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Points of Comparison of Formal Restructuring Processes in US, UK and Turkey

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Points of Comparison of Formal Restructuring Processes in US, UK and Turkey Points of Comparison of Formal Restructuring Processes in US, UK and Turkey Ian Jack Co-Head of Global Restructuring & Insolvency Finance Department London Our global Restructuring & Insolvency team has a deep +44 20 7919 1700 [email protected] understanding of the local and cross border issues arising in all types of restructurings and recoveries. The team is ideally suited to today's business climate where financial Debra Dandeneau restructurings are rarely confined to one jurisdiction. With Global Restructuring & Insolvency Group restructuring and insolvency practitioners located across the New York globe, we can mobilise teams quickly and seamlessly across +1 212 626 4875 debra.dandeneau borders, time zones, markets and cultures to meet our @bakermckenzie.com clients' needs. We offer cutting-edge and innovative legal and strategic solutions to complex cases. Our team regularly represents secured lenders and other secured creditors, creditors' Muhsin Keskin Head of Banking and Finance committees, corporate debtors, investors, insurance Istanbul companies, equity holders and bankruptcy trustees in crafting +90 212 376 6453 [email protected] sound and practical solutions across practices and industries in actual or anticipated financial difficulties. Koray Söğüt Head of Dispute Resolution Istanbul +90 212 376 6422 [email protected] 1 This chart provides a basic overview of key concepts under US, UK and Turkish restructuring and insolvency processes and is not intended to be exhaustive or to be relied on as a legal opinion or advice. For questions and comments, please feel free to contact one of the team members focused on restructuring and insolvency. Esin Attorney Partnership Baker McKenzie LLP İsmail G. Esin Ian Jack +90 212 376 6451 +44 20 7919 1700 [email protected] [email protected] Koray Söğüt Debra Dandeneau +90 212 376 6422 +1 212 626 4875 [email protected] [email protected] Muhsin Keskin Michael Doran +90 212 376 6453 +44 20 7919 1790 [email protected] [email protected] Erdal Ekinci Adam Farlow +90 212 376 6447 +44 20 7919 1514 [email protected] [email protected] Duygu Gültekin Haden Henderson +90 212 376 6441 +44 20 7919 1711 [email protected] [email protected] Bevis Metcalfe +44 20 7919 1102 [email protected] Geoff O'Dea +44 20 7919 1968 [email protected] Simon Porter +44 20 7919 1970 [email protected] Megan Schellinger +44 20 7919 1517 [email protected] 2 US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition (Turkish Scheme of Arrangement) INITIAL CONSIDERATIONS 1. Nature of Chapter 11 used to effect Insolvency Act process Insolvency Act process used Companies Act process used Essentially a contractual Execution and process operational restructuring, primarily used to effect a primarily to effect debt-for- for solvent or insolvent process binding on banks Bankruptcy Code deleverage balance sheet, pre-packaged sale of the equity swap or deleverage restructurings. that signed the framework process used for solvent and/or commence asset business or assets balance sheet. agreement (FA) produced or insolvent sale of the business as a effected by by the Turkish Banks restructurings. going concern. administrators (i.e. Association (TBA) and external qualified debtors that separately appointees). apply to enter the process. 2. Solvency Solvency not relevant for Available for insolvent Available for solvent or Available for solvent or Available for insolvent Available for an insolvent requirement voluntary bankruptcy. entities or those likely to insolvent entities. insolvent entities. entities or those likely to company unable to pay Involuntary bankruptcy become insolvent. become insolvent. Not due debts or unlikely to limited to entities that are available if debtor has pay debts upon maturity. not generally paying their entered into bankruptcy Creditors in a position to debts as they come due. proceedings. file for bankruptcy may Not available if creditors also file for composition. with more than 25% of aggregate claims have begun legal proceedings against the debtor. 3. Requirement to No, but debtor must Yes. Yes. Debtor must have sufficient Procedure only available to Procedure only available demonstrate demonstrate that it has a connection with England or Turkish debtors. to Turkish debtors. COMI ("centre of domicile, place of business, Wales and be capable of Furthermore, Turkish banks, main interests") or property in the US to be being wound up under the financial leasing companies, eligible to file. Insolvency Act.In the case of finance companies, foreign companies English factoring companies, capital If COMI exists elsewhere, creditors may ask the court Law governed loan will markets institutions, to dismiss the case in favor suffice. insurance and reinsurance companies, payment of commencement of Governing law of debt may be proceeding in other changed to English law to services and e-money jurisdiction." provide jurisdiction (where institutions and system operators cannot benefit debt document so permits). No "bad faith" bar. from the framework agreement as debtor. If process is combined with Administration, COMI must be in/shifted to the UK - not a particular obstacle in the case of financial holding companies. 3 US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition (Turkish Scheme of Arrangement) 4. Is pre-pack sale Yes, by way of Section 363 Yes. No, unless process is combined with an administration. Not applicable. Yes. The debtor can possible? sales or a prepackaged transfer all or part of its chapter 11 plan. assets to the creditors (malvarlığının terki suretiyle konkordato). 5. Restructuring of Yes. Yes. No, secured and preferential Yes. Not a restructuring Yes. But the provisions both secured creditors cannot be bound nor procedure to the extent that of concordat process are and unsecured their rights altered without cannot write off debt without different with respect to claims? express consent. 100% creditor consent. secured and unsecured Similarly, security rights creditors. For example, cannot be impaired without the debtor can negotiate individual secured creditor and conclude a separate consent. Ability to change restructuring deal with its other terms of debt secured creditors. (unsecured and secured) with stipulated majority consent across relevant creditor group. 6. Classification of Only similarly situated No classing of creditors. No classing of creditors. Affected creditors are No. Secured and unsecured creditors and creditors can be classed However, secured creditors separated into classes creditors are separately shareholders together for voting not bound by outcome. (classes are made up of classified. purposes, but plan creditor/members and proponent has flexibility. subsidiaries of them) whose Secured and unsecured rights are not too dissimilar to creditors are separately allow them to consult on the classified. proposed plan. 7. Required voting Absent a "cram down," each No voting of creditors. Approval of CVA requires: (i) Each class of creditors or Approval by 2/3 in value of Approval of the approvals by class of impaired creditors 75% in value of those present members must accept the creditors in the Creditor composition plan by creditors and and each class of impaired and voting (excluding secured SoA by (i) 75% in amount and Institutions Consortium (i.e., creditors would require shareholders shareholders must accept or part secured claims); (ii) (ii) majority in number. Turkish bank/financial the affirmative vote of (i) the plan by 2/3 in amount approval is invalid if more institution creditors and half in number of the and majority in number. than 50% in value of creditors Foreign Credit Institutions registered creditors that who are not connected to the and International own a minimum of 50% debtor vote against; and (iii) Organizations) who signed by value of the claims 50% or more in value of the FA and who have subject to the members must vote in favour. exposures to a debtor) composition plan; or (ii) required to approve specific one-fourth of the restructuring agreement for registered creditors that particular debtor, and most own two-thirds of the other decisions. claims subject to the Foreign credit institutions composition plan. The 4 US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition (Turkish Scheme of Arrangement) and international voting right is available organizations authorized to only for creditors affected extend credits to debtors by the composition under the laws of their home project. jurisdiction ("Foreign Credit Institutions and International Organizations") can join the financial restructuring process by signing the FA on a case-by-case basis without being subject to the Creditor Institutions Consortium's approval. Write down of debt requires 100% approval. 75% by volume and 30% by number to approve the accession of third party creditors which have not signed up to the FA, to approve the borrower's borrowing from those willing to lend and/or extending the duration of negotiations to 150 days. 90% by volume and 2 by number for additional lending. 8. Ability to bind The plan may bind a Dissenting creditors
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