Destinator Legalese
mondaq.com
Recently, in the Chapter 15 cases of In re Destinator Technologies Inc., the United States Bankruptcy Court for the District of Delaware recognized the Canadian insolvency proceedings of one Canadian corporation and two Delaware corporations as foreign main proceedings.
Upon recognition, the Destinator Technologies cases were afforded certain protections that automatically apply as a matter of right to the property within the territorial jurisdiction of the United States under Chapter 15 of the Bankruptcy Code, including (i) the granting of adequate protection to creditors (section 361); (ii) the enforcement of the automatic stay (section 362), which applies immediately upon recognition of a foreign main proceeding; (iii) the use, sale or lease of property (section 363); (iv) the avoidance of certain post-petition transfers of property (section 549); (v) the ability to acquire property on behalf of the estate that is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case (section 552); and (vi) the ability of the foreign representative to operate the debtor's business. Prior to the actual recognition order, provisional relief was granted in the form of a preliminary injunction and approval of sale bidding procedures.
In Destinator Technologies, the stalking horse bidder was granted typical bid protections, including expense reimbursement and a break-up fee. Both courts approved debtor-in-possession financing where the stalking horse bidder was the lead lender. After sufficient notice of the sale procedures and the passage of the bid deadline, the Canadian court approved the sale to the stalking horse bidder, and its sale order was given full force and effect by the U.S. bankruptcy court. The U.S. sale approval order granted the purchaser the protections of a good faith purchaser under section 363(m) of the Bankruptcy Code. By properly utilizing Chapter 15, the foreign and U.S. debtors were able to coordinate the sale of their assets located in the United States and elsewhere through one global sale process within seven weeks of the commencement of the insolvency proceedings.
Alison Bauer, a partner in Torys' New York office, focuses her practice on U.S. and transnational business reorganizations and financing, including Chapter 11 reorganizations and liquidations, out-of-court restructurings, secured financings and investments in troubled companies. |
