EuroResource--Deals and Debt

Recent Developments

UK--Court of Appeal Upholds High Court Decision in "Nortel/Lehman Case" On 14 October 2011, the English Court of Appeal upheld the UK High Court decision in the case of Bloom v The Pensions Regulator, commonly known as the "Nortel/Lehman case". The case involved the treatment of obligations to the UK Pensions Regulator on the basis of notices issued by the Regulator to companies in administration whose subsidiaries or other group companies were employers in UK pension plans. Although the case is highly theoretical--the Regulator has not issued any such notices yet--it caused much concern, as the High Court judge felt obliged to permit the Regulator's claim to be an expense of the administration, thus prioritised ahead of other unsecured liabilities, including the administrator's own fees. The decision is not surprising, and it is generally expected that any attempt to overturn the ruling would require an appeal to the UK Supreme Court. If the case were to be appealed further, any final decision would likely be issued in the second quarter of 2012. Until that time, administrators remain wary of taking appointments where there is a group defined-benefit pension scheme, and some have asked for security in order to avoid putting their own fees at risk.

France--AMF Extends Ban on Taking Net Short Positions in 10 French Financial-Sector Securities until 11 November 2011 On 11 August 2011, the chairman of the Autorité des Marchés Financiers ("AMF") placed a ban on creating any net short positions or increasing any existing net short positions, including intraday, in 10 French securities in the financial sector. The ban applies to any "person established or residing in France or in another country". However, it does not apply to financial intermediaries acting as market makers or liquidity providers when operating under a contract with the relevant market undertaking or with the issuer concerned, or when acting as counterparties for block trades in equities. The AMF board renewed the ban on 25 August. On 28 September, the AMF announced that, in close coordination with European regulators in Spain, Italy, Belgium and Greece, and under the aegis of the European Securities and Markets Authority, the AMF had been assessing both the market conditions and the impact of the ban and had determined that the conditions for lifting the restrictions had not been met. Therefore, the ban will remain in force until 11 November. The AMF will continue to monitor the markets closely and may decide to lift the ban if market conditions allow it.

Italy--New Rules on Carry-Forward of Tax Losses, Tax Breaks for Venture Capital Funds, and a New Withholding Tax System While any given situation requires closer examination, an overview of the new tax rules includes the following:

New Rules on the Carry-Forward of Tax Losses. From the 2011 fiscal year, tax losses of Italian companies can be carried forward without the time restrictions of the previous regime, which provided for a five-year limitation after the first three years of business operations. Corporate taxpayers can now use their tax losses to offset the taxable income of the following years, but only up to 80 percent, provided that such 80 percent limitation does not apply to tax losses incurred in the first three years of business

Tax Breaks for Venture Capital Funds. Pursuant to a decree issued last July by the Ministry of Economy and Finance, the proceeds paid by Fondi per Venture Capital ("FVCs") to their unit holders are no longer subject to Italian income tax in the hands of unit holders. However, with regard to proceeds paid by FVCs to business taxpayers, the new income tax exemption will be effective only upon approval by the European Commission. Specific provisions regulate the definition of FVCs for the purpose of applying the favourable new regime as well as the requirements relating to the investments.

New Withholding Tax System. As a general rule, as of 1 January 2012, the domestic withholding tax on outbound dividends paid by Italian resident companies to nonresident persons will be 20 percent, irrespective of whether the shares are ordinary or saving shares. However, the Parent-Subsidiary Directive exemption, i.e., the 1.375 percent withholding rate for certain EU resident companies or the lower treaty rate (if any), will still apply if the relevant conditions are met. The domestic withholding tax on interest paid as of 1 January 2012 will be increased (or, in the case of "tax haven" lenders, decreased) to 20 percent. However, both the Interest and Royalties Directive exemption and the treaty benefits will still be available where applicable.


Jones Day is advising the management sellers of SAV Credit Limited, the UK's leading nonstandard credit card provider, in connection with the sale by Palamon Capital Partners, Electra Private Equity and Morgan Stanley Alternative Investment Partners of SAV Credit to Värde Partners, an investment manager specialising in alternative investments with offices in Minneapolis, London and Singapore, in a transaction valued at £472 million (approximately $740 million). Established in 2001, SAV Credit pioneered specialist credit card lending in the UK, catering to consumers often overlooked by mainstream financial-service providers. The company currently has approximately 500,000 customers under management, with balances in excess of £600 million.

Jones Day has taken a lead role in the restructuring and prepackaged administration of Jarvis Hotels by the distressed-property unit of The Royal Bank of Scotland ("RBS") and the buyout firm Patron Capital. The deal, worth around £111 million, saw Jupiter Hotels Group, a joint venture between RBS and Patron, acquire the majority of Jarvis's hotel portfolio following a debt restructuring. Jones Day advised long-standing client Jarvis in connection with the restructuring and prepackaged administration.

Jones Day is advising Eurasian Natural Resources Corporation PLC ("ENRC"), a Londonheadquartered, leading diversified natural resources group, with integrated mining, processing, energy, logistical and marketing operations in Kazakhstan, China, Russia, Brazil and Africa, in connection with the proposed acquisition by ENRC of 75 percent of the common stock of Shubarkol Komir JSC ("Shubarkol") for up to $600 million, plus assumed debt of approximately $50 million, and a proposed tender offer,
subject to completion of the acquisition and as required under Kazakhstan law, to acquire all of the preferred stock of Shubarkol for up to approximately $12.6 million. Shubarkol is a thermal coal producer based in Kazakhstan with 2010 output of approximately 6 million tons of coal, which accounted for approximately 5.4 percent of Kazakhstan's total coal production.

European Distress Team Members

Corinne Ball

Volker Kammel
Christian Staps

Kay Morley
Michael Pabst
Sion Richards
Andrew Rotenberg
Michael Rutstein
Adam Scarrott
Luke Johnson

Victor Casarrubios
Luis Muñoz
Richard Puttré
Fernando Lillo

Marco Lombardi
Francesco Squerzoni

Sandra Kamper
Ansgar Rempp
Olaf Benning

New York
Paul Leake
Veerle Roovers

Laurent Assaya

San Francisco
Tobias Keller