Global Restructuring Review - Cross-border restructuring and insolvency legal news, features and events

GRR 100 2018

Cleary Gottlieb Steen & Hamilton

04 May 2018

Cleary is acting for an ad hoc group of bondholders in Brazilian telecoms company Oi's contentious judicial reorganisation

Partners in restructuring team 34
Restructuring lawyers in Who's Who Legal 3

History of the practice

"Globalising the legal profession." That's the firm's mission statement. Indeed, Cleary Gottlieb Steen & Hamilton is unapologetic about the cross-border nature of its bankruptcy and restructuring practice – multi-jurisdictional cases are its bread and butter.

Since the firm launched in 1946, it has always had international matters on its books. Today, its 16 offices operate as one single, integrated partnership and more than a third of Cleary partners have done a stint in two or more of its locations. It was the first US firm qualified to practise in Japan.

The firm is internationally renowned for being counsel to sovereign states in sticky situations, particularly Latin American governments. New York partner Lee Buchheit has led debt restructuring negotiations for several countries and invented the collective action clause for sovereign debt agreements – a trick borrowed from the corporate restructuring world that allows a supermajority of sovereign bondholders to compel all bondholders to accept a restructuring deal. Collective action clauses are now mandatory in all European countries' sovereign debt contracts.

Fun fact: The US film director and television producer Doug Liman recently credited Cleary as an inspiration for his TV series Suits, which takes place in a fictional New York law firm and until recently featured American actress, and now member of the British royal family, Meghan Markle.


New York is the beating heart of Cleary's cross-border restructuring and insolvency practice, which also has a strong presence in London, supported in Europe by partners in Milan, Paris, Frankfurt and Brussels.

Elsewhere, there are partners with restructuring experience in Abu Dhabi, Buenos Aires, Moscow, Seoul and Washington, DC.

Who uses it?

Creditors and debtors in equal measure and – of course – bankrupt sovereigns.

One the creditors' side, it recently teamed up with Mexico's Santamarina y Steta to represent bondholders in the financial restructuring of Mexican oilfield services joint venture Oro Negro, and is also counsel to an ad hoc committee of bondholders in the reorganisation of Brazilian telecoms company Oi (alongside Brazil's Pinheiro Neto Advogados).

On the debtors' side, Cleary has acted for Nortel's US entities for years. Korean companies Daewoo, SK Global and Hyundai Merchant Marine, have also hired the firm for restructurings in the past.

Among its sovereign clients are Argentina, for which Cleary was counsel in its long-running battle against holdouts of the state's 2002 sovereign debt restructuring; Russia, which hired Cleary to chase Ukraine for defaulting on a US$3 billion Eurobond in 2015; and Belize. But its most famous sovereign client is arguably Greece.

Historic track record

In 2012, Buchheit designed a Greek law that retroactively installed collective action clauses in the country's sovereign bonds that didn't already have them. It allowed Greece to cram down dissenters and obtain enough votes from bondholders to pass its €200 billion private debt restructuring of that year. Cleary has since successfully defended that restructuring before various international courts and tribunals, including Germany's federal Supreme Court, which found – twice – that Greece had sovereign immunity against claims from German bondholders seeking damages for losses incurred via the retroactive cram down process.

After nearly 15 years of bitter disputes, Argentina and its lead holdouts settled their differences in February 2016, following a change in administration and new political appetite for a deal. The government of new president Mauricio Macri actually brought in Cravath Swaine & Moore to close a series of New York litigations against the lead holdouts – but Cleary remained counsel to Argentina for out-of-court matters and law suits against individual bondholders. Partner Carmine Boccuzzi later successfully defended the state from two separate claims by groups of individual bondholders: one group that refused to enter the settlement, and another that argued the deal breached pari passu clauses in the state's bond contracts.

Again on the sovereign side, Belize recently used the firm for advice on the record-breaking third restructuring of a tranche of US dollar-denominated bonds, via a consent solicitation, rather than an exchange. Buchheit dropped in a collective action clause allowing modifications to the contracts with consent when the bonds were restructured the first time in 2007.

On the commercial side, Cleary represented Barclays in its purchase of Lehman Brothers' broker-dealer business, which was negotiated and approved by a New York bankruptcy court in the course of one fateful week in September 2008.

The firm was (and still is) the long-time counsel to Nortel's US debtors alongside Torys in Canada. Early on in the case, partners Lisa Schweitzer and James Bromley helped Nortel raise US$4.5 billion from the sale of its patent portfolio – the largest patent sale ever closed. It took years and years for the various stakeholders to agree on how to allocate the total liquidation sales proceeds (more than US$7.3 billion was trapped in a lock box until very recently) but in October 2016 the competing parties finally reached a settlement. Under that deal – since approved by UK, US and Canadian courts – Nortel's US entities who hired Cleary will receive US$1.7 billion, or 24% of the overall funds raised.

Recent events

Partners Richard Cooper and Luke Barefoot are working for the ad hoc group of bondholders in the judicial reorganisation of Brazil's Oi Telecom. After a year and a half of acrimonious scuffling between Oi's shareholders and its "G5" creditor group (to which the ad hoc bondholders belong), the creditors approved a restructuring plan in December 2017 providing for a US$1.2 billion capital raise and an exchange of bondholder debt for around 75% of the equity in the restructured group. The plan's approval followed a 15-hour creditors' meeting that took place in a former Olympic boxing venue, and a decision from a court in Rio de Janeiro that it could be pushed through without consent from shareholders or the company's board. As the GRR 100 was going to press, the Oi case was far from done: shareholders had appealed the plan in court and commenced an emergency arbitration and various regulatory proceedings to prevent it from becoming effective, arguing, among other things, that it violated Brazilian corporations law, bankruptcy law, capital markets regulations and the company's own by-laws.

Elsewhere in Latin America, Cooper led a team that helped Mexico's largest construction company, Empresas ICA, restructure US$3.5 billion in debt via a pre-pack plan in local concurso mercantil proceedings. The company had New York law governed bonds and its largest creditor and new finance provider, Luxembourg-registered Fintech Europe, had to approve the pre-pack before it was filed.

The firm also acted for the ad hoc group of bondholders in the largest ever Brazilian extrajudicial restructuring to date and its parallel Chapter 15 recognition, for offshore drilling group Odebrecht Óleo e Gás (OOG). The case won a "restructuring deal of the year" award from GRR's sister publication Latin Lawyer in spring 2018.

Along with local firm Stocche Forbes Advogados, Cleary has been advising bondholders in sugar and ethanol producer Tonon Bioenergia's judicial reorganisation process. Brazilian energy company Raizen won an auction to buy two Tonon sugar mills, having its bid approved by a bankruptcy court in July 2017. The Brazilian restructuring followed a restructuring of Tonon's overseas debts in 2015, on which Cleary also advised, providing counsel to a contingent of international bondholders led by Gramercy Fund Management who agreed to provide new finance in the deal.

In the UK, Cleary has been acting for Goldman Sachs International in the administration of Lehman Brothers International Europe. Goldman Sachs was selected to represent the interests of financial institution creditors in the Waterfall IIC tranche of the multi-faceted litigations concerning the allocation of leftover estate funds.

The firm also represented the Russian Ministry of Finance in a claim a UK investment manager brought against Ukraine before the English High Court, over its unpaid US$3 billion Eurobond issuance. Russia acquired the bonds in 2013: when Ukraine failed to pay out on them, it raised Russia's annexation of Crimea as a defence. Despite finding the underlying circumstances of the deal "deeply troubling", the High Court ruled in favour of the investment manager, but allowed Ukraine to appeal, which it is doing.

Over in the US, the firm was co-counsel to temporary buildings provider ModSpace with Delaware firms Young Conaway Stargatt & Taylor and Stevens & Lee in a pre-packed Chapter 11 plan confirmed in February 2017, and recognised by a Canadian court under the Companies Creditors Arrangement Act.

In November 2017, Cleary's London office hired from Herbert Smith Freehills disputes partner James Norris-Jones, who helped represent EY partners as the UK administrators of Nortel. The previous January, it also made up one new partner, Jim Ho, and two counsel, Kenneth Blazejewski and Knox Mcilwain.