Insights

EuroResource--Deals and Debt

Recent Developments

Global—On 11 September 2013, Argentina's Congress approved an open-ended bond swap offer that would allow holders of the remaining seven percent of bonds still outstanding after the country's 2002 default (as well as participating bondholders) to swap their instruments for new bonds governed by Argentine law. This latest exchange offer follows years of lawsuits stemming from a more than decade-long debt crisis. The terms of the swap are a reiteration of Argentina's 2010 restructuring offer. In that and a previous 2005 debt exchange, 93 percent of holders swapped their defaulted bonds for new paper offering less than 30 cents on the dollar.

The U.S. Supreme Court also announced on 11 September that it will convene a preliminary hearing on 30 September 2013 to consider whether it will decide to review a 26 October 2012 ruling by the U.S. Court of Appeals for the Second Circuit (see NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012)) upholding a lower court order enjoining Argentina from making payments on restructured defaulted debt without making comparable payments to holdout bondholders. In a separate ruling handed down on 23 August 2013 (NML Capital, Ltd. v. The Republic of Argentina, No. 12-105(L) (2d Cir. Aug. 23, 2013), the Second Circuit upheld lower court orders requiring Argentina to pay holdout bondholders in full whenever it makes payments to holders of restructured debt, but it delayed implementation of its ruling until the U.S. Supreme Court decides whether to hear Argentina's appeal. For more information concerning these rulings, consult the August 2013 edition of EuroResource.

France—On 28 August 2013, the French Government released its annual update of the list of Non Cooperative States or Territories ("NCST"), blacklisting Bermuda, the British Virgin Islands and Jersey. Transactions involving NCST are subject to higher than standard withholding tax rates (up to 75 percent for payments made from France to NCST) and stronger disclosure rules. Furthermore, the participation exemption does not apply to dividends paid by an NCST entity to a French resident company nor to capital gains from the sale of participation in an NCST company. According to the French Finance Ministry, the three territories have been added to the blacklist of tax havens for unsatisfactory compliance with an existing tax convention with France. The 2013 update is effective 1 January 2014. Taxpayers will have until the end of 2013 to improve their tax positions and income flows to and from NCST. If the three jurisdictions fulfill their obligations by the end of the year, they may be removed from the list. The remaining NCST are Botswana, Brunei, Guatemala, the Marshall Islands, Montserrat, Nauru and Niue. The list is likely to expand in coming years as France cracks down on tax evasion and implements measures to strengthen tax cooperation criteria. All countries that do not comply with the automatic exchange of tax information—particularly regarding bank accounts—will likely be added to the NCST roster.

The UK—On 6 June 2013, the English Court of Appeal issued an important ruling construing the meaning of "establishment" for the purpose of commencing a secondary winding-up proceeding under the EU Insolvency Regulation (Council Regulation (EC) 1346/2000)). Olympic Airlines ("Olympic") commenced a liquidation proceeding in Greece on 2 October 2009. On 20 July 2010, the company's liquidator filed a petition in the English High Court to commence a secondary winding-up proceeding under the Insolvency Regulation in England. At that time, Olympic had ceased all commercial operations in England and its personnel had all been dismissed, except for a skeleton staff retained to assist with the winding-up. The High Court ruled that the presence of an office and the skeleton staff was sufficient to demonstrate that Olympic had an "establishment" in England, as required by the Insolvency Regulation. The court rejected the argument that some market activity is required. The Court of Appeal disagreed with the High Court's conclusions in Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA [2013] EWCA Civ 643. The court noted that the purpose of secondary proceedings is to protect the interests of creditors who dealt with the "establishment" in question up to the date of the winding-up petition. Therefore, the court reasoned, what is required is a business operation; if the mere winding-up of any business with a former place of operations and the retention of limited staff to assist with the process were sufficient, there would hardly ever be secondary proceedings that did not satisfy the criteria for an establishment.

Newsworthy

Jones Day successfully defended Texas Keystone Inc. ("Texas Keystone"), a U.S. oil and gas company based in Pittsburgh, Pennsylvania, against a US$1.6 billion claim asserted by Excalibur Ventures LLC ("Excalibur") for an interest in various petroleum fields in Iraqi Kurdistan. The 57-day trial was the longest and one of the most complex held in London's Commercial Court in the 2013 judicial year. The case was tried in the English Commercial Court between 8 October 2012 and 1 March 2013. On 10 September 2013, the court handed down its judgment (Excalibur Ventures LLC v Texas Keystone & Ors, 10-1517 [EWHC (QB)] (10 Sep. 2013)), dismissing all claims against Texas Keystone and the other defendants (Gulf Keystone Petroleum Limited, Gulf Keystone Petroleum International Limited and Gulf Keystone Petroleum (UK) Limited) and decided all issues in favor of the defendants. Jones Day also handled a related ICC arbitration filed in New York seeking the same relief (that was eventually abandoned by Excalibur) as well as multiple related U.S. proceedings that obtained critical discovery from third parties which was used in the trial in London.

Jones Day represented Oclaro, Inc., a leading provider and innovator of optical communications solutions, in the sale of its Oclaro Switzerland GmbH subsidiary and associated laser diodes business to II-VI Incorporated in a transaction valued at US$115 million. In addition, II-VI acquired an exclusive option to purchase Oclaro's optical amplifier and micro-optics business for US$88 million in cash.

Jones Day advised Bpifrance as well as its subsidiary, the portfolio management company Bpifrance Investissement, in connection with the formation of the Fund "ETI 2020." With total commitments amounting to €3 billion, the Fund will invest in equity and quasi-equity in transactions of not less than €10 million as a minority shareholder. The Fund's objective is to provide long-term support to medium-sized companies by accelerating their creation and development, strengthening their innovation capabilities and promoting them as French growth leaders in their international development. Some investments already completed by Bpifrance Participations (formerly Strategic Investment Fund-FSI) will be contributed to this Fund, which should follow an annual investment trend of approximately €300 to €500 million.

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