By Corinne Ball, George Cahill, Kay Morley, Jay Tambe, Bruce Bennett, & Heather Lennox (Jones Day)
A recent spate of decisions by the EMEA Determinations Committee (“DC”) has provided clarity on when a chapter 15 filing will trigger a “Bankruptcy” credit event under credit default swaps. Each of the relevant chapter 15 petitions sought recognition of an English scheme of arrangement, which is not a product of insolvency law and does not necessarily constitute a Bankruptcy, and each underlying scheme was considered narrow enough in scope to not be “with or for the benefit of its creditors generally” (triggering limb (c) of Bankruptcy). As such, the primary issue in each determination was whether the relief sought in the chapter 15 was similar to a “judgment of insolvency or bankruptcy” and independently triggered limb (d) of Bankruptcy.
The DC found that Thomas Cook’s 2019 petition for recognition of its scheme as a foreign nonmain proceeding, which expressly waived the benefit of the stay courts can impose in such cases, was not similar to an insolvency judgement and did not constitute a Bankruptcy. On the contrary, it held that Matalan’s August petition seeking recognition of a foreign main proceeding (involving an automatic stay) was similar and triggered a Bankruptcy. In its October determination regarding Selecta, the DC addressed the intermediate scenario, a petition seeking a stay in connection with a foreign main proceeding, finding that this also triggered a Bankruptcy. While every situation must be considered on its own facts, these determinations should prove instructive on when a chapter 15 filing will trigger a Bankruptcy credit event.
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