Restructuring to reduce debt burden following declining oil prices

Type of engagement

Eleanor Fisher of Kalo (Cayman) and Paul Pretlove of Kalo (BVI) have been appointed as joint provisional liquidators (JPLs) of six BVI entities of the Constellation Group, namely Constellation Overseas Ltd, Lone Star Offshore Ltd, Gold Star Equities Ltd, Olinda Star Ltd, Snover International Inc, and Alpha Star Equities Limited (the BVI Companies).

Jurisdiction

BVI

Situation

Following the Constellation Group’s filing for judicial reorganisation in Brazil (Recuperacao Judicial), on 19 December 2018, the JPLs were appointed by the BVI Court in a “soft touch” capacity to oversee and monitor the day-to-day operations of the BVI Companies and take actions in relation to the proposed restructuring. Certain entities with the group have also filed for Chapter 15 bankruptcy protection in New York. The restructuring is intended, should the requisite approvals be obtained, to reduce the debt burden which was brought about as a result of the decline of oil prices and demand, coupled with the economic recession in Brazil. The appointment of JPLs is key to the restructuring. As noted by the Honourable Neville Adderley in his judgment appointing the JPLs, it is a protective measure to 'ward off predatory creditors who may wish to take satellite ex parte actions against the companies registered in the BVI in an attempt to steal a march on creditors generally'.

Key Facts

• Constellation is a market-leading provider of oil and gas drilling and drilling services in Brazil. Constellation currently owns a total of 17 rigs, of which, nine are onshore drilling rigs, and eight are offshore drilling rigs.
• Proposed restructuring of over US$1.45 billion in debt will ensure the maintenance of more than 1,200 direct jobs in Brazil.

Outcome and significant features

To be seen.

Appointment following debt restructuring

Type of engagement

Eleanor Fisher of Kalo acts as one of the directors of a private trust company which serves as trustee for the Ocean Rig litigation trust.

Jurisdiction

Cayman

Situation

In March 2017, Eleanor Fisher was appointed as one of the joint provisional liquidators of Ocean Rig UDW Inc and certain subsidiaries (along with Simon Appell of AlixPartners), to oversee and supervise a debt restructuring under the Cayman Islands scheme of arrangement regime.

During the restructuring, which successfully allowed some US$3.7 billion of debt obligations to be restructured, certain allegations were made in relation to the purported financial misconduct of various entities within the group and related principals.

To allow the restructuring to proceed without delay, it was determined that any causes of action arising out of the allegations would be transferred into a trust for the benefit of the scheme creditors and investigated.

Key Facts

This is first time a litigation trust has been established to carve out and preserve potential causes of action for the benefit of scheme creditors in a Cayman Islands scheme of arrangement.

Outcome

The investigations are still ongoing.

Restructuring of leading financial institution

Type of Engagement

Provisional liquidators

Situation

A leading financial institution in the Gulf Cooperation Council region which was significantly impacted by the global financial crisis, affecting its ability to obtain liquidity from the capital markets and to commit significant funds to new investments

Key Facts

US$2.7billion debt

Outcome

Restructuring plan approved by the requisite majority of creditors, sanctioned by the Cayman Court and confirmed by the US Court.

Featured Service

Restructuring

First judicially approved, multi-jurisdictional debt restructuring of China-based entity

Type of Engagement

Provisional liquidators and restructuring advisors

Situation

The group was significantly impacted by over-capacity and reduced demand in the global market for certain of its products. The group had insufficient liquidity to service its financial obligations as and when they fell due.

Key Facts

US$600million turnover US$800million debt

Outcome

Interlinked Schemes of Arrangement sanctioned in Hong Kong and the Cayman Islands, Chapter 15 recognition in the US and Chapter 11 plans of reorganisation for certain US based subsidiaries.

Featured Service

Restructuring

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