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Debt Restructuring – Cayman Islands Jayson Wood, Jessica Williams and Jaron Leslie, 27 May 2020
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Debt Restructuring Contents
01
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Economic Climate
02 Risks
03 Debt Restructuring 04 Protective vs Reactive Measures 05 Pensions 06 Questions 2019 Š Harneys
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01
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Economic Climate
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Economic Climate Covid-19
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• The COVID-19 pandemic economic impact • Government assistance
• Commercial banks • Debt Restructuring
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02 Risks
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Risks
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Liquidation/Litigation risk
• Breach of contract claim?
• Creditor’s winding up petition?
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Risks
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Protective Measures
• Engagement with creditors
• Proactive vs Reactive Approaches
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03
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Debt Restructuring
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Debt Restructuring Main Types of Debt Restructuring
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• Deferring payments • Offering creditors X cents on the dollar in exchange for a full release of debt obligations (X being greater than in an insolvency situation) • A debt for equity swap • A combination deal
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04
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Protective vs Reactive Measures
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Protective vs Reactive Measures Hats Limited
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• Cayman company (manufacturing and selling hats) • Shelter in Place Regs (closed for over two months)
• Creditors (bank loan obligations and private debt) • Balance sheet solvent - Cash flow insolvent • Cash injection from shareholders • Creditor arrangement
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Protective vs Reactive Measures Appointment of Provisional Liquidators
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The gateway is, that the company: • is unable to pay its debts
• intends to present a compromise to its creditors
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Protective vs Reactive Measures Practical Tips
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• presentation of a winding up petition is required • accompanying documents
• check the articles of association • filing fees • notice to creditors
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Protective vs Reactive Measures Rays Limited
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• Cayman company (provides speed boat rides to tourists ) • Shelter in Place Regs (closed for over two months)
• Creditors (private debt in and outside Cayman) • Balance sheet solvent - Cash flow insolvent • Most creditors defer payment except one (1) creditor (ABC Limited) • ABC Limited files winding up petition
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Protective vs Reactive Measures Reactive Approach
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• Risks
• Creditors entitlement to a winding up order
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Pensions
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Pension Protection Pension and Restructuring
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• Changes to the National Pensions Law • Corporate veil
• Careful consideration of use of withdrawn funds
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Questions?
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