Dechert

Advised an ad hoc group of noteholders in the pre-packaged restructuring of a Chilean car importer

History of the practice

Dechert began life as MacVeagh & Bispham in Philadelphia, Pennsylvania in 1875. After undergoing several name changes and working on key projects such as defending long-time client, the Pennsylvania Railroad, against homeowners in 1877, the firm became Dechert Price & Rhoads in 1962.

The financial restructuring practice was launched more than three decades ago and initially focused on US debtor and trustee representations. With the additions of practice co-head Allan Brilliant in 2010 and now-former co-head Michael Sage in 2009, it expanded to include representations of ad hoc and official committees of creditors, lenders and noteholders globally – with an especially strong focus on Latin America, despite its lack of an office in the region. To this end, the firm acted on the restructuring of telecoms giant Oi – Brazil’s largest-ever bankruptcy filing – as well as that of Brazilian construction firm OAS in 2016. Dechert estimates that about 75% of its restructuring and insolvency work is cross-border.

Sage left in February 2020 to move in-house, but in early 2021 the firm hired Weil Gotshal & Manges partner Adam Plainer in London, who has taken over as global restructuring co-head. In recent years, the growing London team has been particularly active acting for bondholder committees and other creditors on the restructurings of companies and banks in emerging markets.

In October 2021, the firm also launched a new Asia restructuring practice with the hire of Kirkland & Ellis partner Daniel Margulies in Hong Kong. At the time, Plainer told GRR that Asia was an important region for Dechert, and the firm is intent on capturing the growth in restructurings there.

Network

Dechert’s financial restructuring practice is mostly concentrated in New York and London, where the firm has a significant presence – but partner Eric Brunstad works from a Hartford, Connecticut office, and Margulies has given the firm a presence in Hong Kong.

Outside of the financial restructuring practice, it has an international and insolvency litigation team based within its litigation division and led by partners Adam Silver in London and Gary Mennitt in New York.

Silver and London-based corporate and securities partner Giles Belsey and of counsel Camille Abousleiman have helped the firm expand to pick up emerging markets restructuring work in Eastern Europe, the Middle East and Asia. Abousleiman used to head Dechert’s London office but left the firm’s partnership in 2019 to serve for a year as the Lebanon government’s minister for labour.

Who uses it?

Lenders, individual creditors and creditors’ committees are frequent clients, while the firm also advises a host of distressed companies and acquisition groups. Russia’s VTB is a client; as is the holding company of US insurer State Farm and several US asset management firms and distressed investors, such as Aurelius Capital Management, Contrarian Capital Management and Greywolf Capital Partners.

Dechert is advising funds managed by Argentem Creek Partners on defaulted bonds issued by companies in Indonesia’s Berau Coal Group; is counsel to rig-owning entities in the Mexican concurso proceedings of oil extraction group Oro Negro, as well as in its Chapter 15 application in New York and in litigation in Singapore; and is advising creditors of Brazilian miner Samarco Mineração in a US$3.8 million restructuring brought on by a disastrous 2015 dam collapse.

On the debtor side, the firm represents companies in Chapter 11 proceedings and out-of-court workouts, including US opioid maker Purdue Pharma and Brazilian telecoms giant Oi.

Historic track record

Dechert represented debtors-in-possession in the 2006 Bayou Hedge Funds ruling in New York – a landmark Chapter 11 decision in which a bankruptcy court defined the legal standards for asserting claims of actual and constructive fraudulent conveyance under the US Bankruptcy Code in the context of hedge fund fraud.

Fast-forward eight years, and it was counsel to an ad hoc group of noteholders in the major US$3.6 billion cross-border restructuring of Mexican glass manufacturer Vitro, representing them in Mexico, Dallas, Texas and New York.

At around the same time, the firm acted for Standard Chartered Bank as a secured creditor under two murabaha facilities worth US$100 million extended to the shariah-compliant investment bank Arcapita, whose US$1.3 billion restructuring in the Southern District of New York was the first successful Chapter 11 of a Middle Eastern financial institution.

In London, Silver advised funds managed by Franklin Templeton in challenging the International Bank of Azerbaijan’s (IBA) US$500 million restructuring. The IBA wrote down English law-governed debts in an Azeri restructuring, which some creditors objected to in England under the Gibbs rule after failing to participate in Azerbaijan. Dechert helped to block arguments by the IBA that an indefinite moratorium applied to creditors’ claims against it, first in December 2017 and then on appeal the following October.

As mentioned, a team led by Brilliant acted for an ad hoc group of international bondholders owed more than US$2.6 billion in bonds issued by Brazilian telecoms company Oi and its affiliates. In 2018, a Rio de Janeiro court approved a US$20 billion plan for Oi to raise 4 billion reais (US$757 million) in capital, and bondholders swapped their debt for about 75% of the restructured company’s equity the following year, in what was the largest-ever private sector reorganisation in Brazil’s history. Oi later secured approval from creditors to amend the plan in August 2020, in a bid to get higher offers on its assets.

For the Argentem funds that are noteholders of Indonesia’s Berau Coal – and that opposed a planned restructuring being arranged by Berau affiliate guarantor Empire Capital Resources – a team including Brilliant and Silver helped to get Singaporean schemes of arrangement and related Chapter 15 proceedings dismissed. The team simultaneously pursued litigation in New York against the debtors and enforcement action all over the world in respect of US$1 billion in defaulted bonds.

Other household-name restructurings that Dechert has had a hand in include acting for the Bank of New York Mellon as trustee counsel in the 2009 Chapter 11 of Lyondell Chemical Company, one of the largest chemical companies in the world; advising PwC in its role as administrators of Lehman Brothers Limited – the service company for the European group of collapsed global finances firm Lehman Brothers – in the Waterfall III proceedings in the UK; and acting as counsel to hedge fund Elliott Management and its affiliate NML Capital in their 13-year legal battle trigged by Argentina’s 2001 sovereign debt default. Argentina finally reached a US$4.6 billion settlement with the holdout creditors in 2016, agreeing to pay 75% of what they were claiming, plus interest and years of legal fees.

Recent events

In addition to the hires of Plainer in London and Margulies in Hong Kong, Dechert added long-time Jones Day partner Kay Morley to its London office in June 2021. Plainer’s former Weil colleague, counsel Tayyibah Arif, also joined the firm around the same time.

Outside the research period, Dechert hired a pair of partners from Kramer Levin Naftalis & Frankel in New York, Doug Mannal and Stephen Zide, in August 2022.

Top cases of the research period

The firm picked up several instructions in the air travel industry during the covid-19 pandemic, including acting for the committee of unsecured creditors in the Chapter 11 filed by South America’s largest airline, LATAM, in May 2020. The airline also initiated insolvency proceedings in the Cayman Islands and obtained recognition of the Chapter 11 cases in Chile and Columbia. Brilliant, Brunstad and New York partner Craig Druehl secured a victory for unsecured creditors in September 2020 when the Southern District of New York (SDNY) bankruptcy court rejected the debtors’ motion to approve a US$2.45 billion financing facility, which would have given shareholder lenders the option to convert financing obligations to equity, effectively shifting millions of dollars to shareholders at the expense of the unsecured creditors. The Dechert team subsequently filed fraudulent transfer claims against two of LATAM’s shareholders that were referred to mediation and challenged the airline’s Chapter 11 plan up to the New York district court. The airline eventually emerged from bankruptcy with its Chapter 11 plan complete in November 2022.

Brilliant and Druehl are also advising US-based credit union Citadel as one of the largest bondholder creditors in the Chapter 11 filed by Colombian-Panamanian aviation group Avianca. In late 2019, Citadel agreed to exchange US$550 million in bonds due in May 2020 for securities due in May 2023, to help ease the company’s financial burden. After Avianca entered its Chapter 11 in New York in May 2020, Dechert helped Citadel roll up its convertible secured loan into a portion of Avianca’s tranche B debtor-in-possession (DIP) financing, which was approved by the SDNY bankruptcy court in October 2020. The debtors eventually concerted the DIP loan into equity under their Chapter 11 plan, with Dechert assisting in the negotiations, and having secured the plan’s approval, Avianca emerged from bankruptcy in December 2021.

In London, partners Alastair Goldrein and Solomon Noh advised an ad hoc group of noteholders in the restructuring of Ukrainian coal miner DTEK. After a round of negotiations, the noteholders entered a restructuring support agreement with the company in February 2021. The company won court approval for a pair of English schemes in May 2021, allowing it to restructure about US$1.8 billion, despite one of the schemes being challenged by the Swiss branch of Russia’s Gazprombank on the basis that it was unfair and would not be recognised in Europe post-Brexit. The schemes were also recognised in New York.

Noh is also acting for an ad hoc committee of mezzanine lenders in the North American restructuring of Canadian power plant owner Stoneway Capital. The group, which owns power plants in Argentina, entered a restructuring support agreement with senior secured noteholders in September 2020 and subsequently tried to restructure using a Canada Business Corporations Act (CBCA) process. But creditor meetings to vote on a CBCA plan were adjourned five times in light of environmental claims being brought against the group in Argentina. Stoneway eventually changed tack, filing a notice of abandonment in the CBCA proceedings and launching Chapter 11 proceedings in New York in April 2021. Although noteholders originally challenged the venue change, they entered a suspension agreement with Stoneway in July 2020. Finally confirmed in May 2022, Stoneway’s Chapter 11 plan filed in connection with a Canadian plan in Ontario, allowed it to sell its assets to a new UK-based entity. Term loan claimants were due to get preferred equity in the new entity plus new first lien notes it was due to issue.

New York partners Howard Kleinman and Shmuel Vasser are representing a Chilean affiliate of Corp Group, a financial holding company controlled by the billionaire Alvaro Saieh that entered Chapter 11 in July 2021 to seek protection from noteholder claims in Chilean courts. Dechert’s client had issued notes secured against shares in the banking group Itau Corpbanca that were owned by the debtors, but exchanged them during the bankruptcy while under scrutiny from an official committee of unsecured creditors.

The firm also picked up another new instruction with a Chilean slant in 2021, from an ad hoc group of noteholders of the Chilean car importer Automotores Gildemeister, which completed a pre-packaged Chapter 11 restructuring in July. The resulting plan wiped out US$540 million in secured and unsecured notes for US$360 million in new ones plus 100% of the group’s equity going to prepetition secured noteholders. The ad hoc group entered a restructuring support agreement with Gildemeister in advance of the filing and provided it with a DIP facility.

Elsewhere, Dechert has continued to advise the Oro Negro rig-owning entities and an ad hoc bondholder committee in the restructuring of Argentine oil company YPF.

After the end of the research period, bondholders hired the firm to assist in their negotiations for a deal with Ukrainian state-owned natural gas company Naftogaz, which was seeking to postpone payments on its Eurobonds for two years. Dechert also advised the largest shareholder of Kazakhstan-focused oil and gas group Nostrum, ICU Holdings, on a lock-up agreement that resulted in an English scheme, which was sanctioned in August 2022 even though Russian bank creditors were unable to vote due to sanctions.

Client references

Elizabeth LaPuma from investment bank UBS, who worked with Dechert on the LATAM restructuring, describes the firm as one that “approaches problems strategically and commercially”.

As well as highlighting Brilliant, she gives a nod to David Herman in New York and Michael Doluisio in Philadelphia as partners at the firm who particularly impressed her.