Naomi Moore Quoted by China Business Law Journal on Foreign Bankruptcy Regimes
For its article “Back from the Brink,” on an increase in bankruptcy proceedings for Chinese enterprises, China Business Law Journal quoted Akin Gump Hong Kong-based financial restructuring partner Naomi Moore.
Discussing restructurings and reorganizations for Chinese companies that have expanded overseas, Moore noted that she reminds clients that their offshore subsidiaries may fall under other countries’ bankruptcy regimes: “Chapter 11 and chapter 15 [of the U.S. Bankruptcy Code] processes in the US, for example, can be very effective means of cross-border restructuring. Foreign subsidiaries can be the target of involuntary proceedings such as chapter 7. It should further be noted that vigorous disclosure, transparency and creditor involvement are key elements of US bankruptcy.”
She also said that Chinese companies usually use offshore holding companies—often in the Caymans or British Virgin Islands (BVI)—to issue U.S. dollar-denominated bonds and other, similar foreign debts. Moore noted, “Restructuring that foreign debt therefore gives rise to complex cross-border issues, and the use of insolvency regimes in multiple jurisdictions.”
As an example, she cited the $309 million in bonds issued by the BVI parent company of Winsway, a Chinese coal trading group, as having been implemented via “parallel schemes of arrangement in the BVI and Hong Kong, along with relief granted by the US Bankruptcy Court under chapter 15 of the US Bankruptcy Code.”
Akin Gump’s work on the Winsway restructuring was nominated for an Asia Legal Award in 2017. Learn more here.