Insights | Kobre & Kim — Disputes and Investigations

A Kobre & Kim client received a recent ruling by the New York Supreme Court that eases global bondholders’ ability to monetize claims.
Justice Joel Cohen found Zhu Xinli, the sole director of Huiyuan Juice subsidiary Huiyuan Beijing, personally liable for more than US $114 million.
The decision means that bondholders increasingly have monetization options against recalcitrant debtors, including the ability to collect at par from well-heeled decision-makers when the primary obligors may be effectively insolvent, judgment-proof, or even already in bankruptcy proceedings.

The ability of bondholders to sue bond issuers to enforce their rights without going through the cumbersome process of instructing a bond trustee has long been in question.
However, an important ruling in New York court, obtained by Kobre & Kim on behalf of a group of international bondholders, took the first step in establishing standing.
This decision potentially removes key barriers to enforcement in key offshore jurisdictions such as Cayman and the British Virgin Islands (BVI), as well as Hong Kong.

Many Brazilian and Latin American companies that borrow in US dollars are facing a growing mountain of debt.
As international creditors eye a shrinking pool of capital available for repayment, US dollar noteholders may be left at the back of the line relative to onshore creditors.
However, there are a number of options at USD noteholders' disposal that could improve their position and increases their chances of recovery.

The ability of bondholders to sue bond issuers to enforce their rights without going through the cumbersome process of instructing a bond trustee has long been in question.
However, an important ruling in New York court, obtained by Kobre & Kim on behalf of a group of international bondholders, took the first step in establishing standing.
With New York law governing a vast amount of emerging market company debt, this could allow global bondholders to dramatically speed up creditor response times.

Sovereign defaults are increasing after recent years of post-pandemic spending, geopolitical risk and climate change.
This has created opportunities for distressed investors experienced in enforcing against sovereigns.
Investors can improve the value of their claims by deploying strategies targeting unconventional vulnerabilities around the world.

Korean banks are holding an increasing amount of non-performing loans, putting their financial health at risk.
For many with large portfolios exposed to cross-border unsecured debt and loans to high-yield borrowers, sale and write downs may not be optimal.
A cross-border strategy to monetize their claims could offer a superior alternative.

Distressed debt investors who are beneficial owners or contingent creditors of bonds face uncertainty when bond issuers stop paying.
Courts in key jurisdictions are beginning to answer the question of whether creditors can wind-up issuers but are offering diverging decisions.
We explain how a recent ruling in the BVI opens the offshore jurisdiction to creditors considering a cross-border enforcement campaign.

Many Chinese debt issuers are still undergoing a wave of defaults, putting offshore general unsecured creditors at risk.
One way to secure substantial recovery is to enforce keepwell agreements, promises by a PRC onshore parent company to maintain a debt issuer’s liquidity and solvency.
This can expand the range of enforcement targets, increasing creditors’ options and chances of success.

Tightening global credit conditions will put more corporate high-yield debt issuers and private borrowers from emerging markets at risk of default.
This can spiral into complex cross-border disputes with creditors, threatening the company’s survival.
Fortunately, there are creative and aggressive strategies available for debtors to limit their exposure and protect their bottom lines.

Prices of Russian and other sovereign debt are falling as their economies buckle, presenting both opportunities and challenges for investors.
Enforcing the debt against sovereign entities is already difficult, more so when sanctions are involved.
As our Claim Monetization & Dilution team explains, non-traditional strategies may go further in putting maximum pressure on sovereigns and maximizing returns.

Mainland China is undergoing a wave of credit defaults, and creditors should use every tool available to maximize recovery.
Keepwell agreements, a promise by a PRC onshore parent company to maintain an offshore debt issuer’s solvency, is one option for overseas enforcement.
Creditors can use them to launch a multijurisdictional recovery campaign to drive up pressure on the debtor and reach a near-term settlement.

Offshore bondholders of distressed Chinese real estate companies often lack leverage in restructuring negotiations, with those companies’ assets located mostly in China.
China Evergrande Group is just one of the many Chinese real estate companies teetering on default, with wide-ranging consequences.
However, by taking deploying creative strategies and taking positions against competing stakeholders, activist bondholders can carve out a direct path to monetization.