Insights

On February 18, President Trump issued an Executive Order titled “Ensuring Accountability for All Agencies” that directs independent agencies (as well as Cabinet Departments and their sub-agencies) to route all “proposed and final significant regulatory” and budgetary actions through the White House and the Office of Management and Budget. If implemented to its full extent, this action will significantly strengthen the authority of the White House by weakening the political autonomy of these independent agencies. As an assertion of the President’s inherent powers under Article II of the U.S. Constitution, it also stands to weaken congressional influence over these independent agencies, both through the appropriations and confirmation processes.

On September 30, 2024, the SEC announced the settlement of an enforcement action against Marathon Asset Management, L.P. (Marathon) for failing to implement proper policies and procedures to prevent the misuse of material nonpublic information (MNPI).  The issue stemmed from Marathon’s participation in ad hoc creditors’ committees, where the firm inadvertently received MNPI through its consultants and advisers.  This enforcement action highlights the SEC’s intense focus on the participation by investors in ad hoc creditors’ committees and the importance of implementing robust MNPI controls when doing so.

In the ever-evolving landscape of English law credit agreements in the European leveraged loan market, the dynamics of lending have undergone significant transformations in the last few years. One issue that has gained prominence is the increase in limits on the ability of lenders to transfer their loans and the associated restrictions imposed on potential new lenders. European syndicated loan agreements have historically included a standardised and expected set of transfer restrictions applicable to prospective lenders, reflective of the market guidance and templates issued by the Loan Market Association (“LMA”). Certainty of terms and the capability of an existing lender to sell out of a loan position have been the hallmark (and expectation) of the LMA loan market. However, trends in the drafting of credit agreements have contained a concerning increase in limitations on loan liquidity. As a result, many lenders are finding it difficult to sell their distressed loans. This article explores these trends, as well as their implications on the secondary loan trading market.

On 19 March 2024, the Government followed through on a promise from the Ministry of Justice to introduce draft legislation to reverse the effect of  R (on the application of PACCAR Inc & Ors) v Competition Appeal Tribunal & Ors [2023] UKSC 28.  The effect of this ruling was discussed in our prior alert and follow on commentary discussing its effect on group competition litigation and initial government reform proposals. Should the bill pass, agreements to provide third party funding to litigation or advocacy services in England will no longer be required to comply with the Damages-Based Agreements Regulations 2013 (“DBA Regulations”) to be enforceable.

On 29 June 2023, the long-awaited Financial Services and Markets Act 2023 (the “Act”) received Royal Assent, clearing the Act’s final hurdle prior to its implementation. The Act is the framework for the UK’s post-Brexit financial legislative and regulatory landscape.  Focusing on the promotion of competition, innovation and investor protections, it hopes to ensure the UK’s continued leadership in the global economy by providing “a smarter financial services framework”. While the Act is 349 pages in length, we have set out some of the key themes and regulations currently making headlines.

In R (on the application of PACCAR Inc & Ors) v Competition Appeal Tribunal & Ors [2023] UKSC 28, the U.K. Supreme Court has declared litigation funding agreements based on a cut of damages to need to comply with the Damages-Based Agreements Regulations 2013, while the Court of Appeal in Evans & O’Higgins v Barclays [2023] EWCA Civ 876 expands the scope of likely competition opt out litigation approval.

There are few things as daunting to a vendor or supplier as its counterparty’s bankruptcy. The likelihood of a significantly discounted recovery for goods and services provided and potential loss of a customer may have long-lasted impacts on profitability.  Even worse, however, is the prospect that payments received in good faith prior to a debtor’s bankruptcy filing may be at risk of recoupment. In this alert, we address the risk that such payments are voidable as preferential transfers. Section 547 of the Bankruptcy Code codifies the power of the debtor to recover payments that were made within the 90 days preceding the filing. Very generally, a debtor (or trustee) may recover any transfer that is (i) made to or for the benefit of a creditor (e.g., a payment or grant of lien), (ii) on account of antecedent debt (i.e., a debt already incurred), (iii) made while the debtor was insolvent, (iv) within the 90 days prior to the petition date (or one year for insiders), and (v) that enables the creditor to receive more that it would have in a liquidation. The parties’ respective intent is irrelevant.

During the first quarter of 2022, Crowell’s Bankruptcy, Restructuring, and Insolvency (BRI) team continued developing valuable blog content focused on the latest developments across the world of bankruptcy and financial restructuring both in the US and the UK. Our Restructuring Matters Blog tracks and evaluates significant developments on a number of issues and cases to keep readers updated on major bankruptcy decisions and trends, developments in best practices for various finance and restructuring strategies, and the potential impact of the major case decisions and trends for various business sectors.

As debt issued by oil and gas exploration and production companies continues to trade at distressed levels, the secondary loan market has again focused on unique issues presented by the distinct lending structures developed to finance the exploration and production of energy — “reserve-based financing,” under which a lender’s commitment to lend is based on the predicted future value of the oil and gas reserves of the borrower that serve as collateral for the loan.

As the economic impact of COVID-19 continues to unfold, opportunities to purchase debt and claims at attractive prices from sellers who may be starved for liquidity have started to increase. In such periods of market dislocation, even good-faith purchasers may risk claims of “constructive fraudulent transfer”, “constructive fraudulent conveyance”, or a similar “claw-back” suit if the seller was (i) insolvent at the time of the transaction, or (ii) rendered insolvent as result of the transaction. Claw-back causes of action are typically asserted by spurned creditors of the seller that have unsatisfied debts, or by bankruptcy trustees or official committees of unsecured creditors if the seller subsequently files for bankruptcy.

As commercial borrowers struggle to plan in uncertain times, many are drawing down on revolvers, putting stress on bank and non-bank lenders. Efforts by non-bank lenders to raise funds by calling committed capital from investors that are similarly stressed takes time and creates a bottleneck that can impair lenders’ ability to timely advance funds to borrowers under credit facilities. Lenders that face this problem need to understand their legal and economic exposure.

Since the economic downturn in 2008, the legal market has been in a constant state of change. Companies are demanding budget predictability, shared risk and reward, improved efficiency, more transparency, and a new way to define value, and law firms have rushed to respond. Firms cannot rely on the billable hour as they once did. This development has led to the rise of Pricing Departments whose job it is to manage value-based billing arrangements, profitability, and legal project management. Law firms and in-house counsel need to understand each type of alternative fee arrangement, its strengths and weaknesses, how to accurately scope and budget an engagement, and how to manage it once it has begun.