Distressed Debt and Claims Trading

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Overview

Our Clients

Attorneys in Katten's Distressed Debt and Claims Trading practice have represented investors in distressed companies in connection with thousands of transactions with an aggregate value in the billions of dollars. Our experienced team of professionals guides investment banks, commercial banks, and domestic and international hedge funds through the acquisition and sale of distressed investments, including bank loans, trade claims and swap claims, as well as privately traded securities.

Our Services

The Distressed Debt and Claims Trading practice combines the talents of attorneys from several disciplines—derivatives, structured products, financial services, insolvency and restructuring, private equity, and tax, among them—to provide support in all aspects of distressed debt and claims related transactions.  Our team has particular strength in handling bespoke or "off the run" opportunities.

We routinely represent clients in the acquisition of trade claims against debtors in Chapter 11 and Chapter 7 proceedings. These transactions have involved the transfer of secured, administrative expense and general unsecured claims. In addition to negotiating assignment agreements, we provide diligence into the validity and size of the claims and risks presented by counterparties. When disputes arise in bankruptcy cases, we assist our clients (whether original or secondary holders) in negotiation of settlements with the debtor’s estate, often involving preferential payments.  Additionally, we have developed a proven auction process for the rapid monetization of recognized claims.

Our experience in secondary trading includes negotiating trade confirmations, purchase and sale agreements, participation agreements and collateral agreements for both par and distressed trades, and advising on confidential information issues in loan trading. We have represented both providers and purchasers of the right to sell accounts receivable at prenegotiated prices upon an event of default by one or more customers.

Katten is a member of both the Loan Syndications and Trade Association (LSTA) and the Loan Market Association (LMA), and our attorneys are actively involved in the development of standard documentation and resolution of market disruptions in the US market. The firm's presence in London ensures that clients operating in the US and European markets have access to our resources in real time.

With robust industry knowledge, deep transactional capabilities, and extensive debt and claims trading experience, Katten's Distressed Debt and Claims Trading practice offers a comprehensive approach to this specialized investment strategy.

Experience
Representative Credit-Specific Loan and Claim Transactions
  • Allied Nevada—Representation of an investment fund in the purchase of loans in connection with the active restructuring of debtor which involved the negotiation of a restructuring support agreement (RSA) along with rights to subscribe to new notes and participate in DIP financing.
  • Brisconnect—Representation of an investment fund in connection with an Australian credit involving the transfer of debt along with a stapled swap claim. Our representation involved the review and negotiation of transfer documents, in which issues were identified with the proposed settlement structure that jeopardized the efficacy of transfer.
  • Caledonian Bank—Representation of a hedge fund in diligence and acquisition of deposit accounts claims against a Cayman Islands bank in official liquidation.
  • Consolis Holdings SAS—Purchase of loans in a French company utilizing LMA documentation. The transaction required analysis of French law provisions and security issues involving our UK office.
  • Indiana Toll Road—Representation of an investment bank in the purchase of live (non-defaulted) ISDA-based interest rate swaps, previous to an expected event of default. Original lenders were not authorized to hold distressed loans, so the assignment agreement had to contemplate automatic elevation of claims upon an event of default as well as a risk allocation mechanism in the event the position turned in favor of the borrower.
  • Lehman Brothers—Representation of an investment bank in the coordination and settlement of market auctions resulting in the transfer of billions of dollars of inter-company claims assigned by affiliates of the debtor entity.
  • Lumara/AMAG Pharmaceutical—Purchase and sale of equity converted into merger consideration consisting of cash, new equity, milestone payments and escrow indemnity payments. This included an analysis of Registrations Rights and Lock Up Agreement that restricted sale of 90-day and 180-day shares and alternative purchase of open market substitute shares for delivery.
  • Sabine—Review and negotiation of LSTA documentation for the sale/purchase of bank debt, in which an issue was identified in the credit agreement concerning transfers to and by "Affiliated Lenders." The implementation of negotiated language to address this issue has led to market-standard verbiage in transaction documents.
  • Sino Forrest—Purchase of residual litigation trust payments stemming from frozen note positons originating from a Canadian Plan of Compromise (including analysis of the transfer restriction in the Litigation Trust Agreement and alternative transfer language to comply with such restrictions).
  • Southern Air—Sale of post reorganization warrants in Southern Air Holdings, requiring detailed analysis of DOT and foreign ownership restrictions.
  • Sponsor Finance Company—Representation of a major finance company in the liquidation sale of its billion dollar+ bank loan portfolio to a Canadian pension fund. The transaction involved the transfer of 300+ individual loan agreements (including agency positions) in a condensed time period.
  • Target Canada—Diligence into, and negotiation for, the assignment of non-stipulated vendor claims against an insolvent Canadian retailer; preparation of proof of claim and coordination of claim recognition by the debtor's monitor.
  • Urbi—Representation of an investment bank in the assignment of $100mm+ loans of a Mexican borrower to a syndicate of multiple purchasers in connection with the bank's delivery obligations under an ISDA auction. Developed a structure for the custody of a non-assignable promissory note (pagare) for the benefit of the multiple purchasers. Assignment included a transfer of the investment bank's pending litigation rights against the borrower.
General Experience
  • Representation of hedge funds and investment companies in their acquisition and sale of distressed assets and bankruptcy claims arising from foreign and domestic insolvency proceedings. Transactions involve transfers of bank debt, notes, equity, illiquid assets and liquidating portfolios, and the transfer of secured, administrative expense and general unsecured claims. In addition to the negotiation of transfer agreements, Katten provides diligence review of the credit and claim (validity and notional amount of claims) along with mechanisms to manage credit risk exposure to trading counterparties. Representative matters include, Target Canada, Indiana Toll Road, Caledonian Bank, Lehman Brothers (foreign and domestic), Bernard L. Madoff (feeder-funds and direct investors), MF Global (foreign and domestic), American Airlines, Kodak and Icelandic banks.
  • Negotiation of trade confirmations, purchase and sale agreements, participation agreements and collateral agreements based on the LSTA form agreements in the US market and based on the LMA form agreements for the European market for par and distressed trades. Katten attorneys are experienced advisors on issues relating to confidential information issues in loan trading. Recently, our attorneys have counseled clients in the following credits: Quicksilver, Sabine, Samson, Global Geophysical, Overseas Shipping, Caesars, Eagle Bulk, Genco, Alpha Natural, Arch Coal, Brisconnect, Hibu, Bennu, Education Management, EFH/TXU, Longview Power, Mesa Air Group and many others.
  • Representation of sellers and buyers in sales and acquisitions of defaulted and near-defaulted mortgage loans and loan portfolios.
  • Representation of numerous lenders in deed in lieu of foreclosure of commercial real estate transactions throughout the country.
  • Representation of US manufacturing company as issuer of notes in trade receivable securitization with respect to significant restructuring of facility in connection with changing market conditions.
  • Representation of an investor in the recapitalization of an owner, including negotiations of preferred return, controls and cramdown rights.
  • Representation of borrowers, issuers, credit enhancers, underwriters and derivative counterparties in multiple restructurings of tax-exempt auction rate securities in connection with failed auctions and downgrades of monoline insurers.
  • Representation of both providers and purchasers of the right to sell accounts receivables at pre-negotiated prices upon an event of default by one or more customers in connection with stand-by claims purchase (put) agreements and programs.
  • Provision of advice to plan fiduciaries on due diligence with investment managers and investment funds to determine whether plan is exposed to inappropriate assets.
  • Representation of the acquirer of a major position in a tranched loan from investment bank, as agent, including renegotiation of intercreditor agreements and clarifying obligations of the Federal Reserve with respect to representations and duties of the agent.
  • Representation of hedge funds engaged in financing transactions, including loan origination, investments in funds engaged in financing transactions, and structuring incubation arrangements with investment managers in this space.
  • Representation of an investment bank in multiple issuances and private placements of resecuritization (Re-REMIC) securities backed by distressed underlying RMBS.
  • Representation of aircraft financing parties in connection with most of the airline reorganizations during the last decade.
  • Representation of a mezzanine lender in implementing a strategy to deal with the holder of a senior mortgage on a property in Connecticut, as well as preparing for a possible Uniform Commercial Code (UCC) foreclosure sale on pledged membership interests and a suit on a guaranty.
  • Representation of collateralized debt obligation (CDO) and collateralized loan obligation (CLO) investors in due diligence reviews of issuer documentation and collateral acquisitions; counsel to investors and collateral managers in restructurings of CDO and CLO transactions; and representation of sponsors and issuers in liquidations of warehouse financing arrangements.
Events
December 5–7, 2013
ABI's 25th Annual Winter Leadership Conference | Rancho Palos Verdes, California

Recognition

Financial Services, 2012
Investment Funds: Hedge Funds, 2014
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Recognition

Financial Services, 2012
Investment Funds: Hedge Funds, 2014
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