Cayman Fund of Funds Wins U.S. Bankruptcy Protection
January 29, 2010
As counsel to the joint official liquidators (“JOLs”) of Saad Investments Finance Company (No.5) Ltd. (“SIFCO5”), a Cayman Islands fund of funds subject to a liquidation proceeding in the Cayman Islands, SRZ convinced the U.S. Bankruptcy Court for the District of Delaware that the foreign proceeding deserves the protection of the U.S Bankruptcy Code. Chapter 15 of the Code allows U.S. courts, under appropriate circumstances, to recognize foreign proceedings, but bankruptcy courts had previously denied or limited the availability of similar protection to other Cayman funds in liquidation.
Enacted less than five years ago to provide “effective mechanisms for dealing with cases of cross-border insolvency,” Chapter 15 includes an automatic stay provision that can afford the liquidator in a foreign proceeding with the breathing room needed to evaluate, liquidate and maximize the value of, a debtor’s U.S. assets. While the Bankruptcy Court’s order was based on the specific facts and circumstances of the case, this decision of the Bankruptcy Court suggests that Chapter 15 may be an accessible mechanism for foreign funds in cross-border insolvency proceedings to protect and maximize their U.S. assets, notwithstanding some earlier precedent to the contrary. The Delaware court rendered the favorable decision on Dec. 4, 2009. Led by Brian Pfeiffer, the trial team also included Karen S. Park and Erik Schneider.
For more information, please refer to the SRZ Client Alert, "Delaware Bankruptcy Court Grants Chapter 15 Protection Over U.S. Assets of Cayman Islands Fund in Liquidition."