Kalo Involvement in Securing New York Court Recognition with ‘Soft Touch’ Provisional Liquidation Approach
Offshore insolvency and restructuring experts at Kalo achieved successful recognition of innovative BVI restructuring proceedings for two subsidiaries of global oil company, Constellation.
The achievement comes almost a year after the subsidiaries were originally excluded from a previous recognition order. Global Restructuring Review’s Dominic Lawson reported on the matter on April 6th, 2020:
"On 3 April in the US Bankruptcy Court for the Southern District of New York, Judge Martin Glenn recognised the “soft touch” provisional liquidation of Olinda Star in the BVI and the judicial reorganisation of Arazi* in Brazil.
"The court found there had been a resolution of issues that forced it to exclude the companies from an order recognising the group’s Brazilian reorganisation in May, which had followed a Brazilian court’s decision to dismiss them from the restructuring.”
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The Brazilian court had previously held that Olinda and Arazi could not participate in the judicial recovery proceedings owing to a lack of jurisdiction.
Following this, Arazi successfully appealed the earlier decision, and Olinda, in provisional liquidation in the BVI, instead successfully pursued a Scheme of Arrangement in an attempt to mirror the restructuring of the rest of the group. It was these proceedings that were then recognised in the US Bankruptcy Court through Chapter 15 of the US Bankruptcy Code.
In the US proceedings, Judge Glenn found that Olinda’s centre of main interests (COMI) is in the BVI and that the provisional liquidation could therefore be recognised as a foreign main proceeding. The NYC court also considered the facts that Olinda had property in the US, and US debt in the form of New York-law governed notes.
The new recognition grants legal reciprocity; so that the standalone Scheme of Arrangement for Olinda, which had received support from a majority of creditors and had been sanctioned by a BVI court, can now be recognised.
Kalo managing director Paul Pretlove acted as joint provisional liquidator to Olinda and five other Constellation entities. Paul said: “The scheme was the final step in a US$1.5 billion global restructuring of the group that had closed in December 2019. Kalo were the first soft-touch provisional liquidators ever appointed in the BVI and have a growing reputation in this field building on a number of previous successful and significant restructuring assignments including Ocean Rig and LDK Solar.
“This case has really put BVI on the global restructuring map as a place that companies and stakeholders can come to perform the types of restructuring of holding companies that have been seen more regularly in the Cayman Islands and Bermuda previously. I have to commend the BVI judiciary, who have shown swift assistance, considered the position and are prepared to cooperate with international courts to put in place the necessary protections to allow a successful outcome.”
The provisional liquidators were assisted by Grant Carroll of Ogier in the BVI and by John Cunningham, Thomas MacWright, Samuel Hershey, Richard Kebrdle and Jason Zakia of White & Case in the Chapter 15 proceedings.
Paul Pretlove, along with fellow Kalo Managing Director Liz MacKay, are well-placed to assist with both BVI and Cayman soft touch liquidations and UK appointments in respect of the restructuring of BVI and Cayman Islands companies. As the only two dual authorised and licensed insolvency practitioners able to take restructuring appointments spanning the Caribbean and in the UK.
*For the avoidance of doubt, the matter of the judicial review of Azari was separate to the Olinda recognition, and Kalo had no role in that matter.