Financing company group restructurings

625 Pages·2015·5.271 MB·English

by  Gregor Baer, Karen O'Flynn

FINANCING COMPANY GROUP
RESTRUCTURINGS

FINA NCING
COMPA N Y GROUP
R ESTRUCTUR INGS
Edited by
Gregor Baer
Karen O’Flynn
1
1
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PREFACE
This is a pioneering study. While much has been written concerning insolvency
financing of single companies, this comparative law study examines out-of-court
restructuring and post-commencement insolvency financing of distressed com-
pany groups in light of the corporate finance reality that businesses increasingly
operate (and must restructure or reorganize) as members of groups—frequently,
as multinational enterprise groups in the ever more global marketplace. Over
and above canvassing case developments and the wide array of applicable laws,
the contributors offer strategic analysis for navigating restructuring financing
through—and beyond—existing legal landscapes.
While it is apparent to practitioners that, as a leading law reform expert’s empirical
study demonstrates, the group ‘phenomenon’ in insolvency is ‘momentous’,1 there
is a dearth of resources to guide either practitioners who must structure pre- and
post-commencement group financing, or courts that might be asked to approve
the latter. Arranging distressed company financing is often the first (sometimes
insurmountable) challenge in business restructurings or reorganizations. The com-
pany group context, however, presents additional financing complexity increasing
dramatically in cross-border enterprises, which is usually not squarely addressed
by national law.
In this volume, a collection of distinguished contributors at the forefront of finance
and insolvency practice and global law reform fill this void, addressing and cri-
tiquing ‘state-of-the-art’ practice and work-arounds for financing out-of-court
group restructurings as well as judicial reorganizations, going-concern liquidations
and administration of financially distressed global business groups. Restructuring
financing risks and opportunities under local law are evaluated from perspectives
of companies and their affiliates, directors, lenders, investors, and insolvency rep-
resentatives. Co-ordinating reorganization financing of multinational company
groups under national law, regional regulations, and cross-border rules proposed
pursuant to global law reform initiatives is afforded special attention.
Financing distressed company groups involves a complex decision matrix stretch-
ing from restructuring attempts to judicial insolvency proceedings. Country
1 Mevorach, Irit, ‘On the Road to Universalism: A Comparative and Empirical Study of the

UNCITRAL Model Law on Cross-Border Insolvency,’ European Business Organization Law Review
12: 517–57 (2011) 539.
v
Preface
chapters therefore examine in critical detail non-insolvency rules (such as those
governing directors’ duties, secured transactions, and voidable transfers) circum-
scribing pre-insolvency restructuring financing, with a view to liabilities that
might arise when restructurings fail and insolvency proceedings follow. In the lat-
ter case, the authors describe wide variances in availability of preferential treatment
of post-commencement financing or rules affecting intra-group financing, which
might well be relevant in planning for a cross-border group’s insolvency filing(s).
The authors further explore how best to respond to national and supra-national
legal frameworks to arrange and win court-approval of post-commencement (or
‘post-petition’) financing.
Advances in cross-border group insolvency cases are described, setting the stage
for an analysis of law reform proposals intended to facilitate financing of domestic
and cross-border enterprise groups through more effective global standards and
harmonious domestic laws. This volume builds on UNCITRAL’s release of the
world’s first legislative guide on cross-border enterprise group insolvency—and
the EU’s subsequent amendment of the European Insolvency Regulation to pro-
mote cross-border co-operation in group insolvency cases. Several of this volume’s
authors contributed to those efforts.
The Editors, on behalf of the International Bar Association Insolvency Section, and
the authors are pleased to offer this study and the practical insights it provides for
the benefit of practitioners, judges, financial institutions, scholars, legislators, and
international organizations, not only in structuring or adjudicating cross-border
transactions, but in developing legal solutions (domestic and global) so essential to
the promotion of international trade and commerce involving enterprise groups.
Gregor Baer, San Francisco, California, USA
Karen O’Flynn, Sydney, New South Wales, Australia
vi
CONTENTS
Table of Cases xiii
Table of Legislation xxv
Contributor Biographies xxxix
1. Argentina
Tomás M Araya
A. Introduction: Argentine bankruptcy law overview 1.01
B. Financing a group restructuring before insolvency proceedings 1.08
C. Post-commencement financing 1.57
D. Financing multinational companies in insolvency 1.92
2. Australia
Ian Walker
A. Introduction 2.01
B. Financing before formal insolvency proceedings 2.02
C. Australian insolvency principles relevant to restructurings 2.11
D. Centre of main interest 2.15
E. Australian company law and directors’ issues 2.20
F. Issues on taking security and guarantees 2.45
G. Practical considerations 2.66
H. Funding after commencement of insolvency 2.77
3. Austria
Gottfried Gassner and Thomas Schirmer
A. Introduction 3.01
B. Financing group restructurings before insolvency proceedings:
‘pre-commencement/pre-petition financing’ 3.08
C. Financing company groups after
commencement of formal insolvency proceedings:
‘post-commencement/post-petition financing’ 3.64
vii
Contents
4. Brazil
Eduardo Secchi Munhoz
A. Introduction 4.01
B. Financing of companies in financial distress 4.10
C. Risks for the transaction and for investors 4.67
5. Canada
Mike Weinczok and Kathy Le
A. Introduction 5.01
B. Out-of-court financing and restructuring 5.04
C. Formal insolvency proceedings 5.33
6. China: Hong Kong Special Administrative Region,
People’s Republic of China
John Marsden
A. Introduction 6.01
B. Financing group restructurings before formal
insolvency proceedings 6.02
C. Funding after the commencement of insolvency 6.61
7. Czech Republic
Daniel Hájek
A. Introduction 7.01
B. Financing group restructurings before insolvency proceedings 7.09
C. Financing group restructuring after commencement
of formal insolvency proceedings 7.34
8. England & Wales
David Ereira and Paul Sidle
A. Introduction 8.01
B. Financing before formal insolvency proceedings 8.02
C. Funding after the commencement of insolvency 8.73
9. France
Jean-Marie Valentin and Sylvain Paillotin
A. Introduction 9.01
B. Financing group restructurings before insolvency
proceedings 9.07
viii
Contents
C. Financing company groups after commencement of formal
insolvency proceedings: ‘post-commencement’ financing 9.80
10. Germany
Andreas Spahlinger and Helge Kortz
A. Introduction 10.01
B. Financing group restructuring before insolvency proceedings 10.03
C. Financing group restructurings in insolvency proceedings 10.55
11. Greece
Constantinos Klissouras
A. Introduction 11.01
B. Overview of key areas of the law 11.06
C. Financing group restructurings before the opening
of insolvency proceedings 11.77
D. Post-petition and post-opening finance 11.95
E. Conclusion 11.101
12. Ireland
Barry O’Neill and Nicola McGrath
A. Introduction 12.01
B. Financing before formal insolvency proceedings 12.11
C. Funding after the commencement of insolvency proceedings 12.78
13. Italy and EU Considerations
Alberto Mazzoni and Matteo Bazzani
A. Introduction 13.01
B. Financing group restructurings before insolvency proceedings
(pre-commencement) 13.11
C. Financing company groups after commencement
of insolvency proceedings: ‘post-commencement’ financing 13.77
14. Japan
Shinnosuke Fukuoka and Toshihide Haruyama
A. Introduction 14.01
B. Pre-commencement distressed group restructuring finance 14.06
C. Financing company groups after commencement
of formal insolvency proceedings 14.40
ix