn Lunde, former head of shipping at Germany’s DVB Bank, said a further problem arose because loans had been used to finance a type of container ship which became obsolete once the Panama Canal was extended in 2016.

“The losses were clocking up without them (the banks) seeing it,” Lunde said.

With the shipping industry still struggling, the banks’ prospects for offloading their toxic debts are challenging.

“How are they going to recoup an asset that is losing money all the time?” said Mark Clintworth, head of shipping at the European Investment Bank. “They will have to ring-fence their shipping assets and in a worst-case scenario take a complete haircut on it.”

Fire Sales

European banks have stepped up efforts to get rid of shipping loans by selling portfolios. RBS has sold hundreds of millions of dollars in loans to buyers including Japanese financial services firm Orix Corp.

Others have found selling more difficult. Attempts by HSH to sell a 500-million-euro segment of shipping loans, as part of a 3.2-billion euro portfolio sale which included other assets, proved unsuccessful because the debt was deemed toxic and attracted offers that the bank considered too low, shipping finance sources said. HSH declined to comment.

NordLB said in July it had abandoned efforts to sell a 1.3-billion euro portfolio of loans to U.S. private equity group KKR.

Germany’s Commerzbank said in June it had sought to shed its 4.5-billion euro portfolio of distressed shipping loans through swaps with covered bonds — securities backed by shipping mortgages. It is not yet known whether it will succeed.

Sellers still trying to offload billions of dollars in loans include Deutsche Bank, shipping finance sources say.

“Investors will want to see a bit more sustained profitability to the sector – there is some way to go before that,” said Paul Taylor, global head of shipping & offshore with French bank Societe Generale CIB.


From Bloomberg

A group of hedge funds that owns $3.3 billion of Puerto Rico bonds disclosed in court documents the amount that each of them holds.

The disclosure is related to the territory’s May 3 bankruptcy, which will allow Puerto Rico and its agencies to reduce the $74 billion of debt left after years of economic decline and borrowing to cover operating expenses. The group includes distressed-debt buyers and municipal mutual fund Franklin Mutual Advisers LLC.

The group claims that general-obligation bonds must be paid before other types of Puerto Rico debt because the island’s constitution gives those securities the highest claim to the government’s cash. The group wants Puerto Rico’s sales-tax revenue to help repay general-obligation debt. The island sold sales-tax bonds backed by that revenue stream.

The amounts that each firm holds, as of July 12, are as follows:

  • Aurelius Capital Management LP: $470.9 million of general obligations and $2.5 million of Highways and Transportation Authority bonds
  • Autonomy Capital (Jersey) LP: $937.6 million of general obligations
  • FCO Advisors LP: $422 million of general obligations and $10.2 million of junior-lien sales-tax bonds
  • Franklin Mutual Advisers LLC: $294 million of general obligations
  • Monarch Alternative Capital LP: $585 million of general obligations and $21.5 million of highway debt
  • Senator Investment Group LP: $254.7 million of general obligations
  • Stone Lion LP: $310 million of general obligations and $15 million of highway debt

A portion of debt held by Aurelius, FCO Advisors, Monarch Alternative and Stone Lion is guaranteed repayment by bond insurers.




From The Sundaily

PETALING JAYA: Alam Maritim Resources Bhd’s share price fell 9.38% this morning after the oil and gas player said it is in talks with financiers and sukukholders to restructure its existing loans and sukuk programme.

At 10.28am today, the shares lost 1.5 sen, trading at 14.5 sen with some 3.03 million shares changing hands. It has a market capitalisation of RM147.9 million.

Last Friday, Alam Maritim said the group and its subsidiaries, joint venture companies and associated companies are in active discussions and negotiations with their respective financiers and sukukholders to restructure the repayment terms and conditions of the existing financing facilities and sukuk programme.

The group is required to submit a proposed debt restructuring scheme within 60 days from the date of the approval letter dated May 25, 2017 issued by the corporate debt restructuring committee (CDRC) of Bank Negara Malaysia.


From Reuters

MUMBAI, July 6 (Reuters) – India’s Insolvency and Bankruptcy Board on Thursday called for public comment on the country’s revised bankruptcy code that went into effect last year, signaling that it plans to tweak the law, which the government hopes will resolve India’s $150 billion stressed-loans problem.

The board said the window for receiving comments will be open till Dec 31. Modifications to the regulations would be made by March 31 and take effect from April 1, 2018.

Lawyers and insolvency professionals maintain that the new Insolvency and Bankruptcy Code is a huge step forward from the prior regime. That involved a series of overlapping regulations under which lenders, company promoters and other creditors could initiate competing proceedings in different forums and regions.

All the same, some lawyers contend issues exist with the new code that need to be resolved. Among those is an opportunity for borrowers to get a fair hearing before any matters are admitted to tribunals empowered to rule on these cases.

“This is a lacuna in the new code and it will need to get addressed,” said a lawyer involved in some ongoing insolvency cases under the new code.

The Insolvency and Bankruptcy Board’s move comes just as the new act is set to be tested in some major cases.

The Indian government recently empowered its central bank to push banks to begin insolvency proceedings on non-performing assets under the bankruptcy code. And the Reserve Bank of India last month directed lenders to begin proceedings against 12 of the country’s largest defaulters . (Reporting by Suvashree Dey Choudhury and Euan Rocha, editing by Larry King)


From Mediat Bankry

ave you ever wondered why Congress, when it adopted the Bankruptcy Code in 1978, limited the term of service for bankruptcy judges to fourteen years?

–This term limitation, established in 28 U.S.C. Sec. 157(a)(1), assures that bankruptcy judges are serving as Article I judges under the U.S. Constitution. Life tenure would have given them the same protections as Article III judges.

–Lifetime tenure would also have eliminated, in all probability, the limited-jurisdiction struggles that have enveloped bankruptcy courts and their appellate overseers for the past thirty five years (beginning with the Supreme Court’s 1982 Northern Pipeline decision).

I’ve often wondered why Congress did this: and have never received a satisfactory answer — until recently.

What happened recently is that I finally read (from beginning to end) all the plurality, concurring and dissenting opinions in the U.S. Supreme Court’s 1982 bankruptcy case of Northern Pipeline v. Marathon Pipe Line, 458 U.S. 50 (1982).

The four-Justice plurality opinion in Northern Pipeline declares the entire Bankruptcy Code unconstitutional. Fortunately, however, the combined effect of the five other Justices, who write concurring and dissenting opinions, limits the ultimate reach of Northern Pipeline to a narrow jurisdiction issue.

The dissenting opinion in Northern Pipeline, authored by Justice White (joined by Chief Justice Burger and Justice Powell), answers the why-no-lifetime-tenure question. Justice White’s answer escapes notice because it appears in the very-last paragraph of his dissenting opinion, which is the last of four lengthy opinions printed in the case.

Justice White puts the 14-year term limitation question this way:

–“The real question is not whether Congress was justified in establishing a specialized bankruptcy court.” Rather, the question is whether Congress “was justified in failing to create a specialized, Art. III bankruptcy court.”

He then expresses his own view of what Congress had in mind. His view focuses on the specialized nature of bankruptcy courts and the fluctuating nature of their workload, along with an evolution-not-revolution approach. Here’s what he writes.


–The “very fact of extreme specialization may be enough, and certainly has been enough in the past, to justify the creation of a legislative court.”

–“Congress may legitimately consider the effect on the federal judiciary of the addition of several hundred specialized judges”:

(i) “We are, on the whole, a body of generalists”; and
(ii) “The addition of several hundred specialists may substantially change, whether for good or bad, the character of the federal bench.”

Fluctuating Workload

–Congress wanted to “maintain some flexibility” in “future responses to the general problem of bankruptcy.”

–“There is no question that the existence of several hundred bankruptcy judges with life tenure” would have “severely limited Congress’ future options” because:

(i) the “number of bankruptcies may fluctuate, producing a substantially reduced need for bankruptcy judges”; and
(ii) if specialized bankruptcy judges don’t serve in the “countless nonspecialized cases that come before” the district courts, Congress “would then face the prospect of large numbers of idle federal judges.”

[Editorial note: The reduced caseloads, reduced budgets and reduced staff that characterize today’s bankruptcy courts are “Exhibit A” for this “Congress’ future options” point.]


–Congress “believed that the change [in 1978] from bankruptcy referees to Art. I judges was far less dramatic, and so less disruptive of the existing bankruptcy and constitutional court systems, than would be a change to Art. III judges.”