Lex Mundi Insolvency, Bankruptcy and Restructuring Practice Group Newsletter

Updates from Around the World

Asia Pacific:Debt Restructuring of PT Bumi Resources

Rajah & Tann ("R&T") acted as Singapore counsel to PT Bumi Resources Tbk ("Bumi") in one of the largest and most complex debt restructuring transactions completed in South East Asia. The restructuring primarily involved the issuance of new loans and securities comprising of senior notes, mandatory convertible bonds and contingent value rights ("CVR") in exchange for US$4.5 billion of Bumi's financial debt. Notably, R&T worked on the first ever CVRs (contingent on the price of coal) to be listed on Singapore Exchange Securities Trading Ltd.

On December 11, 2017, Bumi entered into agreements for the issuance of new loans and securities in exchange for US$4.5 billion of its financial debts, including three publicly issued bonds, six bank-syndicated loans, and loans from both China Investment and China Development Bank. These debts have now been successfully exchanged for approximately US$2.3 billion of new debt, comprising senior loans and notes, mandatory convertible bonds and contingent value rights, in addition to new Bumi equity issued pursuant to a rights offering for the remainder of the amount. In November 2016, the secured and unsecured creditors of Bumi voted overwhelmingly to approve a composition plan, which was then ratified by the Central Jakarta Commercial Court. A voluntary petition for relief was subsequently granted by the US Bankruptcy Court, recognising the PKPU proceedings as a foreign main proceeding under Chapter 15 of the US Bankruptcy Code.

Bumi is a leading Indonesian natural resources group focused primarily on coal mining. It is Indonesia's largest coal miner by production volume and the world's largest thermal coal exporter.

This matter won ‘Debt Market Deal of the Year (premium)’ at the Asian Legal Business SE Asia Law Awards 2018 and ‘Deal of the Year’ at the Asian-mena Counsel Deals of the Year 2017.

Europe/ Middle East/ Africa: Please see below is a condensed version of an article by Christiaan Zijderveld at Houthoff regarding recent changes to restructuring distressed companies in the Netherlands (for the article, please refer to “Dutch Design: Restructuring Trends in the Netherlands” in the International Insolvency & Restructuring Report 2018/19):

The Dutch Bankruptcy Act came into force in 1896. Since then, it has only seen relatively minor changes. The Dutch Bankruptcy Act in its original form was flexible enough to allow it to develop on the basis of case law. In recent years, however, Dutch insolvency law has become a beehive of activity owing largely to the efforts of the Dutch legislature. Most of these legislative initiatives aim to introduce new instruments for restructuring a distressed company prior to formal bankruptcy proceedings.

The most notable legislative effort in this regard is the ‘Act on Court Confirmation of Extrajudicial Restructuring Plans’. The draft bill outlining a debtor-in-possession restructuring tool was published for consultation in September 2017. Once implemented, the draft bill will allow a debtor to present a plan outside of formal bankruptcy proceedings, something which is currently unavailable under Dutch insolvency law. This initiative is to a certain extent comparable to a US Chapter 11 or a UK Scheme of Arrangement. We expect a final legislative proposal to be submitted to the Dutch legislature in the autumn of 2018 and, at the earliest, the final version of the bill could be enacted in the second quarter of 2019.

Another initiative that addresses pre-insolvency restructuring is the formalization of the current practice regarding pre-packaged administrations. In a pre-pack, the court appoints a provisional administrator who prepares a sale of the distressed company prior to the actual opening of an insolvency procedure. Once an insolvency procedure has been opened, the sale is executed. The aim of a pre-pack is to preserve the going concern value of an enterprise, which is assumed to be more than the liquidation value normally received by the creditors in the case of bankruptcy. A statute that seeks to formalize this practice, the Act for the Preservation of Continuity of Enterprises, is currently going through the final stage of the Dutch legislative process but has been postponed due to a decision by the European Court of Justice (“ECJ”) in the Estro/Smallsteps case (ECJ June 22, 2017, ECLI:EU:C:2017:489). As a consequence of this decision, the rights of employees involved in a pre-pack are protected by this directive, which can make it more difficult to terminate employment contracts in the context of a pre-packed insolvency. Nevertheless, the ECJ’s decision has not quelled the support for the proposed legislation. The act is expected to be passed in the summer of 2018.

Apart from introducing various pre-insolvency proceedings, the Dutch legislature has also turned its attention to formal bankruptcy proceedings in court. The ‘Act on the Modernization of Insolvency Procedure’ is about to be passed by the Dutch Senate. As the name suggest, the act introduces various amendments with the aim of bringing insolvency proceedings in line with 21st century standards. Most of these changes address the claims admission process in bankruptcy. The act will allow the bankruptcy trustee to tailor claims admission meetings as he or she deems fit. For example, once the act has been adopted, these meetings will no longer have to take place physically; they can also be held by way of a conference call or video conferencing. The most notable feature of the act is the introduction of a claims bar date. The claims bar date can be set at the discretion of the bankruptcy judge. Currently, Dutch bankruptcy proceedings lack a hard deadline for the filing of claims. This gives creditors the ability to stall the distribution process, for example by filing objections against the distribution list. Introducing a claims bar date will put an effective end to these practices. This is an important change, because creditors that do not file in time will not be able to make a recovery.

Latin America:

It is no news that during recent years, Brazil has experienced a severe economic recession. Domestic and international macroeconomic factors and developments of several police investigations related to corruption scandals involving Petrobras, a state-controlled oil company, and several Brazilian companies have contributed to the downturn in the economy. Read More

North America:Titanic Artifacts involved in Bankruptcy Case

On June 14, 2016, Premier Exhibitions, Inc. (OTC: PRXIQ) and its subsidiary, RMS Titanic, Inc., along with other affiliated companies, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court, Middle District of Florida, Jacksonville Division. The Honorable Paul M. Glenn presides over these bankruptcy cases. RMS Titanic, Inc. hold rights to approximately 5,500 artifacts recovered from the wreck site of RMS Titanic which tragically sank on April 15, 1912. The Bankruptcy Court recently granted a motion filed by Premier Exhibitions, Inc. to sell its assets, including RMS Titanic, Inc., and set a sale hearing for October 18, 2018 at 10 a.m. The proposed deadline to submit a Qualified Bid is October 5 at 4 p.m. and the proposed auction will be October 11 at the Troutman Sanders law firm in Atlanta, GA starting at 10 a.m. The minimum overbid is $21,500,000 and a 10% deposit of any bid is required with the bid. Those interested in more details on the bankruptcy case can contact Jay Brown at jacob.brown@akerman.com.

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