Insights

EuroResource--Deals and Debt

Recent Developments

Global—On 10 January 2013, the U.S. Court of Appeals for the Second Circuit denied a request by participating bondholders in 2005 and 2010 restructurings of Argentina's defaulted bond debt to have New York State's highest court resolve a dispute with holdout bondholders regarding the meaning of an "equal treatment" or "pari passu" clause in the original bond indenture. See NML Capital, Ltd. v. Republic of Argentina, No. 12-105(L) (2d Cir. Jan. 10, 2013) (summary order). Participating bondholders had complained that the legal question concerning which debt takes precedence has provoked volatility in the bond markets and should be resolved by the state court whose law governs the contract. They argued that the meaning of a pari passu clause in a sovereign debt case has not been decided by a New York state court, and that if holdout bondholders—principally private equity companies—are allowed to disrupt Argentina's sovereign debt restructuring, countries may choose London or Singapore (rather than New York) as the base from which to issue debt.

On 21 November 2012, a U.S. district court ordered Argentina to pay $1.3 billion to holdout bondholders no later than 15 December 2012. The ruling came on the heels of the Second Circuit's ruling in NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012), where the court upheld a lower court order enjoining Argentina from making payments on its restructured debt without making comparable payments to holdout bondholders. Argentina received a temporary reprieve of its obligation to make payments to holdout bondholders on 28 November 2012, when the Second Circuit stayed the ruling until it has an opportunity to hear the merits of Argentina's appeal, scheduled for argument on 27 February 2013.

Global—On 4 December 2012, a U.S. bankruptcy judge ruled that the decision by Mexican glassmaker Vitro SAB de CV ("Vitro") to shift property secretly out of the U.S. and to reincorporate a number of subsidiaries offshore amounted to fraud under U.S. law, justifying the commencement of involuntary bankruptcy cases against the subsidiaries. In In re Vitro Asset Corp., 2012 BL 317004 (Bankr. N.D. Tex. Dec. 4, 2012), the court held that the actions, including reincorporating five subsidiaries in the Bahamas and failing to disclose information to U.S. courts in an effort to frustrate a bid by a group of hedge fund bondholders to push Vitro's U.S. subsidiaries into bankruptcy, constituted "special circumstances" allowing creditors to file an involuntary bankruptcy case against a company "when there is fraud, trick, artifice, or scam by an alleged debtor." The court also ruled that, on the basis of rulings handed down by New York state courts, the bondholders' claims were not subject to bona fide dispute within the meaning of section 303(b)(1) of the Bankruptcy Code.

The actions were undertaken by Vitro in connection with its Mexican bankruptcy case (concurso) under a controversial plan of reorganization that U.S. courts have refused to recognize because it effectively extinguishes the guarantee claims of U.S. bondholders by releasing non-debtor guarantors under circumstances that are repugnant to U.S. bankruptcy law. See Ad Hoc Group of Vitro Noteholders v. Vitro SAB de CV (In re Vitro SAB de CV), 2012 WL 5935630 (5th Cir. Nov. 28, 2012). Concern over the restructuring and Vitro's concurso, which has been recognized under chapter 15 of the U.S. Bankruptcy Code, has prompted several U.S. lawmakers to write to Mexico's embassy in the U.S. and to U.S. Secretary of State Hillary Rodham Clinton, warning of possible consequences for U.S. cross-border investment.

Europe—European Union leaders agreed on 13 December 2012 to place banks in the euro area under a single supervisor, calling it a concrete measure to maintain the viability of the currency as well as a step toward a broader economic union. The agreement on new banking supervision would put between 100 and 200 major banks under the direct oversight of the European Central Bank ("ECB"), leaving thousands of smaller institutions to be overseen principally by national regulators. The new system is designed to strengthen oversight of a sector that, under the supervision of national regulators, failed to prevent banks from amassing so much debt that they endanger the finances of eurozone states and threaten the future of the currency. The supervision mechanism, whose details have yet to be finalized, is to be fully operational by March 2014 and is subject to the approval of the European Parliament and national legislatures before it goes into effect.

Europe—On 12 December 2012, the European Commission ("EC") proposed reforms to the EC Insolvency Regulation (Council Regulation (EC) No 1346/2000) (the "Regulation") designed to modernise the current rules on cross-border insolvency proceedings. The preamble to the proposal states that "the new rules will shift focus away from liquidation and develop a new approach to helping businesses overcome financial difficulties, all the while protecting creditors' right to get their money back."

Key elements of the proposed reforms include:

  • Broadening the scope of the Regulation by revising the definition of "insolvency proceedings" to include hybrid and pre-insolvency proceedings, as well as debt discharge proceedings and other insolvency proceedings for natural persons;
  • Clarification of the jurisdictional rules;
  • More efficient administration of insolvency proceedings by: (i) giving courts the discretion to refuse a petition to commence a secondary (non-main) proceeding if it is deemed unnecessary to protect the interests of local creditors; (ii) abolishing the requirement that secondary proceedings be winding-up proceedings; and (iii) improving coordination between main and secondary proceedings;
  • Enhanced public access to court decisions in cross-border insolvency cases and standardization of creditor claim forms; and
  • Coordination of insolvency proceeding involving affiliated entities.

Newsworthy

Jones Day advised Taiwan Semiconductor Manufacturing Company, Ltd. ("TSMC") in connection with the €1.11 billion acquisition of five percent of the shares in ASML Holding N.V. ("ASML"), with a view toward accelerating the development and industrialisation of key next-generation semiconductor manufacturing technologies. As of 24 November 2012, TSMC holds an aggregate of 5 percent in ASML. ASML is a Dutch company and currently the largest supplier in the world of photolithography systems for the semiconductor industry. The company manufactures machines for the production of integrated circuits, such as DRAM memory, flash memory and CPUs.

The 2013 edition of Chambers UK: A Client's Guide to the UK Legal Profession has named 27 Jones Day London Office lawyers as among the leading lawyers in Britain. The directory also ranks 20 Firm practice areas in London, including first-tier rankings in the "Corporate/M&A: Mid-Market" and "Dispute Resolution: Highly Regarded" categories.

Juan Ferré has joined Jones Day to spearhead the firm's Madrid Business Restructuring & Reorganization Practice. Mr. Ferré is a leading bankruptcy lawyer in Spain with more than 15 years of experience in restructuring and insolvency. He arrives at Jones Day from the boutique restructuring firm Pluta in Madrid where he was Partner in Charge.

Jones Day is advising Baxter International Inc. ("Baxter") regarding the antitrust aspects of its proposed acquisition of Gambro AB, a privately held dialysis product company based in Lund, Sweden, for SEK26.5 billion (approximately US$4 billion). Gambro is a global medical technology company focused on developing, manufacturing and supplying dialysis products and therapies for patients with acute or chronic kidney disease. The acquisition gives Baxter a comprehensive dialysis product portfolio, complements Baxter's global home dialysis offerings and positions the company to better meet the evolving needs of the large and growing dialysis market.

Jones Day advised General Motors Company in connection with the sale of its Strasbourg plant to Punch Metals International N.V. The transaction also includes a long-term supply agreement with ZF, a German gearbox giant supplying Jaguar, Audi and BMW. ZF has committed to purchase a large number of drivelines from the plant until 2017. The transaction was approved by the Strasbourg court on 3 January 2013 in the course of creditor conciliation proceedings. All current employees of the operations will be maintained by the new owner.

European Distress Team Members

Global
Corinne Ball

Brussels
David Roger

Frankfurt
Volker Kammel
Christian Staps

London
Matthew French
Kay Morley
Michael Pabst
Sion Richards
Andrew Rotenberg
Michael Rutstein

Madrid
Victor Casarrubios
Juan Ferré
Fernando Lillo
Luis Muñoz
Richard Puttré

Milan
Marco Lombardi
Francesco Squerzoni

Munich
Olaf Benning
Sandra Kamper
Ansgar Rempp

New York
Paul Leake
Veerle Roovers

Paris
Laurent Assaya
Frédéric Gros
Linda Hesse
Florence Moulin

San Francisco
Tobias Keller

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