Browsing: Insolvency


Corporate Restructuring: United States vs. United Kingdom

Sep 2nd, 2019 | Filed under: Private Equity, Hedge Fund Strategies, Debt Types of Private Equity, Newly Added, Insolvency, Regulatory Environment, Event-Driven Hedge Funds, Other Issues in Private Investments, Business News, The Alts Industry, Hedge Funds, Private Investments

David Stevenson, a US District Court Judge for the Northern District of Texas, has presented his analysis of the  differences between the law in the United Kingdom and the United States concerning “a debtor’s ability to approve a restructuring arrangement over the objection of creditors that disapprove.” This is moreRead More

10 Years Later: Reflections on the Madoff Meltdown

Dec 23rd, 2018 | Filed under: Due Diligence Process, Newly Added, Media Coverage of Hedge Funds, Insolvency, Regulatory Environment, Legislation/Court rulings, Alternative Investments in Context, Business News, The Alts Industry

It was just about 10 years ago (Dec. 10, 2008) that Bernie Madoff acknowledged to his sons, Mark and Andrew, that he had “absolutely nothing left” of the funds that had been entrusted to him; that the investment fund that bore his name was “just one big lie.” There isRead More

Who Killed the Brokaw Paper Mill?  Not the usual hedge fund suspects

Dec 2nd, 2018 | Filed under: Equity Hedge Funds, Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, The Alts Industry, Hedge Funds

A new paper in the Journal of Business, Entrepreneurship, and the Law looks at the “Brokaw bill” of 2016 and at the facts said to have motivated it. This turns out to be an object lesson in how scary hedge funds, especially activist hedge funds, look to legislators, and theRead More

Stein’s Law and Rising Production Costs

Jun 26th, 2018 | Filed under: Commodities, Investing in Commodities, Newly Added, Insolvency, Business News, Commodities

Herbert Stein, who was President Richard Nixon’s chairman of the Counsel of Economic Advisors, is often quoted as saying, “If something cannot go on forever, it will stop.” This statement, known as “Stein’s Law,” has the right ring of profundity about it, a mixture of tautology and empirically verifiable generalization.Read More

SCOTUS Decision Regarding Distressed Assets, Safe Harbors & Clawbacks

Mar 13th, 2018 | Filed under: Newly Added, Insolvency, Business News, Finance & Economics

The U.S. Supreme Court decision in Merit Management v. FTI Consulting may prove important to distressed asset managers, who need to know when defendants can assert the protection of the “safe harbor” provision of federal bankruptcy law, thus avoiding clawbacks. Section 546(e) of the statute says that a debtor mayRead More

Top 5 Alpha Stories of 2017

Dec 31st, 2017 | Filed under: Newly Added, Insolvency, oil, Business News, Commodities: Examples, The Alts Industry, Commodities, Finance & Economics

In surveying this year for dramatic alpha-related stories, we have much whence to choose. This was the year in which the Murdoch family announced its intention to sell some of their highest value holdings to Disney. Also, in 2017 the EQT Rice merger (contested, unsuccessfully, by one prominent hedge fundRead More

Federal Reserve on Counterparties to the next Lehman Brothers

Nov 2nd, 2017 | Filed under: Service Providers, Newly Added, Insolvency, Operations, Business News, Risk Management & Operations

The Federal Reserve has issued a final rule relating to the qualified financial contracts (QFCs) of global systemically important U.S. banking institutions (GSIBs). Derivatives & Repo Report, a blog maintained by the international law firm Perkins Coie, has done a thorough write-up on the subject, to which the material belowRead More

Are Clearinghouses Systemically Risky? Gary Cohn is Heard From

Oct 31st, 2017 | Filed under: Newly Added, Insolvency, Business News, Hedge Funds, Structure of the Hedge Funds Industry

Economists sometimes cite a “law of unintended consequences.” This is what it sounds like, the principle that actions of people, inclusive of and perhaps (depending on who is writing) especially the actions of a government, have unanticipated and (as far as third party observers can judge intentions) unintended consequences. InRead More

International Debt Enforcement: Nautical Twists and Turns

Oct 17th, 2017 | Filed under: Newly Added, Insolvency, Business News, Finance & Economics

Since sovereign debts and collection issues we shall always have with us, it is not amiss to look back four years to a decision by the Supreme Court of Ghana issued in June 2013, on NML Capital’s effort to enforce its judgment against the Republic of Argentina through the seizureRead More

Fraudulent Transfer: No ‘Safety’ for Lyondell Shareholders   

Oct 20th, 2016 | Filed under: Equity Hedge Funds, Newly Added, Insolvency, Business News, Hedge Funds, Finance & Economics

In two decisions this year, in July and against in a re-affirmance in October, the U.S. District Court for the Southern District of New York has reinstated a claim brought by Trustee of the creditors of the bankrupt  chemical company Lyondell, looking to recover distributions made to the company’s shareholdersRead More

It’s On: Bondholder Groups Square Off over Puerto Rico Financing

Oct 16th, 2016 | Filed under: Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, Hedge Funds

On Oct. 7, a group of hedge funds that hold the general obligation bonds of Puerto Rico amended an existing complaint (initially filed in July) in a significant respect: by adding a new defendant. The new defendant is the issuer of the “COFINA” bonds, the Puerto Rico Sales Tax FinancingRead More

Papaconstantinou on ‘Selling the Family Silver’  

Oct 2nd, 2016 | Filed under: Currencies, Newly Added, Insolvency, The Global Economy & Currencies, Business News

A former finance minister of the Republic of Greece has published a book, Game Over, on what it is like to be in the midst of a continent-wide political and financial crisis. This is a volume that might be read with attention by those who seek alpha from distressed sovereignRead More

Sovereign Debt: A Cryonic Solution to the Holdout Problem

Sep 1st, 2016 | Filed under: Industry Size & Managers, Insolvency, Business News, Finance & Economics

Where does the world stand on the restructuring problem after NML v Argentina?  One professor and one practicing attorney recently coauthored a fascinating proposal that might answer that question, part of which they call the “cryonic solution,” after the hoped-for science of freezing people to await the development of aRead More

Giving the Baron King of Lothbury his Due

Jun 7th, 2016 | Filed under: Newly Added, Insolvency, The Global Economy & Currencies, Business News, Finance & Economics

The Bank of England is not only the central bank of the United Kingdom, in continuous operation since 1694; it is the model upon which central banking worldwide has been created. The Mother Central Bank is what it is. Mervyn King, the chief economist of the Bank of England throughRead More

Consequences of the Paris Climate Agreement

Jun 1st, 2016 | Filed under: Equity Hedge Funds, Newly Added, Insolvency, Business News, Hedge Funds, Finance & Economics

In early December 2015, representatives of 196 parties met in Paris, France, to discuss climate change, and the necessary reduction of greenhouse gas emissions on a global basis.  The result, the “Paris Climate Agreement,” seeks to limit warming to just 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial levels, through aRead More

Puerto Rico and Bankruptcy

May 30th, 2016 | Filed under: Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, Hedge Funds, Finance & Economics

The bankruptcies of public bond-issuing entities, such as Orange County, Calif.; Jefferson County, Ala.; and the City of Detroit, Mich. are still rare events, but they exert a lot of influence, in part because they demonstrate the possibility of that which isn’t supposed to be possible. The sort of entityRead More

Thoughts on the Valuation of Secured Assets of a Bankrupt Debtor

Apr 26th, 2016 | Filed under: Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, Hedge Funds, Finance & Economics

How should one value the assets of a bankrupt entity, especially those that secure its debt instruments? That is obviously a key question in the world of distressed-debt investing.  A 2014 report from a commission of the American Bankruptcy Institute, and the continued controversy over that commission’s proposals, offers usRead More

Greek Debt: Back in the Headlines

Apr 4th, 2016 | Filed under: Newly Added, Insolvency, The Global Economy & Currencies, Business News, Finance & Economics

The issue of Greece’s insolvency had receded a bit from the headlines since the stormy days of last summer. Alpha-savvy readers will surely recall, though, that in July 2015, the Greek government and its European creditors reached a bailout agreement that required actions by the former, especially on pensions andRead More

The Puerto Rican Debt Crisis: Some Highlights Thus Far

Mar 31st, 2016 | Filed under: Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, Hedge Funds, Finance & Economics

It has happened before. An insolvent public entity, whether a sovereign nation, state, county, or other, can’t pay its bills and blames the crisis on the ‘vulture’ hedge funds taking its instruments from their first buyers for pennies on the dollar. The leaders of the insolvent entity thereby deflect blameRead More

Latest News on Argentina and the Pari Passu Clause

Feb 25th, 2016 | Filed under: Newly Added, Insolvency, The Global Economy & Currencies, Emerging markets, Business News, Finance & Economics

The Hon. Thomas Griesa, of the U.S. District Court for the Southern District of New York, has issued an “indicative ruling” in response to a motion by the Republic of Argentina.Read More

Antonin Scalia: Three Decisions on Distressed Assets

Feb 16th, 2016 | Filed under: Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, Hedge Funds, Finance & Economics

From the point of view of fund managers who seek alpha in bankruptcy courts, the late Justice Antonin Scalia was an ally. His decisions in bankruptcy and insolvency matters tended to offer such litigants exactly what they need: clear and predictable rules of law. Further, although Scalia’s popular reputation hasRead More

The Bonds of War: Ukraine, Russia, the IMF

Feb 11th, 2016 | Filed under: Newly Added, Insolvency, The Global Economy & Currencies, Business News, Frontier markets, Finance & Economics

Argentines take heart. Yes, you have implacable holdout bondholder NML Capital to contend with, and NML has been beating you in court battles arising from your 2001 bond defaults. But … Paul Singer isn’t Vladimir Putin, and NML isn’t Mother Russia. Your courtroom battles aren’t actual battlefield battles. The defaultRead More

Saudi Arabia: Opening to Distressed Debt Arb?

Dec 22nd, 2015 | Filed under: Newly Added, Insolvency, Event-Driven Hedge Funds, Business News, Hedge Funds

A recent article in The National Law Review says that the Kingdom of Saudi Arabia is about to change its restructuring law in a way that will likely make restructurings more common in that influential country. One implication is that the change will provide alpha-seeking opportunities for investors and tradersRead More

Looking a ‘Gift’ Horse in the Mouth: The Latest on Section 363

Oct 22nd, 2015 | Filed under: Regulatory, Insolvency, Regulatory Environment, Business News

Something that may look a bit like a "gift plan" in the prohibited sense may turn out to be permissible under section 363 after all, according to a recent ICL decision written by Judge Thomas Ambro, in a precedent that will matter to anyone pursuing a distressed-assets strategy. Read More

Javert Frustrated Again: This Time in the Second Circuit

Sep 8th, 2015 | Filed under: Insolvency, Emerging markets, Legislation/Court rulings

NML tried to get around the sovereign immunity of Argentina's Central Bank by arguing that it and the Republic were only one entity (the "alter ego" theory developed by the U.S. Supreme Court in an opinion concerning Cuba, in the 1980s), and that the one entity involved has waived its/their immunity. No dice. Read More

The Enablers of the Fraudsters, Part I

Sep 1st, 2015 | Filed under: Regulatory, Insolvency

A new lawsuit against the corporate and individual enablers of a securities fraudster moves forward. The former are "alleged" enablers, but the latter is a convicted fraudster, already serving his time. Faille seeks to draw lessons. Part One of Two. Read More

Commodities & Currencies From May to August: How Much Has Changed

Aug 12th, 2015 | Filed under: Commodities, Currencies, Insolvency

What a difference a summer makes! In May of this year it was still taken for granted that the "normalization" of Federal Reserve policy and so of U.S. interest rates approached. Now, that cannot even remotely be taken for granted.Read More

Predicting the Re-Creating of the Drachma

Jul 13th, 2015 | Filed under: Currencies, Insolvency

The prime minister has pushed aside the Greek Finance Minister, Varoufakis, and has replaced him with Tsakalatos. Is this change a matter of conciliation? or further defiance? Read More

Dead Hand Proxy Puts: A Case Study

Jun 29th, 2015 | Filed under: Insolvency, Legislation/Court rulings

The creation of a so-called Dead Hand Proxy Put in the Healthways matter was especially egregious because it took place immediately after the board had agreed, under considerable shareholder pressure, that it would de-stagger its elections. The appearance then was that after giving up one defensive moat, the incumbents with the help of lenders immediately created for themselves another.Read More

One Decision, Two Courts, Three Nations, Four Angles

Jun 3rd, 2015 | Filed under: Media Coverage of Hedge Funds, Alpha Hunters, Insolvency, Alpha Seekers

Faille is struck by a brief passage in the recent Nortel decision (the Delaware side of the Delaware/Ontario concord over allocation) that suggests the degree to which the United States dominates the patent-granting as well as the patent-litigating world. Like what the U.K. is for defamation.... Read More

Side Letters and the Caymans: The Latest

Jun 2nd, 2015 | Filed under: Hedge Fund Regulation, Alpha Strategies, Insolvency, Legislation/Court rulings

This Lancelot's adventures came to a bad end: defeated by the dragon of insolvency. But its official liquidator did win a victory over an investor seeking special treatment via a side letter.Read More

AIMA: Debt Funds Filling a Need in Europe, UK and US

May 11th, 2015 | Filed under: Hedge Fund Strategies, Alpha Strategies, Insolvency

A new survey from AIMA seems designed to dispel the idea that alternative finance is a game played somewhere far away from the 'real economy.' The gist of it is that as banks withdraw from lending to that real economy, alternative asset managers, including hedge funds, have stepped in to fill the void. Read More

Bankruptcy Giant Harvey Miller: Rest in Peace

May 5th, 2015 | Filed under: Alpha Strategies, Insolvency, Legislation/Court rulings

One can argue with Harvey Miller, and with his old-school views about bankruptcy law, but now that he can no longer argue back one should show due deference. Read More

The Latest News from Italian Banking and the Dane-geld

Apr 15th, 2015 | Filed under: Alpha Strategies, Risk management, Insolvency

Banca Monte dei Paschi di Siena, BMPS, the oldest bank in the world, has now admitted that its exposure to Nomura Holdings has exceeded the 25% cap set by Italy’s regulators. Faille can't think of a good alpha-winning play on this fact, but it does inspire him to re-work a Kipling poem. Read More

When I Learned Truth About RadioShack

Apr 13th, 2015 | Filed under: Hedge Fund Strategies, Insolvency, Technology

IT guys have been denigrating RadioShack, from their own perch of superiority, for a long time. The trouble is, while those IT guys were the future, RadioShack's customer base was fading into the past. Read More

Long-Term Infrastructure Debt: The Valuation Issue

Feb 26th, 2015 | Filed under: Infrastructure, Alpha Strategies, Insolvency

Three authors at EDHEC propose a two-step modeling process for the valuation of certain infrastructure debt. One of the key ideas they incorporate is the value of the step-in rights that come when the issuers violate a covenant or otherwise find themselves in technical default. Read More

Competing Bankruptcy Filings for Caesar’s: Third-Party Releases

Jan 25th, 2015 | Filed under: Private Equity, Insolvency, Legislation/Court rulings

A legal donnybrook has begun for control of Caesar's assets. An important side issue involves bankruptcy court treatment of non-debtors seeking release from alleged liabilities of their own, and a split amongst the appeals court circuits over such treatment. Read More

Detroit Bankruptcy: Foes Become Allies

Oct 20th, 2014 | Filed under: Insolvency

The legal environment in The United States remains averse to the sort of bold-faced repudiation of debt that Detroit attempted in the matter of its so-called Certificates of Participation (COP). Fortunately on several fronts, Detroit has decided to repudiate the repudiation. Read More

Late September Bombshell from Judge Lamberth

Oct 8th, 2014 | Filed under: Alpha Hunters, Insolvency, Legislation/Court rulings

As the editorial page of the Wall Street Journal reminded us recently, investors sometimes gamble on politics. That is their right, but good capitalist hygiene is served when, once in a while, such a bet goes badly wrong. Read More

Is Liability Insurance an Estate Asset in Bankruptcy?

Sep 16th, 2014 | Filed under: Derivatives, Insolvency, Legislation/Court rulings

The Manhattan bankruptcy court has now granted individual defendants in the MF Global matter, including Jon Corzine, access to funds from their D&O insurance. But it wasn't easy for them to get here, and therein lies our moral. Read More

Custodians Helping Customers with Securities as Collateral

Sep 11th, 2014 | Filed under: Infrastructure, Risk management, Insolvency

How address issues of supply/demand imbalance in the world of collateral requirements? Custodians can do a good deal on behalf of their customers here, and are exploring just how much. Read More

Judge Drain: Make That ‘Make Whole” Clause Explicit and Clear

Sep 7th, 2014 | Filed under: Alpha Strategies, Insolvency

Judge Drain didn't actually accept the Momentive plan, but it now seems likely he will accept some very similar plan in due course. What is key is that the objections that he found had unconvincing represented until then the conventional wisdom among much of the bar devoted to the service of event-driven litigators. Read More

A Back-Handed Look at ‘Too Big to Fail’

Aug 27th, 2014 | Filed under: Currencies, Alpha Hunters, Insolvency, Alpha Seekers

The significance of the size of bank reserves and deposits as channels for the influence of QE upon macro-economic factors varies bank by bank. Monetary levers don't work on the really big rocks. A word on implications for the equity positions in those banks. Read More

A Brief History of the Direct Borrowing Power of the U.S. Treasury

Aug 24th, 2014 | Filed under: Currencies, Insolvency

The Federal Reserve practice of the direct purchase of bonds from the U.S. treasury has a fascinating history. Though there have been no direct purchases since 1981, the idea surely is not forgotten. Is indirect purchasing simply a better way for the sovereign and central bankers to assist their cronies? Read More

How Not to Nationalize the Clearinghouses

Aug 17th, 2014 | Filed under: Derivatives, Risk management, Insolvency

Let's not make clearinghouses too big to fail. Or if, through, Dodd-Frank, we already have, let's turn back and reconsider that decision. That's how not to end up bailing them out or nationalizing them in due course. Read More

Advancing the Infrastructure Investment Narrative

Aug 11th, 2014 | Filed under: Infrastructure, Alpha Strategies, Insolvency

Intuitively, the problem with valuing the debt issued by an private SPE in an illiquid infrastructure project is this: the free cash flows of the SPE aren't easily observed. So how does one go about deriving their present value? Read More

Loosening the Bank/Sovereign Feedback Loop

Jun 11th, 2014 | Filed under: Regulatory, Insolvency

Crisis-ridden banks yield crisis-ridden sovereigns, and vice versa. One way to make both institutions more resilient going forward is to loosen the feedback loop that connects their troubles. How to do that? Read More

BVI Fund: Priority of Redeemed Members Upheld

Apr 2nd, 2013 | Filed under: Insolvency

What happened when a liquidator on the British Virgin Islands sought directions from the trial judge that he be permitted to make a priority distribution to redeemed members? To the surprise of many working in that legal/financial space, the trial judge refused. The liquidator's first instinct, though, has now received vindication on appeal. Read More