August 23, 2019
Annette W. Jarvis, Dorsey & Whitney LLP, Salt Lake City, Utah and Denver, Colorado, Co-ModeratorCharles A. Beckham Jr., Haynes and Boone, LLP, Houston, Texas, Co-ModeratorPanelists:Judge David R. Jones, Chief Judge, United States Bankruptcy Court, Southern District of Texas, Houston, TexasPatrick T.McCarthy,Borden Ladner Gervais LLP, Calgary, CanadaDario U.OscosCoria,OscosAbogados, Mexico
Highlights of Canadian Insolvency ProceedingsCompanies’ Creditors Arrangement Act(CCAA)Debtor-in-possession proceedingDebtor company retains control of its business with the protection of a stayCourt appoints a Monitor (licensed trustee in bankruptcy) who acts as eyes and ears of the Court and serves as liaison between debtor and creditorsGoal of debtor company is to present a plan of compromise or arrangement to creditors who vote on the plan. If requisite majority vote in favour, debtor company brings application to Court to sanction the plan.Statute is relatively brief and gives broad discretionary powers to the Court to approve “any order that it considers appropriate in the circumstances”
Highlights of Canadian Insolvency Proceedings (part 2)Bankruptcy and Insolvency Act(BIA)Bankruptcy proceedingAppointment of Trustee in BankruptcyDebtor can voluntarily assign itself into bankruptcy or a creditor (typically unsecured) can apply to Court for a bankruptcy orderTrustee takes possession of the business, assets and undertaking of the debtorGoal is to monetize the property for the benefit of the bankrupt estateAppointment of ReceiverProcess for secured creditorsApplication brought by secured creditorCourt appointed receiver is a licensed trustee in bankruptcy whose mandate is to act in a commercially reasonable manner to realize value for the benefit of the receivership estate
Highlights of Mexican Insolvency Proceedings (Part 1)Civil law system.Insolvency is of a federal exclusive jurisdiction.Governs insolvency of commercial companies and individuals engaged in commerce.Mexican Insolvency Law (Ley deConcursosMercantiles(LCM) enacted 2000, amended as of 2014).Filing is not mandatory. Voluntary and involuntary.LCM provides a single insolvency proceeding,concursomercantile, with two phases:Conciliation (reorganization – debtor in possession – pre-package).Bankruptcy (liquidation) under the possession and administration of a trustee.
Highlights of Mexican Insolvency ProceedingsConciliationDebtor company retains control of its business with the protection of a stay under the overview of a conciliator.Court appoints a conciliator (licensed or private) who acts as eyes and ears of the Court and serves as liaison between debtor and creditors seeking a reorganization plan.Interventor– appointed by 10% of creditors. Protects creditors’ rights. Power to request and examine debtor’s accounting and administration. Serves as a liaison between debtor, conciliator and trustee.Public Policy: Preserve the business, keep business as an ongoing concern by means of a reorganization plan, prevent aggravation of cessation of payments of debtors and creditors.Reorganization plan.Approval of 51% of allowed claims in conciliation phase.Requires approval by the Court.Statute gives broad powers to the Court to approve “any order that it considers appropriate in the circumstances” to meet public policy.
Highlights of Mexican Insolvency ProceedingsBankruptcy (Liquidation) ProceedingDebtor can voluntarily assign itself into bankruptcy, when conciliation expires, or conciliator or creditors files for bankruptcy.A trustee is appointed and takes possession of the business, assets and undertaking of the debtor.Goal is to monetize the property for the benefit of the bankrupt estate for distribution to allowed payment claims upon priority.Optimizestate asset values.
Highlights of Mexican Cross-Border Insolvency Title 12 (Part 2)Incorporates UNCITRAL Model Law on Cross Border InsolvencyLimitations of Title 12Public Policy Exception (prevailing fundamental principles of Mexican Law)Limitations on granting additional assistance consistent with Mexican Law and LCMLimited to merchants (commercial companies and individuals engaged in commerce (traders))Limited to state assets and rights within territorial jurisdiction of MexicoInternational cooperation and assistance must be conducted by Mexican Court and the person appointed by theMxTrustee Office.Provisional relief can be granted to protect assets while a petition for recognition is pending (stay). Additional relief upon recognition.Voidance action may be brought and enforced by Mexican trustee upon foreign representative request.
Highlights of Mexican Cross-Border Insolvency Title 12 (Part 2)Incorporates UNCITRAL Model Law on Cross Border InsolvencyLimitations of Title 12Recognition as main proceeding or non-main proceeding.When there is an establishment, a fullconcursoshall be conducted.When there is no establishment, summary proceeding.Mexican Courts may allow relief and taking of evidence and extend the application of other sections of the LCM to the foreign representative in a foreign main proceeding or in a foreign non-main proceeding upon request. Including avoidance powers through the Mexican trustee.A foreign representative, once recognized, may also commence aconcursoproceeding by involuntary filing.Recognition and enforcement of insolvency related judgments is automatic under the umbrella of the recognition in Mexico of the foreign insolvency proceeding.Rules of cooperation are included with respect to foreign courts and foreign representatives with respect to concurrentconcursoproceedings.
Limitationsof Chapter 15Public Policy ExceptionLimitations on granting additional assistance consistent with US Bankruptcy lawpolicyLimited by debtor eligibilityProvisional relief can be granted to protect assets while a petition for recognition is pendingWith recognition of a foreign representative in a foreignmainproceeding,there is automatic application of sections 361, 362 and 363, among other sections, but only with respect to property within the territorial jurisdiction of the United StatesU. S. Courts may allow discovery and extend the application of other sections of the bankruptcy code to the foreign representative in a foreign main proceeding or may provide protections to a foreign representative in a foreign non-main proceeding upon request, except that avoidance powers may not be granted to a foreign representative in a chapter 15A foreign representative, once recognized, may also commence a Chapter 11 proceeding by a voluntary filing by a foreign representative in a foreign main proceeding or by an involuntary filing by a foreign representative in a foreign non-main proceedingRules of cooperation are included with respect to foreign courts and with respect to concurrent Chapter 11 and Chapter 15 cases
Mexico, Canada and the U.S.COMI FactorsVenue factors in the U.S.Location and types of assets or claimsRelative experience of bankruptcy bench/practitionersJurisdictional considerations within Mexico and the U.S.Location of assets and restructuring mechanismsTiming of relief neededType of relief neededJurisdictional considerations within Canada and the U.S.Relative experience of bankruptcy/commercial bench in state/provinceAvailability of court resourcesLocation of sales and restructuring mechanisms
VENUEFORUM SHOPPING AND SELECTION OF COUNTRY
HSBC Bank Canada vCalmenaEnergy Services Inc.Canada – head office (2 employees)Mexico – conventional drilling business (rigs owned by Luxembourg entity and leased to Mexico entity) (114 employees);United States – directional drilling business with locations in Oklahoma and Texas (directional assets owned by US and Luxembourg entities) (4 employees)Libya – conventional drilling business (suspended in April 2014) (none as at filing date)Process / Selection of JurisdictionReceivership proceeding in Canada (main proceeding)Chapter 15 in the U.S. (Receiver appointed as foreign representative)No formal process in Mexico / Luxembourg / LibyaRealization of AssetsReceiver conducted sales process for assets in U.S., Mexico and LibyaSales of US assets approved in Canada (passing/vesting order)Canadian sales recognized in US as 363 sales
Process / Selection of JurisdictionReceivership proceeding in Canada (main proceeding)Chapter 15 in the U.S. (Receiver appointed as foreign representative)No formal process in Mexico / Luxembourg / LibyaRealizationof AssetsReceiver conducted sales process for assets in U.S., Mexico and LibyaSales of US assets approved in Canada (passing/vesting order)Canadian sales recognized in US as 363 sales
CalmenaEnergy Services Inc.(continued from page 1)
CalmenaEnergy Holdings Ltd.(NS)
CalmenaEnergyServices (Barbados) Inc.
CalmenaEnergy Holdings LtdLuxembourg Branch
CalmenaEnergyServices Limited(Dubai JAFZA)
CalmenaEnergyServicosLtda. (Inactive Brazil)
CalmenaEnergy Services (Barbados)Inc-SurcursalColombia(Branch)
CalmenaEnergy Services Inc.(continued on page 2)
CALMENA ENERGYSERVICES DE MEXICO SDL RL DE CV(1)
1414995 Alberta Ltd.
BWES de MexicoS. De R.L. de C.V.(Mexico)(1)
BW HR pro.S. De R.L. de C.V.(Mexico)(1)
CalmenaEnergyServices (USA) Corp(Delware)
CalmenaDrillingServices LLC(Nevada LLC)
CalmenaDrilling Services US LP(Texas LP)
Pan AmericanDrilling ServicesS. de R.L. de C.V.(Mexico)(1)
CalmenaEnergy Services Operating Limited Partnership
Limited Partner:100% Class B LPUnits100% Class Cpreferred units
GP:1 Class Acommon GPunit
In reXacur,216 B.R. 187 (Bankr. S.D. Tex. 1997)7 Mexican Banks commenced involuntary Chapter 7’s in Houston against 4 Mexican citizens (all brothers) for $240 million in loan obligations incurred in Mexico3 of the 4 brothers had substantial assets or were living in the United StatesRelief was granted against 3 of the brothers but not the 4thChapter 7 Trustee was appointed; Chapter 7 Trustee seized assets in the United States valued at over $7 millionIn 2001, Chapter 7 Trustee sought UNCITRAL Treaty recognition in Mexico which was granted in 2003Following recognition, Chapter 7 Trustee sought to enforce remedies in Mexico
In re Vitro, S.A.B. de C.V.473 B.R. 117 (Bankr. N.D. Tex. 2012);In re Vitro, S.A.B. de C.V., 701 F.3d 1031 (5thCir. 2012)Vitro is an international glass manufacturing company based in Monterrey, MexicoIn 2011, Vitro filed an insolvency proceeding in Monterrey, Mexico to reorganize under theLey deConcursosMercantilesin MexicoIn 2012, Vitro filed aConcursoPlan which was approved by the Mexican CourtIn 2012, Vitro filed a Chapter 15 recognition proceeding in Dallas for the Mexican proceeding and sought enforcement of theConcursoPlan in Bankruptcy Court in the United StatesThe Bankruptcy Court in Dallas recognized the Mexican proceeding but refused to enforce theConcursoPlan primarily because third party releases of guarantor liabilities contained in theConcursoPlan were “manifestly contrary to public policy” (Section 1506)In 2012, Fifth Circuit affirmed the Bankruptcy Court decision to not enforce theConcursoPlan in the United States on slightly different grounds (Sections 1507 and 1521) than the Bankruptcy Court
Judicial Insolvency Network GuidelinesPractical approaches for bettercoordinationSolv-Ex case – The 10thCircuit SolutionTiming and sequencing of dual hearingsConcurrent hearingsDealing with conflicting law provisionsEnsuring fairness for claimantsNoted difficulties of coordinationLessons learned?