Insights

• Recent challenging economic conditions in China are putting many PRC companies in distress.
• This puts offshore joint venture partners and private credit lenders at risk, potentially having to attempt a difficult recovery by taking over PRC projects, companies or assets.
• A new Chinese company law may give investors an upper hand by strengthening their information rights, which when combined with a multijurisdictional strategy allow a more effective takeover.

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• Deals and partnerships between Latin American and Chinese companies are growing as economic ties between the two regions deepen.
• However, unique risks are involved if a dispute arises with the Chinese company – the Chinese legal system could create barriers to payment, even with an award or judgment in hand.
• Latin American companies and investors should consider cross-border strategies to increase their leverage.

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• 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.

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• U.S. litigators will be familiar with the powers of U.S. courts to gather discovery, including through letters rogatory and Section 1782 applications.
• Less well known are powerful non-U.S. discovery tools that can provide the ever-growing need for information from multiple jurisdictions.
• One such example, the Norwich Pharmacal order, can offer litigants access to third-party information in key English common law jurisdictions around the world.

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• 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.

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• Unfavorable economic conditions in China are putting many offshore companies in distress.
• In a worst-case scenario, joint venture partners and private credit lenders may have to attempt to take over onshore projects, companies and assets.
• A new Chinese company law coming into effect on July 2024 could smoot this path to recover – including by making it easier to replace legal representatives.

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• Several features make Delaware’s trust law attractive for debtors to hold assets in the jurisdiction.
• This also means creditors often struggle when attempting to access the trusts to recover assets.
• By deploying aggressive, multijurisdictional strategies, creditors may be able to crack even Delaware’s notoriously tough trusts.

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• International creditors are seeing more opportunities in the United Arab Emirates and wider Middle East as courts continue to signal openness to recognizing and enforcing overseas judgments.
• This includes overcoming a fraudulent conveyance, as a UAE court recently decided in what may be an unprecedented judgment in favor of a judgment holder represented by Kobre & Kim.
• The judgment demonstrates that there are a rapidly growing number of creditor tools available in the region to combat recalcitrant debtors.

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• Investments from the Middle East into Mainland China are growing recently as many see increasing opportunities for returns.
• However, there are risks that may materialize if investors become embroiled in a global dispute with Chinese companies.
• Investors should consider ways to increase their leverage and expand their options, including by bringing disputes directly into China through Hong Kong.

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• Debtor-friendly Delaware has strong asset protection laws that make it a destination of choice for global entities and individuals looking to hold their assets in a trust.
• This creates a headache for international creditors – recovering assets in a Delaware trust can seem like an insurmountable challenge.
• By adopting a creative, aggressive and multijurisdictional strategy, however, creditors can crack even Delaware’s notoriously tough trusts.

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• 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.

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• It is commonly assumed that it is difficult and impractical to enforcement judgments in the United Arab Emirates.
• However, this is increasingly untrue – even when no bilateral enforcement treaty exists, creditors can obtain recognition of their common law judgments.
• A recent Kobre & Kim case shows how that can happen.

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• 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.

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• The Middle East is opening up to cross-border investors, creditors and claimants, as Saudi Arabia’s adoption of rules based on the UNCITRAL Model Law on Cross-Border Insolvency demonstrates.
• The openness is not limited to that country – the United Arab Emirates has also made strides that gives more tools for creditors considering a global enforcement campaign.
• We explain what these developments mean for creditors.

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• Global bond issuers looking to restructure their debt have often turned to English courts, relying on debtor-friendly rules such as the ability to cram down creditors.
• Two recent English court decision, however, are improving prospects for global bondholders.
• Creditors who are willing to take swift and forceful action against even the biggest players can see the greatest chances of success.

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