%1

Chinese courts handled more than 4,700 bankruptcy cases in the first seven months of 2017, up "steadily" on the same period of 2016 as Beijing stepped up its campaign against “zombie firms,” Reuters reported today. "The difficulties of launching a bankruptcy case have been effectively eased," said He Xiaorong, a senior director at China's Supreme People's Court. He said that after 2009, the number of bankruptcy cases in China went into decline with creditors finding it difficult to bring insolvency cases in the courts, but subsequent reforms had improved the situation. Zombie enterprises are loss-making firms that continue to operate only with the support of government subsidies or soft loans. China promised last year to shut them down as part of supply side reform efforts to rejuvenate its debt-ridden state sector and make better use of its capital, labour and resources. Senior leadership sources estimated last year that the plans to close zombie enterprises over the 2016-2018 period could involve more than 6 million layoffs, and the government has already introduced special funds to help pay for redundancies.

A battle over whether energy-company creditors should help pay for cleaning up thousands of abandoned oil wells in Canada may be heading to the country’s Supreme Court, Bloomberg News reported yesterday. At the center of the dispute is Redwater Energy Corp., a small publicly traded oil producer in Alberta that filed for bankruptcy in late 2015. The receiver that’s liquidating the company argues it should be able to sell its best wells and leave the worst behind for an energy industry-funded group to clean up. The province’s regulator argues that buyers should have to take both good and bad wells, even if it means that the sale proceeds will be lower. A court in Alberta sided with the receiver in May 2016, reducing companies’ concerns about the legal liability of walking away from some of their oil wells. Since then, the number of inactive, abandoned, or otherwise orphaned sites has more than doubled to 3,200, according to the Orphan Well Association, the cleanup group. The provincial government has given the organization an emergency loan to fund the growing costs. Read more.
https://www.bloomberg.com/news/articles/2017-08-01/fight-over-abandoned…

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI's revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition.
https://store.abi.org/business/when-gushers-go-dry-the-essentials-of-oi…

A battle over whether energy-company creditors should help pay for cleaning up thousands of abandoned oil wells in Canada may be heading to the country’s Supreme Court, Bloomberg News reported yesterday. At the center of the dispute is Redwater Energy Corp., a small publicly traded oil producer in Alberta that filed for bankruptcy in late 2015. The receiver that’s liquidating the company argues it should be able to sell its best wells and leave the worst behind for an energy industry-funded group to clean up. The province’s regulator argues that buyers should have to take both good and bad wells, even if it means that the sale proceeds will be lower. A court in Alberta sided with the receiver in May 2016, reducing companies’ concerns about the legal liability of walking away from some of their oil wells. Since then, the number of inactive, abandoned, or otherwise orphaned sites has more than doubled to 3,200, according to the Orphan Well Association, the cleanup group. The provincial government has given the organization an emergency loan to fund the growing costs. Read more. 

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI's revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition. 

Banks may need to find $30 billion to $50 billion of additional capital to support new European units in the aftermath of a hard Brexit, and some smaller firms may abandon their operations on the continent altogether as profitability plunges, according to Oliver Wyman Inc., Bloomberg News reported today. The extra money is equivalent to 15 percent to 30 percent of the capital wholesale banks commit to the region, the management consultant said in a report released today. In addition, operating costs could rise by $1 billion as functions currently handled in London are duplicated on the continent as banks scramble to establish new hubs to ensure prized access to the European Union’s markets. A hard Brexit, where banks lose privileges access to the European Union’s single market, would “fragment European wholesale banking,” Oliver Wyman partners including Matt Austen and Lindsey Naylor said in the report. 

Eddie Lampert and Bruce Berkowitz called off a potential joint bankruptcy deal for Sears Canada Inc., clearing the way for other bidders to challenge its two largest shareholders, MarketWatch.com reported on Friday. The two hedge-fund managers on Friday terminated a joint legal engagement ahead of an Aug. 31 bid deadline. ESL Partners LP, the hedge fund operated by Lampert, also said it might sell "some or all" of its 45.3 percent Sears Canada stake to generate a tax loss for its investors.

Facing a number of lawsuits against his firm DryShips, Inc., George Economou is also facing a legal challenge at his offshore firm Ocean Rig, Splash247.com reported. New York lawyer Tally Wiener is contesting Ocean Rig’s chapter 15 process. Wiener, who invested in Ocean Rig stock, has filed an objection to the relief Ocean Rig is seeking in the U.S., in aid of its Cayman Islands restructuring proceedings. Ocean Rig’s Cayman liquidators need to prove Ocean Rig and its three affiliates seeking relief in the US in aid of their Cayman proceedings have either a center on main interests (COMI) or establishment in the Cayman Islands. A COMI assessment includes location of principal assets, which Wiener has sought to track down using AIS data to find where Ocean Rig’s fleet of drillships and semi-submersibles have been located since the company filed for bankruptcy protection in late March. Lawyers representing Ocean Rig have dismissed the claims made by Wiener. Read more.

Baha Mar's main contractor yesterday denied reneging on promises to make a supplier “whole” and instead alleged it had "misappropriated" its $390,500 lounge chairs payment, the Nassau and Bahama Islands Tribune reported yesterday. Natalia Dwornik, China Construction America's (CCA) Bahamas contract manager, said that the company was "dumbfounded" to learn that Source Outdoor had applied the payment for 1,420 chairs to instead cover debts owed by Baha Mar's former developer. Her affidavit, filed with the south Florida federal court yesterday, claimed that CCA "never received complete information" from the lounge chair manufacturer to enable it to cover debts owed prior to the chapter 11 bankruptcy protection filing. Dwornik said that the payment could not be made because Baha Mar's receivers — Raymond Winder, the Deloitte & Touche (Bahamas) managing partner, and two Hong Kong-based colleagues — were alleging that Source Outdoor had "refused to honor" $450,000 in deposits already paid.

India's Gujarat High Court today dismissed Essar Steel India Ltd's appeal against a central bank order that asked creditor banks to start insolvency proceedings against the steelmaker, lawyers on the case said, Reuters reported. The ruling is a boost to the government, which in May tweaked Indian banking laws to empower the Reserve Bank of India (RBI) to tackle the country's bad debt issue, allowing the RBI for the first time to direct lenders to force defaulters into insolvency courts. The ruling paves the way for the start of bankruptcy proceedings against Essar Steel, although the company could appeal the ruling. Essar Steel had argued that it should have been given an opportunity to present its case before the Reserve Bank of India decided to include the company among 12 defaulters that would be referred to bankruptcy court. Essar had also argued that proceedings could result in the company's demise when it was "almost in the stage of revival" and working to resolve its debt problems, according to court documents.