EuroResource--Deals and Debt

EuroResource--Deals and Debt

For the benefit of our clients and friends investing in European distressed opportunities, our European Network is sharing some current developments.

Recent Developments

Global—On 10 January 2014, the US Supreme Court agreed to resolve a court split over the scope of discovery orders aimed at enforcing judgments against foreign states. In Argentina v. NML Capital, Ltd., No. 12-842, 2014 BL 7274 (Jan. 10, 2014), the Supreme Court granted a petition for a writ of certiorari to hear an appeal stemming from Argentina's default on its government debt in 2001. Argentina restructured its defaulted debt in 2005 and 2010. One of the holdout bondholders from those restructurings, NML Capital, filed 11 federal lawsuits in New York to collect on its defaulted bonds. The Cayman Island hedge fund has since been awarded judgments totaling approximately US$2.5 billion. The US Court of Appeals for the Second Circuit upheld a lower court's order forcing two banks, as part of NML's effort to enforce the judgments, to disclose information concerning assets Argentina owns outside the US. See EM Ltd. v. Republic of Argentina, 695 F.3d 201 (2d Cir. 2012). This ruling, however, put the Second Circuit at odds with three of its sister circuits, which have limited post-judgment discovery to assets located within the US, in accordance with their interpretation of the Foreign Sovereign Immunities Act. See Rubin v. Islamic Republic of Iran, 637 F.3d 783 (7th Cir. 2011), cert. denied, 133 S. Ct. 23 (2012); Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080 (9th Cir. 2007); Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240 (5th Cir. 2002). The Supreme Court will likely hear arguments in April.

In a related dispute, Argentina is expected by mid-February 2014 to appeal to the Supreme Court a ruling by the Second Circuit (NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230 (2d Cir. 2013)) upholding a lower court's order directing Argentina to pay holdout bondholders US$1.33 billion.

Refer to previous editions of EuroResource (here, here and here) for additional information regarding the Argentine debt restructuring dispute.

US, UK and Canada—On 7 January 2014, the US Bankruptcy Court for the District of Delaware signed an order approving the "milestone" deal reached on 17 December 2013 between Nortel's US division, its European creditors and representatives of British pensioners settling some of the "costly and contentious litigation" that has been tying up the division of Nortel's liquidation proceeds. The settlement, which resolves nearly US$2 billion in claims, ends disputes over how much European creditors and representatives of British retirees are owed by Nortel US. A joint US-Canadian trial to resolve the remaining issues in the long-running battle between divisions of Nortel Networks Corp. and their creditors over the division of US$7.5 billion in liquidation proceeds of the defunct Canadian telecom company is scheduled to commence before the Ontario Superior Court of Justice and the US Bankruptcy Court on 14 May 2014. Refer to the December 2013 edition of EuroResource for additional information regarding the Nortel dispute.

The EU—The reporting obligation under the European Market Infrastructure Regulation ("EMIR") will become effective as of 12 February 2014. The obligation applies to all derivatives contracts irrespective of whether they are traded on or off exchange, all new transactions entered into after 12 February and certain old transactions ("backloading") that were entered into prior to the 12 February effective date but are still outstanding on that date. For certain old transactions that terminated before the effective date, backloading is delayed until 12 February 2017.

The reporting obligation will apply not only to financial counterparties, but also to non-financial counterparties (as defined in EMIR) and therefore will extend to corporate entities and funds established in the EU. It also applies to intra-group transactions. Although branches of non-EU entities operating in the EU may not be subject to the reporting requirement themselves, their EU counterparties will be and can be expected to request corresponding data necessary to comply with their reporting obligation. By contrast, non-EU branches of EU entities may be subject to the reporting obligation, and subsidiaries or affiliates established in the EU will also need to report. Even though an entity may delegate its reporting responsibilities, the entity will remain liable for any breach of its reporting obligation and is well advised to monitor the reports.

The information required to be reported under EMIR is extensive and continues in force during the entire lifecycle of a transaction (e.g., from execution to any modifications and termination, all of which must be reported). Each counterparty will also be obligated to obtain a unique legal entity identifier issued by the Local Operating Unit endorsed in the jurisdiction where it is registered. A more detailed explanation of the new EMIR reporting obligation can be found here.

Spain—On 24 January 2014, the Council of Ministers approved Royal Decree–Law 1/2014, which introduces certain changes in administrative regulations regarding the State's liability in the event of the termination of an administrative toll-motorways concession. Two specific regulations were amended in order to clarify the role of the State if it is obligated to compensate concession companies upon the termination of a concession: (i) Law 8/1972 of 10 May 1972, which governs the construction, maintenance and operation of toll motorways under the concession regime; and (ii) Legislative Royal Decree 3/2011 of 14 November 2011, in which the Rewritten Text to the Public Sector Agreements Act was approved.

The amendments were motivated by recent Spanish Supreme Court rulings construing the role of the State in expropriation procedures in the aftermath of the controversial toll motorways' concessions for Madrid (Radiales), whereby the State was declared liable (upon default of the concession companies) for the payment of expropriation liabilities. The amendments have also been enacted in the context of the State's proposed rescue project for failed toll motorways. The new changes were effective as of 26 January 2014. It is anticipated that the amendments will be retroactive. A more detailed discussion of the amendments can be found here.


Jones Day represented OHB AG, an aerospace and technology company, in connection with its €250 million (US$341 million) unsecured revolving credit facility agreement. The funding was provided by a syndicate of banks led by Bayerische Landesbank, Commerzbank Aktiengesellschaft and UniCredit Bank AG. BNP Paribas Fortis SA/NV, Deutsche Bank AG, Landesbank Baden-Württemberg and Landesbank Hessen-Thüringen Girozentrale acted as mandated lead arrangers.

Jones Day represented DV4 Limited in connection with the formation of a joint venture with APG Strategic Real Estate Pool relating to the development of major income-producing villages in Greater London. As part of the transaction, the new joint venture acquired the Elephant and Castle Shopping Centre from Key Property Investments (a joint venture between St. Modwen Properties PLC and Salhia Real Estate Company K.S.C.) for £80 million (US$131.3 million).

Jones Day advised Trafigura Beheer B.V. ("Trafigura"), a market leader in the global commodities industry, in connection with its offering of €500 million in 5.25 percent Guaranteed Notes due 2018 listed on the Irish Stock Exchange. The deal was Trafigura's first issuance under its recently established €2 billion Euro Medium Term Note programme.

Jones Day is advising Cinema City International NV ("Cinema City") in connection with the proposed £900 million merger of its cinema business with that of Cineworld Plc ("Cineworld"). Upon completion of the transaction, which is expected in March 2014, Cineworld will buy the entire cinema business of Cinema City for an enterprise value of approximately £503 million, which will be paid by means of the issuance to Cinema City of 24.9 percent of the shares of Cineworld in addition to a cash payment of £272 million (less assumed debt of approximately £169 million). Moshe Greidinger will head Cineworld as CEO, and Israel Greidinger will be its COO. Cinema City will retain its real estate business, which will not be transferred to the combined company. Cinema City is the largest multiplex cinema operator in Central and Eastern Europe and in Israel. It operates 99 multiplexes with 966 screens, in seven countries. Cineworld is the leader in the UK and Ireland market, operating 102 cinemas and 886 screens.