International Insolvency & Restructuring Report 2019/20 capital markets intelligence Insolvency cover 2019.indd 1 10/04/2019 09:57:58 Focused. Effective. Precise. We provide Swiss made advice and representation to enterprises and entrepreneurs in a global environment in transactions, disputes and complex legal, tax and regulatory matters. Arbitration Banking and Finance Capital Markets Competition | Regulatory Compliance Corporate | M&A Crisis Management Employment Law and Executive Compensation IP | IT Insurance Investigations and Enforcement Litigation Private Clients Real Estate Restructuring | Insolvency Tax Technology and Digital Economy White Collar Crime www.homburger.ch InternationalInternational Insolvency Insol vency Focused. & Restructuring& Restructuring Report Report Effective. 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ISBN 978 1 9996098 5 6 CAP8908 II&RR_pIFC-D_Title_Contents_Credit.indd 2 30/05/2019 16:37 Contents Foreword 01 by Alan Bloom, President, International Insolvency Institute, and Partner – Restructuring, Ernst & Young LLP The current work by UNCITRAL in the area of insolvency law 04 UNCITRAL Secretariat, Office of Legal Affairs, United Nations Johnston Press PLC – Restructure by pre-pack 08 administration GLAS Cross-border restructuring in the US: Chapter 15 approval 12 of third-party releases granted in foreign proceedings Milbank LLP Developments in Australian insolvency law: 17 Combatting illegal phoenixing Gilbert + Tobin Restructuring trusts: A viable structure for securing 22 and restructuring financing in Austria Fellner Wratzfeld & Partner Rechtsanwälte GmbH The insolvency scenario in Brazil: Certain relevant issues 26 Felsberg Advogados Off with his head! An offshore perspective – Is the 29 “headcount test” heading for the guillotine? Walkers Selected restructuring issues in continental Europe – 35 An illustration with Luxembourg Loyens & Loeff Insolvency and restructuring in Mexico 39 Peña Briseño, Peña Barba, Palomino Abogados CAP8908 II&RR_pIFC-D_Title_Contents_Credit.indd 3 30/05/2019 16:37 Contents Overview of insolvency and restructuring in Nigeria 43 PUNUKA Attorneys and Solicitors Swedish insolvency law 47 White & Case Crypto assets and data in insolvency: Switzerland’s 50 proposed new rules Homburger AG Proposed reforms create cross-border opportunities 53 in the UK Skadden, Arps, Slate, Meagher & Flom (UK) LLP Proposed amendments to Chapter 15 in the US 57 Drinker Biddle & Reath LLP Contributors 62 CAP8908 II&RR_pIFC-D_Title_Contents_Credit.indd 4 30/05/2019 16:37 International Insolvency & Restructuring Report 2019/20 Foreword by Alan Bloom, President, International Insolvency Institute, and Partner – Restructuring, Ernst & Young LLP I last offered a Foreword to this publication to coincide with the International Insolvency Institute’s Conference in New York City in September 2018. This latest contribution coincides with the equivalent 2019 Conference being held in Barcelona in June, just nine months later. What a difference nine months makes. From a position where most world stock markets were at record levels with an upward trajectory, we have since seen significant corrections in the past nine months, with the Dow Jones, the FTSE, the Nikkei and pretty much all other stock markets suffering major falls, many of them over 20%. As regards the prospects for economic growth, the OECD has forecast static global growth for 2019 and 2020 at 3.5%. Most of the G20 countries show slowing growth and China’s significantly slowing economy is forecast to have a very marked impact on world growth more generally. Growth in the Eurozone is forecast to reduce from 2.5% to 1.6% with Germany, the largest Eurozone economy by far, showing signs of a slowdown. The US, from a position of strong and steady growth in 2016 and 2017, is now forecasting a slowdown in that rate of growth. The oil price which, nine months ago, looked as if it was on the rise and providing a steady base for investment, has again fallen and is still operating a few dollars either side of US$60 per barrel. And for those with an appetite for cryptocurrencies, Bitcoin, which was trading at US$18,000 at its highpoint in 2018, is now trading at US$8,000. Curiously, bond defaults remain relatively static and Moody’s recently anticipated that corporate profits and liquidity will remain healthy despite the projections of slow economic growth and although there is expected escalation in the volatility in the high yield market, most rated companies have a low refinancing risk in 2019. So as with my previous Foreword, the messages are mixed. On the one hand we have slow growth and a significant slowdown in some of the largest economies, adverse stock market reaction and lower oil prices but, on the other hand, defaults on high yield remain at a relatively comfortable level. When discussing these trends with colleagues, some who operate within the stressed and distressed markets and others who do not, the broad consensus is however that we are more likely than not to see a downturn and some form of market correction if not towards the end of 2019, then certainly by early 2020. The most likely cause of the downturn? As in 2006 and 2007, there is no real consistency as to what might precipitate matters. The most frequently made suggestions revolve around increased protectionism, most obviously evidenced by the current tariff war between the world’s two largest economies, the US and China; the complexities of the UK’s planned departure from the EU; the rise in nationalism and the effect this may have on global trade; political tensions between the United States and North Korea, Russia and others. Add to this, the enormous impact of the changes that technology is making to almost every walk of life, the financial impact of which is already being felt by a number of sectors and will continue to affect any market that finds itself disrupted by technological advancement. We are already seeing the effects of this on the automotive sector, where investment in electrification and autonomous vehicles is creating pressures in the sector with some manufacturers very hard hit by the move away from traditional fuels, particularly the demonisation of diesel. The impact is, of course, felt right through the supply chain, as the OEMs seek to offset some of the cost. In retail we are seeing enormous changes to the way in which people shop with the consequential impact on bricks and mortar retailers, many of which have filed for bankruptcy protection of some sort in order to re-organise their real estate portfolio. 1 CAP8908 II&RR_p01_Foreword.indd 1 30/05/2019 16:37 In the oil and gas sector, the flattening out of the oil price has again left a number of participants vulnerable and although as we speak there has not been a further large-scale increase in the number of bankruptcy filings in this sector, it remains a weak and vulnerable sector. Many other sectors are finding themselves vulnerable to the disruption of their business model and it is highly likely that we will