The right of a creditor who is owed a liquidated debt that is not subject to a bona fide and substantial dispute to have the debtor company wound up if that debt is not paid in accordance with its terms is fundamental to the proper functioning of any modern financial system.

The existence (or absence) of an efficient creditor-driven winding up regime can have a marked impact on the way in which stakeholders (whether creditors or investors) assess investment opportunities, including on the decisions as to which form of structure to use, the type of investment they elect to effect, and the protections they seek to build into their investment agreements.

A creditor-driven winding up regime, and the associated consequences of a winding up application being filed, and/or a winding up order being made, also materially influences the way in which directors and / or controlling shareholders conduct themselves in periods of financial stress or distress.

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Despite the impact of the Global Pandemic, the structured finance market enjoyed strong performance in 2021, with signs that 2022 will see more of the same, supported by wider economic growth. There are positive signs across our jurisdictions, including promising ABS deals, continued strong performance in Europe, and sustained use of BVI by PRC issuers.

The structured finance specialists in our Bermuda, BVI, Cayman, Channel Islands, Hong Kong, Ireland, London and Middle East offices work every day with onshore counsel and financial institutions, and have summarised the key trends relevant to their jurisdictions of law and the regions in which they operate.

Key Trends for 2022 - Structured Finance

The Cayman Islands continues to be at the forefront of developments in restructuring and insolvency law in the offshore world and one of the premier jurisdictions of choice to facilitate complex and high-value cross-border restructurings.

The much-anticipated reforms to the insolvency legislation in the Cayman Islands are now expected to come into force during the course of 2022 and will provide practitioners and their clients with an alternative restructuring tool. The amendments to Part V of the Cayman Islands Companies Act (the “Companies Act”) will introduce a new restructuring officer regime available to companies in financial distress, which can be accessed without the need to present a winding up petition to the Grand Court of the Cayman Islands (“Cayman Court”).

Upon filing the application seeking the appointment of restructuring officers, an automatic and standalone restructuring moratorium will immediately arise which will have extraterritorial effect, similar to a Chapter 11 stay or English administration moratorium, within which a restructuring may be proposed and implemented (by way of a Cayman Islands scheme of arrangement, a restructuring process in a foreign jurisdiction or consensually, as between affected stakeholders).

This article was first published in INSOL World. 

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Climate activist, Greta Thunberg, has on various occasions lashed out at global leaders for “empty” and “beautiful” words that she considers do not translate to meaningful action on climate change. Most recently at COP-26, Ms Thunberg sought to paraphrase the pronouncements of certain politicians as “blah blah blah”, and spoke of the failure of governments to implement climate change strategy.

Whether or not you agree with Ms Thunberg’s political views on government actions regarding emission reductions, there can be little disagreement in respect of the pace of growth in private sector interest and investment in ESG funds. The data is irrefutable: US sustainable funds saw $15.7 billion in net inflows during the third quarter of 2021, according to Morning Star with assets in these funds totaling more than $330 billion as of September. According to Bloomberg, Global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management. Further, more than half of the environmental, social and governance-linked funds in the market outperformed the S&P 500 in the first several months of 2021.

Although the reasons for the growth and performance of ESG products are the subject of vigorous debate, the data is conclusive in relation to the surge of interest in funds being raised with an environmental or social purpose.

This begs a question: How do statements of intention around the environmental purpose and social objectives of a fund translate into action? When an offering document states that the purpose of a fund is to advance environmental and social goals, how can investors be certain that the fund will, in fact, deliver on its promise?

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