South China Morning Post Quotes Naomi Moore on Hong Kong Court’s Keepwell Clause Ruling

Akin Gump financial restructuring partner Naomi Moore has been quoted in the South China Morning Post article “Shanghai court’s nod to Hong Kong ruling on keepwell clause bodes well for offshore creditors of defaulting Chinese bonds.”

“Keepwell” provisions, the article reports, are undertakings by Chinese companies to guarantee the solvency and financial well-being of their subsidiaries when they sell foreign-currency debt in the global market. First seen in 2012, the SCMP says keepwells served as workaround solutions helping companies raise much-needed capital.

The article asks, though, whether China’s courts are willing to recognize and grant help to insolvency administrators appointed in Hong Kong to enforce those keepwell clauses. According to an Akin Gump client alert cited in the article, Hong Kong has no statutory framework for dealing with cross-border insolvency matters, relying instead on principles of common law to determine such matters.

Some recent instances show signs of positive coordination between the legal systems of Hong Kong and China, said Moore. One example, she pointed out “is the discussions which are continuing between the Supreme People’s Court in China and the Hong Kong government [on] a potential framework for dealing with cross-border insolvency matters. If that is agreed, it will be the first of its kind for China and will materially enhance the legal landscape for cross border insolvencies involving China and Hong Kong.”