Energy XXI Ltd: Bermuda Court provides assistance to US Bankruptcy Court to effect Chapter 11 Plan of Restructuring of Bermuda exempt company

In a recent decision of the Supreme Court of Bermuda, In the matter of Energy XXI Ltd [2016] SC Bda 79 Com, Chief Justice Kawaley has granted an application made by the ‘soft-touch’ (restructuring) provisional liquidator of a Bermuda exempt company, for prospective recognition (under Bermuda law) of a Plan of Reorganization to be implemented by the Company, with respect to its debt liabilities, under Chapter 11 of the US Bankruptcy Code, under supervision of the US Bankruptcy Court.

The judgment is mainly of interest for its review of the Bermuda Court’s powers and practices to assist in the restructuring of Bermuda exempt companies, whose business, assets and interests are primarily located overseas, with the consequence that their restructuring is primarily (and usually most appropriately) supervised by a foreign Court.

What was unusual about this particular application is that provisional liquidator’s Plan recognition application was challenged on jurisdictional grounds, despite the fact that the practices and procedures have been applied by the Supreme Court of Bermuda for 20 years, to the point where the jurisdictional principles have now become “orthodox”.

The challenge was advanced by an Equity Committee (which had been appointed by the US Bankruptcy Court, but whose legal standing under Bermuda law was unclear), who sought to argue that the orthodox practice was to be rejected, in the absence of express legislative foundation.

The Bermuda Court concluded that the Equity Committee’s arguments were not “seriously arguable“, given the broad legislative provisions, the commercial and legal desirability of a ‘modified universalist’ approach to cross-border insolvency and restructuring, as well as the weight of authority against the arguments.

The full judgment can be found here: https://www.gov.bm/sites/default/files/Reasons-RE-Energy-XXI-LTD.pdf

 

 

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