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Part III Sovereign Debt Restructuring, 10 An Introduction to Sovereign Debt Restructuring »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter starts by introducing the Brady Plan which aimed to address the debt crisis that occurred in the developing countries during the 1980s. The chapter also looks at new developments which have taken place in the area of sovereign debt restructuring since the Brady Plan. These are the EU sovereign debt crisis, and the ongoing Argentine litigation in New York. The former is a debt crisis that was originated in Greece in late 2009 and has been taking place in other Euro-areas ever since and has affected Portugal, Ireland, Spain, and Cyprus. The ongoing Argentine litigation in New York relates to a claim initiated by a hedge fund to collect on defaulted debt obligations issued by Argentina based on the breach of the pari passu clause. The pari passu clause is a standard clause in public or private international unsecured debt obligations.

Annex »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Author Biographies »

From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Part II Bank Resolution, 7 Banking Act Restructuring and Insolvency Procedures »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter starts by introducing the Insolvency Act 1986 and the Insolvency Rules 1986. It argues that for the most part they work effectively in the rescue or liquidation of companies. Special insolvency regimes have been put in place for a number of important industries in order to meet the situation where the application of the normal corporate insolvency law to a monopoly company causes essential services to be interrupted. The area governing both banks and investment firms has undergone more recent reforms with the introduction of the Financial Services Act 2012, the Financial Services (Banking Reform) Act 2013, and with the move to implement the Bank Recovery and Resolution Directive. Specific measures concerning the broader special administration and insolvency arrangements are addressed, looking at the treatment of depositors and client assets and explaining the priority accorded to them during the administration and insolvency procedure.

Part II Bank Resolution, 6 Banks in Distress »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter looks at the background of the Banking Act 2009 and various other reforms in the UK. While the Banking Act 2009 was originally introduced to deal with banks in distress it has been significantly modified to apply to a range of UK institutions such as building societies, investment firms, and central counterparties and banking groups. The 2009 Act provides the ‘appropriate regulator’, and the Bank of England as resolution authority provides the tools to deal with a UK institution that is experiencing financial difficulties. The chapter also looks at the recovery and resolution plans that are now an integral part of the decision-making process for the authorities as they decide how best to prepare an institution in advance of crisis.

Contents »

From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Debt Restructuring »

Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Part I Corporate Debt Restructuring, 2 The EC Regulation on Insolvency Proceedings »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
The chapter discusses instances where the restructuring plan demands that the debtor be made subject to a formal insolvency system. The applicable laws are determined in accordance with the EC Regulation on Insolvency Proceedings if the debtor has its centre of main interests (COMI) in one EU Member State and assets in another Member State. If the COMIs of individual group companies are situated in the same Member State, the EC Regulation can be used to group together the administration of group insolvencies, or once the recast EC Regulation comes into force, to implement voluntary group coordinator proceedings. Any restructuring plan may include moving a debtor’s COMI to take advantage of a more flexible insolvency regime. This chapter describes the framework and key features of the EC Regulation including the concept of COMI, its application to group insolvencies, ‘COMI shifting’, and the provisions of the recast EC Regulation.

Part II Bank Resolution, 9 European Bank Resolution Regime »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter considers the response to the European banking and sovereign debt crisis, which resulted in the introduction of the Bank Recovery and Resolution Directive (BRRD). It also considers the Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM) which will be implemented to facilitate the supervision and resolution of certain financial institutions in the Eurozone. The chapter looks at the consequences of these reform measures and explains the salient features of the new framework of supervisory and resolution intervention. It also looks separately at the EBA technical standards and guidance where necessary to assist the interpretation of the provisions in the directive.

Index »

From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Part I Corporate Debt Restructuring, 1 Insolvency in the UK and the US »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter starts by presenting the case for a comparative approach of the UK and US models for financial restructurings of companies in financial difficulties. It argues that a comparison is useful as the systems used to deal with financial problems are actually very dissimilar. The US has its chapter 11 regime, which is a statutory process under the Bankruptcy Code. This allows a company to restructure under court protection and does not require proof of insolvency. The English system has, by contrast, a mixed approach of contract, common law, and statute and no formal regime specifically designed to achieve a financial restructuring of secured debt. The chapter also considers what changes have occurred since the first edition of this book was published.

Part II Bank Resolution, 5 Legal Aspects of Banking Regulation in the UK and US »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
The chapter starts by describing what the banking industry does and how it is regulated and managed. The susceptibility of banks to collapse or failure is the result of the ‘maturity mismatch’ between their borrowing and lending. The fallout from failure can have very wide systematic consequences, and efficient regulation is vital. This chapter sets out the principal features of the UK and US bank regulation. First, the UK proposals for reform and key features of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) supervisory regime are outlined. Secondly, the US federal bank regulatory system and the impact of the Dodd-Frank Wall Street Reform and Consumer Act 2010, as well as the impact of the Act on areas of the regulatory and supervisory regime are described. The chapter examines how significant reform has improved the safety and soundness of banking and brought supervisory measures to the fore.

List of Abbreviations »

From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Part III Sovereign Debt Restructuring, 11 Litigation Aspects of Sovereign Debt »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter starts the study of litigation aspects of a sovereign debt by looking at the effect of a disruption in the economy in terms of legal options for recovery. The chapter also looks at the pari passu clause in sovereign debt instruments. A pari passu clause is a standard clause included in public or private international unsecured debt obligations (syndicated loan agreements and bond issuances). From a close reading of the clause, it can be argued that it has two limbs: firstly, an internal limb, ie that the bonds will rank pari passu with each other; and, secondly, an external limb, ie that the bonds will rank pari passu with other unsecured (present or future) indebtedness of the issuer. Not all pari passu clauses are drafted in the same way, and they will vary according to the drafter. The chapter considers various relevant cases.

Part I Corporate Debt Restructuring, 3 Out-of-Court vs Court-Supervised Restructurings »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter looks at the advantages and disadvantages of out-of-court workouts in both the US and UK. It starts by looking at the reasons for which companies seek reorganization relief. When considering the advantages, it shows how in many instances an out-of-court workout may be a more efficient method of debt restructuring than a court-supervised bankruptcy proceeding. The chapter then looks at the considerations that are fundamental to the workout process, irrespective of the restructuring process that a debtor might choose. It also considers typical out-of-court approaches. Successful execution of an out-of-court restructuring begins with an analysis of the debtor’s business. Such analysis should identify the specific problems that led to the necessity of a restructuring and should address the company’s financial prospects on a realistic basis.

Part II Bank Resolution, 8 Resolution of US Banks and Other Financial Institutions »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
The chapter starts by looking at resolution as understood in the United States. ‘Resolution’ refers to the way bank failures are dealt with in the United States. Similar to the traditional bankruptcy model, the chapter explains, two of the main goals of resolution are to maximize the value and minimize the losses of an institution for the benefit of its depositors and other stakeholders and, at least in a receivership situation, to determine who receives the residual value of the institution in satisfaction of their claims. However, resolution is also aimed at promoting a third goal: to deal with a failed institution in a manner that reduces the risk of contagion, preserves or restores public confidence in the banking or wider financial system, and otherwise promotes financial stability. The chapter then describes the history of financial resolution in the United States and outlines the fundamentals of resolution authority.

Table of Cases »

From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Table of Legislation »

From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh

Part III Sovereign Debt Restructuring, 12 Transactional Aspects of Sovereign Debt Restructuring »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter details the transactional aspects of sovereign debt restructuring. The amount of accumulated debt and its progressive increase have led to repayment problems for some countries and, in some cases, resulted in default. Therefore, as countries amass unsustainable debt burdens (as happens when the ratio of debt to gross domestic product rises to such an extent that the application of policies cannot revert the situation), they have an increasing need to restructure their sovereign debt. Sovereign debt restructuring can be understood as the technique used by sovereign states to prevent or resolve financial and economic crises and to achieve debt sustainability levels. The IMF has reviewed its lending framework in the context of sovereign debt vulnerabilities. It is hoping to introduce greater flexibility and be able to provide exceptional access to funding on the base of a debt operation that involves an extension of maturities.

Part I Corporate Debt Restructuring, 4 The UNCITRAL Model Law on Cross-Border Insolvency »

Rodrigo Olivares-Caminal, John Douglas, Randall Guynn, Alan Kornberg, Sarah Paterson, Dalvinder Singh
From: Debt Restructuring (2nd Edition)
Rodrigo Olivares-Caminal, Alan Kornberg, Sarah Paterson, John Douglas, Randall Guynn, Dalvinder Singh
This chapter begins by introducing the Model Law on Cross-Border Insolvency (‘the Model Law’), which was adopted by the UN Commission on International Trade Law (UNCITRAL) in May 1997 and approved formally in December. Its purpose originally was to provide a template for use by countries seeking to put into place a cross-border insolvency regime, or strengthen one already in existence. This chapter looks at how the US and UK, despite seemingly seeking to adopt the same Model Law, in reality have very different conceptions of how it is to work in practice. The chapter starts with a brief examination of the objectives and scope of the Model Law, before analysing in more detail key aspects of the US and English versions and the reasons why there appears to be a growing divergence in the way in which the Model Law is applied in practice.