Nuances of a Cross Border Restructuring

[Music] hey um hi everyone um as after our um in intros we don't need to actually go into those so I'm just GNA uh kick off um so on this panel um sort of question one how do you think I'm going to ask this um to uh anavin how have uh the regime over the last let's say 10 to 15 years like changed and how's that influenc cross uh our border restructuring thank you for the question and and very nice to be here um I think the example I would use here is is probably our capita um so for people that remember that was a a barini based company that went into a a chapter 11 process actually uh during the GFC so 0809 if I get my dates correct um I I think there are a couple of lessons or a few lessons to learn from our capita it's it's very interesting that a Bahraini company went into a US process I think that's the first observation I think the second question is well why did that happen um and I think it's very um important or encouraging in the UAE and Saudi that there are now insolvency regimes and there have been for quite a while that allow these kind of processes to be resolved within those countries so so the UAE we all know has a great insolvency regime uh you can cram down creditors you can take businesses from uh scenarios where they might go into liquidation 15 years ago and bring them out of that position and actually have them survive and thrive um I think the reason our capita went into a US chapter 11 so many years ago was there just wasn't that insolvency regime in Bahrain in particular um and I would you know Hazard a guess that if that scenario were to play itself out again today and that corporate was in the UAE or that corporate was in Saudi I don't think there would be a need um or indeed perhaps even a desire for that company to go through a US process I think it could be done in the UAE I think it could be done in Saudi um so that's that that would be my kind of main example here is look our capita 15 odd years ago maybe a bit more versus what could be done today perfect great cool uh moving on um this is about uh law so I think actually Nikki you're probably the best um able to answer um how do the uh varying uh laws around insolvency across all the all the different uh Mees how do they impact cross like crossborder restructuring efforts sure so um obviously nowadays companies tend to have um assets or or exposure in in in different presence in different jurisdictions and so when you're looking at restructuring you have to think about what you're doing in one jurisdiction and how that might impact other jurisdictions and if there's no sort of recognition regime in place it can create quite a lot of complexity you're always looking what might happen if it goes into an insolvency process and it can obviously be a bit of a mess if you find you've got different competing processes in different parts of um of the world um and and the other thing is it can be bit of an opportunity because they you can shop for different jurisdictions to get the outcome that you need and so you might find that there's potentially insolvency proceedings available to implement restructuring whether that's in a sort of um you know consensual way or as some sort of contingency plan um but you might find that there's options available in different jurisdictions and if you can use them to access those different jurisdictions you might be able to get a better outcome for for for the stakeholders of the business great perfect okay and actually that actually ties into the next one uh thick ass I think I'll be coming over to you for this um cool so how do you basically sort of handle the different sort of stakeholders how do you um coordinate them that which have I proven to be all the best in terms of aligning the interests between them all yeah hi good afternoon K okay no I think I think just building on some of my other panelists so I I suppose one thing that we talking about cross jistic is just not between countries right it's actually also within the same count so if you look at in the UA you know you have two or three different regimes operating here in Saudi that's the case as well so I think it's important to just navigate that uh across that piece so you know the more complex the stakeholder the more difficult it is to implement such uh such processes I think going back to Niki your point you know I think companies which are which are aware of the different regulations actually are seeing precedents being placed out in some of these markets and actually seeing how that relates to their own situation are likely to be better place and and better outcome for all stakeholders serving the company so I think what we are finding is agility you know because as we look at um you know companies looking at optionality how they coordinating their different stakeholders keeping them fully informed of of of that situation such that as they decide which option they're going to go for um they're all ready to go for it it's not like a whole process and actually very interestingly and importantly as we all know there are clearly working groups that are involved but there are also you know internal stakeholders that have to be managed right and and you could have weeks of delay if if that hasn't been managed uh there's a case that some of the people in this panel are working on right now in Saudi Arabia and just to explain complexity of uh trying to put something through bankruptcy where even in the same country if you've got um you know different parts of the entity in domiciled in in different you know um jurisdictions just that whole intercreditor Dynamics right which wasn't the case for example if you're looking at a group group basis so that becomes an important issue where is a cash sitting you know uh what happens if you liquidate one element and not the other element so there just a lot of complexity and I think the the best uh guidance I suppose just being in this market now for a long time is that stakeholder management becomes extremely important and if you could have the best late plans but if you don't have all the stakeholders operating in tandem I mean it's just subes plan so that would be my my sense of how that whole thing needs to be orchestrated can I maybe add to that VI so so I think on the crossborder element um having a crossborder Nexus can sometimes be good for one stakeholder and very bad for another and um an example is um jbf which we we closed very recently where you had a plant in the UAE you had a plant in Belgium and you had a plant uh in in Bahrain and it was it went through a UAE restructuring process and ultimately was successful um but we did as the senior secure creditors look at uh working up a plan B uh which would have seen a Comey shift to the UK which would have allowed us to execute the UAE restructuring plan in the England and Wales courts and as a secure creditor that was an amazing option to have uh as a shareholder it was a much worse option to to have so there's not always synchronicity stating the obvious there's not always synchronicity between the various stakeholders and I think typically as a secure creditor the ability to go to another jurisdiction to have a stick or to have another option away from the primary jurisdiction is often much more helpful for the secured creditors than it is for the equity great thanks uh cool if we can move on if anyone's got anything to ship in um estan I'm going to come to you um you for this one um recent Trends could you provide any insight into some recent High uh profile cases and what you've actually learned from them well I mean building on what my colleagues have been saying if you see the evolution on on the solvency framework particular in the UI and Saudi is is quite both are have followed quite a remarkable uh Pace I mean at to the extent that we have randomly seen that in other jurisdictions in elsewhere in the world you know and and that connects to the topic of the panel which is cross border um which which cross border as vas explained I mean in the context of particularly the U as well as Saudi I mean you have a cross border within the country between offshore and onshore jurisdictions and between Emirates and then of course you have a a what is truly cross border you know and and as as as as um Nikki was explaining as well I mean you these days you know companies randomly are Incorporated in one jurisdiction having business in one jurisdiction and asset in one jurisdiction so naturally you always have some sort of a a a challenge or or or in terms of how to to work out Solutions you know depending on multiple stakeholders and jics but if you take a if you take a view of some sample cases and things that have happened you take a view you start for example with nmc nmc you had two Administration processes one one in in the PLC one in the UK one in edgm here both administrators uh uh were the same the same institution but working on a on a protocol and working in cooperation I mean when it comes to crossb and insolvency there are two words that are important cooperation and and reciprocity of enforcement okay I mean so absent cooperation and cooperation comes with protocols agreement whatever they call them and and and reciprocity reciprocity is the is the flip side of the coin of accepting enforcement okay and accepting the jurisdiction of another Court H when you see nmc you had a parallel insolvency Administration proceedings working in coordination with different crators different assets but still a common problems or certain common problems within a NFC situation something quite remarkable happen I mean in terms of Bank bankruptcy course they generally have Imperium of of of of the of the of the of the crator mass and the asset mass of a company and they they will randomly relinquish a jurisdiction in modern bankruptcy Pro you know in modern bankruptcy you have courts you have presence in the UK or us where bankruptcy courts will will accept the certain matters that should belong to them will be resolved by arbitration that was the case on on in the case of nmc the the the the the the court in ad gen accepted a certain m Ms would be resoled for under arbitration in in in UK which is is is quite a sophisticated feature uh if you continue with examples I mean you have the EM hospital it was a local Banky proed in in in Abu Dhabi courts domestic courts but there were some proceeding happening offshore course on egm some enforcement proceedings happening there was some respect and some communication between courts um and and you can continue you can continue with some um liquidations have have happened a rash there have been ample cooperation between the IFC courts and kman cours cooperation and and protocols agreed between Liquidators sometimes they were the same you know but so all these things are not irrelevant you know I mean they they they are a Testament that that the evolution putting aside issues of new money and and and cramming down and so forth the when it comes to the concept of crossborder and the ability to work out innovative solutions and preserve and conserve value I mean I feel that we are I mean as pretty much as good as you can you could get short of the US you know or the UK or some other sophisticated jurisdiction but I would Challenge and say that this has become an infant sophisticated jurisdiction when it comes to insolvency I mean Saudi has done a remarkable Evolution as well in in in when it comes to insolvency most cases have been more domestic in nature they have had less crossborder issues I mean they have but you have seen other Salient factors like the case of as with a perpet instrument being approved by by multiple Banks so s the fact that Saudi have fa less crossborder um challenges in in the in the in the in the landmark cases have happen is not a a a testament that they are behind perhaps the UA but rather the the the nature of the cases that were filed the in in in in that jurisdiction okay great I think actually nmc oh sorry it's quite an interesting case study because it actually covers quite a lot of the things that that people have been saying because as as stepan mentioned those was the two two different administrations one in England and one in the adgm there was also quite a lot of recognition issues because you had to deal with recognition onshore between the ADM and onshore court so to Vic's Point Saudi and the UAE they've got multiple different jurisdictions within the same country so it's quite easy to sort of think oh it's the UAE but actually this was an onshore group at accessing adgm proceedings with a footprint that's not only across the UAE but also across the globe and so uh that was a sort of example of lots of different elements of crossborder restructurings coming together to develop a solution for stakeholders yeah I'm just going to add that uh in terms of one of the other trends that obviously we've seen is that the um you know the interest of the special situation funds right so if you look at the five or six years I mean I've been in this market now 17 years and you know going back to our capita but even things like decree 57 in the W World case you know those were ancient times in many ways but if you think about um you know there are many more funds that are now housed in adgm you know uh who are operating in this market who have access to similar information that most of the most of the you know Legacy lenders have access to but I think what what's happening is two things have coming out so one is clearly looking at optionality right so looking at where might be their interest best sub which is understandable but also certainty right um so I think these are two factors which are leading to uh you know for shopping the Arbitrage between different jurisdiction but of course it's also an issue on costs because you know it's not the easiest to implement you know these Solutions sometimes efficiency and and and just time it takes right so there are multiple considerations I suppose but that's I think just maybe add as a as further Trend that's happened in the last five six years I I think what the UA and Saudi now do which is you know super helpful is within a class of creditors you can you can cram down so you don't need 100% to get something done you need 2/3 typically um I think the maybe the if you look forward a little bit what you can do in the UK now is you can cram up and cram down so you have the part 26a which means you need one class of creditor you need the requisite threshold and then based on certain tests you can cram the equity and you can cram whoever's above you as well that that infrastructure is not here yet but maybe maybe it will be in the future but I think that that's the key thing for me in in this in in the UA in is you can cram down a class of credit so you you get rid of the extreme hold out voice you know and and and inject a bit of um pragmatism into a process and to be honest I mean the the the the sophistication of jurisdiction is a terine by the ability to to the ability to evolve no like that win so I mean I mean you you can you can dictate on any institution on any jurisdiction a a legal framework for for whatever for insolvencies in this case and establish some some some infrastructure to deal with it but but if the if the if the environment is static and doesn't learn then H you know like uh the trends are no Trends because you get stuck in whatever you get stuck here what you can see is in whatever topic and this is what is exciting in whatever topic yes there were challenges between cross Emirate enforcement or offshore onshore enforcement and recognition but initiatives have are been taken and have been taken to harmonize so they they the the leadership understood there are issues when it comes to H harmonizing and and educating domestic courts ver versus offshore courts so on any topic you always see that a an issue arises simply because it's an issue that exists in that particular situation but then even the the courts or the system makes an effort to evolve and and grow and that's that's what you feel so I feel that when it comes to investors or when it comes to professionals or when it comes to companies that are thinking shall we file I I'm not so afraid to say if we Face an issue we'll figure out a way to solve it and tackle it perhaps 10 years ago that was not necessarily the case you know that you were more afraid but uh for example you I mean what you are dek if if you're facing a new Noel issue you you feel more comfortable now when you go to investment committee that you will find a way yeah I you know we've been in the region for you know 10 11 years in in size and I think um that that kind of Journey has been um and a journey of increasing conviction you know just because the insolvency regime's got better you got You' got precedents uh that make you feel more comfortable you've obviously got the npls that are coming out now uh in the region so um yeah I think I think I think it's been a very positive iterative process yeah and I think the trajectories going the way we want it to go as well I mean the the the legislative re regimes are evolving you know we are seeing cross-class cram down options brought in in some jurisdictions and actually I think the courts um have shown a willingness to try and get to grips with a world that they you know it's it's a new thing right it's a new thing for the region it's doesn't have the long history that you have in Europe but people are demonstrating a will to get on on top of it and so I think it'll have a real galvanizing effect as more people come into the market and the regional the regional market participants sort of increase their sophistic sophistication it's it feels like it's only going in one in One Direction cool okay um right we've got a couple of a couple of minutes so uh maybe just as a sort of closing one um could everyone actually pick out the trend that they see sort of coming into this Market into the new year uh ofus do you want to go first no thank you I think I think listen uh from my perspective this is a journey we are on right and I think we we probably never going to arrive in a way but as markets are maturing in this in this part of the world as different um jurisdictions are maturing at different PES you know this Arbitrage or this element will will remain I think the one trend is going to be that I think I I would hope to believe that as more participants are coming there'll be a lot more information sharing lot more sophistication and people will be able to have better decision guidelines in terms of trying to get to these options great it's Market participants for me it's it's private credit coming into the market and and shaking things up a bit I think we'll that we'll see more and more of that and that will have a big impact on the way we do restructuring going forwards uh for me it's debt for Equity swaps so we've seen two this year jbf and ehg and I think those both said a very good precedent great asan I mean I don't know I mean who knows what the next Cas is but the the trends will be dictated by the situation we may face down the road I mean but yeah I mean as I say before I mean I I feel quite confident that uh no matter the situation there's always a solution great who anything else so we'll that's it okay uh thank you everyone and also thank you for listening [Music]