Presentation on theme: "Jennifer Marshall, Partner 12 February 2008 The Future of Corporate Insolvency Law."— Presentation transcript:
Jennifer Marshall, Partner 12 February 2008 The Future of Corporate Insolvency Law
Four key themes Complexity in number of insolvency regimes Complexity of lending and capital structures leading to cram-downs and pre-packaged solutions Valuation issues International scope
The fear: carve-out complexity Five corporate insolvency regimes Special administration regimes for: railways (e.g. Railtrack) PPP companies (e.g. Metronet) water and sewerage companies air-traffic services companies building societies banks (watch this space …) others? Modified insolvency regimes / special rules for: insurance undertakings registered social landlords industrial & provident / friendly societies royal charter and statutory companies partnerships and LLPs charities trust funds (e.g. pension funds) TOTAL : 22 regimes!
The alternative fear: corporate insolvency laws in 2025 Blue = US Chapter 7 and 11
Carve-out complexity The hope: UK insolvency regimes Compulsory liquidation (for basket-cases) Administration as “single gateway” procedure for rescues and/or distributions Schemes of arrangement / CVAs (either with or without administration moratorium) where cram- down required Receivership or administrative receivership where an exception to the prohibition applies (until rating agencies accept administration)
Complexity of capital and lending structures Consensual restructurings becoming more difficult due to: multiple layers of debt / equity other stakeholders (e.g. pension trustees) with greater leverage than before trading mentality of financial creditors impact of credit-default swaps over-emphasis on shareholder rights? Likely to lead to use of formal insolvency procedures e.g. sales through pre-packaged administrations / receiverships schemes of arrangement / CVAs Leads to fundamental question: how do you value the enterprise in such a procedure?
Valuation evidence Debt rankingValuations 450m 150m 300m Senior debt Second lien Pension debt (unsecured) Bond debt (unsecured) Liquidation / break up Distressed acquisition / forced sale Enterprise value / going concern 150m 500m 800m
The valuation question Secured Debt600Liquidation Valuation 150 Unsecured Debt450Enterprise Valuation800 Class Valuation Distribution Rights on Liquidation Liquidation Valuation Liquidation Priority Rights on Liquidation Enterprise Valuation Liquidation Priority
International scope Re UNCITRAL Model Law on Insolvency Proceedings, it is hoped that the world will now follow suit Re European Insolvency Regulation, time to move away from jurisdictional squabbles and on to difficult choice of law questions Still issues re recognition of UK administrations: out-of-court appointments appointments by qualifying floating charge-holder Need to be able to search on-line for all insolvency proceedings in a particular jurisdiction Central database of Model Law / European Insolvency Regulation decisions?
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