In the roundtable discussion that follows, four of the firm’s leading practitioners share their perspectives on the evolving global marketplace and the legal and cultural realities that confront companies and investors involved in international restructurings today.
How long has Bingham been involved in cross-border financial restructuring? Michael Reilly (New York): The short answer might be “From the beginning,” when you take a look at the development and cross-border migration of insolvency law. In 1978, the amendments to the U.S. Bankruptcy Code created a streamlined Chapter 11 process that focused on preserving the value of the going concern with management in place, rather than chopping up and liquidating the business, which continues to be the legal course in many countries. That focus on going-concern value was, and still is, a distinguishing feature of U.S. law.
“Clients laud Hideyuki Sakai for marrying a ‘tenacious and persistent’ approach with a ‘controlled and composed’ demeanour…an authority in this area.” - Chambers Asia
James Roome (London): Let’s call that the American approach. By the early 1990s, the U.K. banks had adopted the London Approach, which developed in response to political concerns about the widespread use of liquidation-style receivership proceedings to address large corporate failures during the 1980s. The advent of the London Approach led to a surge in out-of-court restructurings for companies with large, multi-bank exposures. These
restructurings were assisted by the Bank of England through informal actions, backed up by its statutory powers as overseer of U.K. banks. However, whenever creditors lost faith in the consensual restructuring approach — due to the discovery of fraud or other serious problems — they had the option to revert to formal insolvency proceedings including the appointment of an administrator or receiver. Yuki Sakai (Tokyo): And Japan had a third system, grounded in a Japanese culture favoring long-term relationships and long-term goals, but inevitably shaped by economic events. Historically, a parent-child relationship existed between a Japanese company and its main bank. A main bank was viewed as a protector and would rescue a borrower facing financial trouble. Management, employees and trade partners all benefited from the rescue. The main bank often organized an out-of-court restructuring and led by example, assuming larger rates of losses if other lenders agreed to accept a principal haircut. So, although the difference between the American approach and the London Approach were of interest to restructuring practitioners, the tension between the two did not affect us in Japan. In the late 1990s, however, main banks found themselves unable to fulfill their prior role. Foreign capital purchased bad loans for market value and took over the positions of the Japanese main banks. The rescue plan of the foreign capital usually involved a change of ownership, an idea not yet commonly accepted in Japanese restructuring. Michael Reilly: The American approach and the London Approach collided in 1992 with the Maxwell case. In Maxwell, you had assets and businesses in many jurisdictions but primarily in the U.S. and U.K. So there were two parallel proceedings — one in New York and one in London — both focused on preserving goingconcern value. The case was incredibly complex, and judges in both countries began to talk to one another through representatives, >