Official Creditors’ Committees in US Chapter 11 Cases: What Foreign Creditors Should Expect
By Stuart A. Laven, Jr. and Yao Liu, Cavitch Familo & Durkin LPA
The continuing upward trend in US bankruptcy filings by ‘brick and mortar’ retailers has significantly impacted non-US suppliers, especially those in China and other apparel/textile manufacturing centres in Southeast Asia.
The first question these overseas suppliers often face in US Chapter 11 cases is how to respond to – and what to expect from – an invitation from the United States Trustee (UST) to serve on an Official Committee of Unsecured Creditors (UCC).
UCCs in US Chapter 11 cases have statutory standing to represent the entire unsecured creditor body and counter-balance what would otherwise be the unfettered power of the debtor’s senior secured lenders. The UST has discretion in appointing a UCC, which typically has seven members (plus or minus). In most jurisdictions, the UST sends an invitation letter to each of the top 20 creditors as listed by the debtor, and those interested in serving must attend (in person or via proxy) a formation meeting in the US. Committee service is not compulsory for any creditor.
For overseas creditors, the prospect of serving on a UCC can be daunting, especially at the formation stage. Thus, it is common practice in large jurisdictions for creditors to designate an attorney or other representative to attend the formation meeting and vote on important matters – e.g. selection of UCC counsel – via written proxy.
Stuart A. Laven, Jr.Cavitch Familo & Durkin LPA, Cleveland, OH, USA
T: +1 216 621 7860
Stuart A. Laven, Jr is a Shareholder of Cavitch, Familo & Durkin LPA, where he focuses his practice on US Chapter 11 bankruptcies and distressed M&A transactions. Mr Laven has significant restructuring experience in industries including healthcare, transportation, telecommunications, heavy industries and retail.
Yao LiuCavitch Familo & Durkin LPA, Cleveland, OH, USA
T: +1 216 621 7860
Yao Liu is an Associate with the firm and represents both Chinese and US clients in cross-border investments, M&A, financing transactions and related regulatory matters.
Published: Winter 2017 l Photo: f11photo - Fotolia.com