Worldwide: EuroResource--Deals And Debt - June 2015

Last Updated: June 11 2015
Article by Corinne Ball

Recent Developments

Germany—On 10 March 2015, the German Finance Ministry published a proposal for legislative changes to the German Banking Act (Kreditwesengesetz) that would amend the priority of creditor claims if a bank becomes insolvent. According to the draft bill, certain types of unsecured claims against "credit institutions", as defined by the European Union capital requirement regulation (so-called CRR institutions), are subordinated in the event the bank concerned becomes insolvent. With the "bailing-in" of certain categories of claims, the legislation would subordinate the claims of senior unsecured bondholders to other unsecured claims, including claims based on unsecured deposits, derivatives and certain structured bonds that have been combined with derivatives. The purpose of the proposed German legislation is to implement an EU resolution providing that creditors shall be required to bear losses equivalent to eight percent of a bank's liabilities before governmental rescue funds are made available. The change is designed to increase the stability of the financial system and aims to augment efficient creditor participation in banking rescues. Due to the narrow category of creditor claims affected by the measure, write-downs by creditors should be foreseeable, at least to some extent, and the risk of any domino effect should be limited. The new law would apply retroactively.

Canada, the US and the UK—On 12 May 2015, the US and Canadian courts presiding over the bankruptcy cases of Nortel Networks Inc. and its affiliates ("Nortel") handed down long-awaited rulings regarding the division among creditors of US$7.3 billion in proceeds realised from Nortel's liquidation. In separate rulings, US Bankruptcy Judge Kevin Gross and Justice Frank J.C. Newbould of the Ontario Superior Court of Justice, following a 21-day cross-border trial, decided on a modified pro rata allocation among Nortel's Canadian, US and European units. The formula presented by the judges in their rulings would result in all creditors receiving approximately 71 percent of the face amount of their claims. Nortel's regional divisions and other parties offered widely divergent proposals for allocating the proceeds generated by a series of post-bankruptcy deals, including a US$4.5 billion patent sale. Nortel's Canadian unit argued that it should receive approximately US$6 billion (roughly 82.2 percent of proceeds) because it held legal title to the patents involved. Nortel's US division claimed that it was entitled to approximately US$5.3 billion (72.6 percent) because it contributed most of the valuable assets that were sold, including exclusive US patent licences. The European units argued that they should be paid more than US$1.3 billion (18.2 percent). In his lengthy allocation trial opinion, Judge Gross noted that the varying proposals left nearly no virtual ground between the parties, which spent more than US$1.3 billion in attorneys' fees during the course of the six-year proceedings. Judge Gross wrote that "The court can only speculate why the parties, all represented by the ablest of lawyers and sparing no expense, were unable to reach a settlement on allocation". The sentiment was echoed by Justice Newbould in his 97-page ruling. The rulings divide Nortel's assets by region only, rather than allocating funds to specific creditors. According to Judge Gross, "It is now the parties who have to make a decision: accept the courts' rulings and give them effect, take appeals and thereby prolong the hardship and deplete the remaining estate, or utilize the courts' rulings to resolve any remaining differences".

On 26 May 2015, Nortel, joined by the official creditors' committee appointed in its chapter 11 cases, asked Judge Gross to reconsider the allocation methodology, claiming that the allocation treats Nortel's US general unsecured creditors unfairly. Overall, Nortel argued, although US creditors stand to recover the most out of any of the three groups—approximately US$3.3 billion from the sale of Nortel's patent portfolio and nearly US$2 billion from the sale of the remainder of its business assets—US creditors stand to recover only 14 cents on the dollar for their claims compared with 47 and 48 cents on the dollar for Canadian and European creditors respectively.

On 21 May 2015, Judge Gross also denied a request by an ad hoc committee representing 170 former employees of Nortel's Canadian unit for permission to file claims for US$18 million in severance payments in Nortel's US bankruptcy case on behalf of the employees more than three years after the 30 September 2009 bar date for submitting claims expired.See In re Nortel Networks, Inc., No. 09-10138 (KG), 2015 BL 161166 (Bankr. D. Del. May 21, 2015). In his ruling, Judge Gross wrote that "the Published Notice met the requirements of due process with respect to the Canadian Employees and their failure to timely file proofs of claim in the U.S. proceedings was not the result of excusable neglect".

Argentina—On 6 April 2015, the Republic of Argentina appealed a 12 March 2015 order of the US District Court for the Southern District of New York that blocked Citibank NA ("Citibank") from processing scheduled interest payments on US$2.3 billion of Argentine-law governed bonds issued as part of 2005 and 2010 debt restructurings. Argentina's notice of appeal argues that the 12 March 2015 order improperly extended a 2012 injunction that barred Argentina from making interest payments on restructured bonds without also paying amounts owed to holdout bondholders. However, on 20 March 2015, US District Judge Thomas Griesa approved a stipulation between Argentina's holdout bondholders and Citibank that conditionally authorised Citibank's Argentine branch to make interest payments scheduled for 31 March 2015 and 30 June 2015 on the Argentine law bonds. The judge also authorised Citibank to exit its custody business in Argentina.

On 7 April 2015, Argentina asked Judge Griesa to hear a group of eight class actions filed by certain holders of the country's defaulted debt separately from the lawsuits brought by hedge fund holdouts who acquired their bonds at a discount after Argentina defaulted on its debt in 2001. Argentina asked Judge Griesa to deny a request by the non-hedge fund classes to consider their cases along with dozens of what are referred to in the bond dispute as "me-too" cases. Both bondholder groups are seeking the benefit of Judge Griesa's 2012 rulings blocking Argentina from paying holders of its restructured debt until it pays US$1.7 billion owed to the hedge fund holdouts.

On 7 April 2015, the US Court of Appeals for the Second Circuit dismissed an appeal by Argentina of Judge Griesa's 3 October 2014 order holding the South American nation in contempt for violating his 2012 injunction preventing the country from making payments on restructured bonds without making corresponding payments to holdout bondholders. A two-judge Second Circuit panel dismissed the appeal for lack of jurisdiction, writing that "We conclude that a final order has not been issued by the district court ... and the collateral order doctrine does not apply to this appeal".

Argentina's Economy Minister Axel Kicillof announced on 8 April 2015 that the Argentine government will seek an injunction against Citibank in local Argentine courts for its role in the 20 March 2015 agreement between Citibank and holdout bondholders to permit certain one-time payments on Argentine law bonds, enabling Citibank to wind down its operations in Argentina without violating Judge Griesa's orders.Kicillof, however, provided few details with respect to the nature of the charges and the court in which the government will pursue its case.

On 20 April 2015, Argentina announced that, in an effort to evade US restrictions on its market access, Argentina would issue US$500 million of a new series of "BONAR 2024" bonds paying an interest rate of 8.75 percent and maturing in nine years. On 22 April 2015, Judge Griesa ruled that the holdout bondholders suing Argentina are entitled to disclosure of the details of the BONAR 24 bond offering. Judge Griesa held that the hedge fund holdouts can seek documents from Argentina and banks subscribing to the offering, including Deutsche Bank AG and Banco Bilbao Vizcaya Argentaria SA, related to the 21 April 2015 US$1.4 billion bond sale to determine if any assets exist in the United States that could satisfy billions of dollars in unpaid judgments against Argentina.

On 11 May 2015, holdout bondholders filed a motion with the US District Court for the Southern District of New York to amend their complaint against Argentina to include US$5.3 billion in BONAR 2024 bonds issued by the republic in April 2015. The amendment would bring this latest bond offering into the ongoing battle before Judge Griesa concerning the validity of the pari passu, or "equal treatment", clause that, according to Judge Griesa's 2012 ruling, prevents Argentina from making payments on restructured bonds without making corresponding payments to holdout bondholders. Argentina's Ministry of Economy later responded to the action taken by holdout bondholders, asserting that the BONAR 2024 bonds constitute domestic debt denominated in foreign currency, which has nothing to do with the jurisdiction of Judge Griesa. He also accused the holdouts of seeking to generate "uncertainty in the market to harm the Republic and the bondholders" or creditors with exposure to exchanged debt.

The government of Argentina disclosed on 18 May 2015 that one of the republic's federal administrative courts granted an injunction requested by the Ministry of Economy and Public Finance and ordered Citibank's Argentina branch to "refrain from any act" intended to fulfill the 20 March 2015 agreement between the New York-based bank and holdout bondholders. Among other things, the Argentine federal court ordered Citibank's Argentine branch to refrain from making decisions that could result in the bank exiting from its custody business in Argentina. According to the court, Citibank failed to satisfy the requirements of Argentina's Codigo Procesal to validate the agreement approved by Judge Griesa.

On 5 June 2015, Judge Griesa granted partial summary judgment to a group of 526 "me-too" plaintiffs in 36 separate lawsuits, finding that, consistent with his previous ruling in litigation commenced by a group of holdout bondholders led by NML Capital Ltd., Argentina violated a pari passu clause in bonds issued to the "me-too" bondholders under a Fiscal Agency Agreement beginning in 1994 by refusing to make payments on their bonds at the same time that it paid holders of debt restructured in 2005 and 2010.See Guibelalde v. The Republic of Argentina, No. 11 civ. 4908 (TPG), 2015 BL 179208 (S.D.N.Y. June 5, 2015). The decision obligates Argentina to pay the plaintiffs US$5.4 billion before it can make payments on restructured debt.

Newsworthy

Jones Day represented Cellectis S.A., a French biotechnology company that is developing novel cancer treatments, in connection with its initial public offering in the United States and its Nasdaq listing. The US$228 million offering is one of the largest IPOs in the biotechnology industry.

Jones Day advised Trafigura Beheer B.V., one of the largest physical commodities trading groups in the world, in connection with its offering of €550 million 5.0% guaranteed notes due 2020 listed on the Irish Stock Exchange. The deal is Trafigura's second issuance under its Euro Medium-Term Note (EMTN) programme.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions