Alexandria, Va. — While U.S. bondholders often confront impediments when seeking to protect their rights in foreign insolvency proceedings, chapter 15 bankruptcy proceedings leave a door open for bondholders when dealing with a foreign debtor, according to an article in the August edition of the ABI Journal. “Increasingly, U.S. bondholders and other creditors of foreign debtors have turned to U.S. courts in chapter 15 cases in an attempt to improve their position against a foreign debtor or other stakeholders,” write George W. Shuster, Jr. and Benjamin W. Loveland of (Boston) in their article, “Can Chapter 15 Be an Ally to Bondholders in Foreign Insolvency Cases?” Chapter 15 was added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to provide an effective mechanism for dealing with insolvency cases involving debtors, assets, claimants and other parties of interest in multiple countries. "A chapter 15 case can only be commenced by a 'foreign representative' of a foreign debtor seeking recognition of a foreign proceeding in a U.S. court," Shuster and Loveland write. "U.S. bondholders cannot commence a case directly." The debtor must also have a place of business or asset in the U.S. in order to be eligible for chapter 15 protection, according to Shuster and Loveland. Once a chapter 15 case has been commenced, a particular transaction must sufficiently implicate U.S. assets or interests in order to be deemed reviewable by a U.S. court. “Lastly, chapter 15 is generally structured to grant relief only at the request of the foreign representative of the debtor, and in some cases, U.S. bondholders may only be able to obtain protections related to, or in reaction to, whatever relief that the foreign representative decides to request in a U.S. court,” they write. Recent cases have seen U.S. bondholders utilizing chapter 15 to improve their leverage against foreign debtors. "In Vitro (Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. de C.V.), U.S. bondholders successfully challenged a foreign representative’s efforts to enforce a nondebtor discharge injunction in the U.S. that would have prevented the bondholders from pursuing the U.S. assets of subsidiary guarantors," Shuster and Loveland write. The chapter 15 case of In re Elpida Memory Inc. saw U.S. bondholders obtaining U.S. bankruptcy court review of sales of U.S. assets that had previously been approved by a foreign court presiding over a foreign debtor's main insolvency proceeding, according to the authors. “U.S. bondholders are often at a disadvantage in seeking to enforce their rights against a foreign debtor in a foreign insolvency proceeding,” Shuster and Loveland write. “In all events, U.S. creditors of foreign debtors should pay close attention to the dynamics of chapter 15, and evaluate whether they can slip through the chapter 15 door without it being slammed in their faces.” To obtain a copy of “Can Chapter 15 Be an Ally to Bondholders in Foreign Insolvency Cases?” published in the August issue of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at [email protected]. Also be sure to visit the GLOBALINSOLvency.com site, a joint project of ABI and INSOL International. The site has updated insolvency information from around the world, including a unique database of chapter 15 cases that is updated weekly and is searchable for all chapter 15 cases dating back to 2005. ### ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.