The firm helped Chinese coffee chain Luckin restructure US$460 million worth of senior notes through a Cayman scheme that was recognised in the US
|Global heads of restructuring and insolvency:||Phillip Kite, Peter Ferrer|
|Partners in restructuring team:||24|
|Restructuring lawyers in Who’s Who Legal:||3|
History of the practice
Offshore firm Harneys has established a long track record in restructuring and insolvency since its founding in Tortola in 1960. The firm says that its British Virgin Islands (BVI) practice completed and advised on the islands’ first scheme of arrangement, creditors’ arrangement and plan of arrangement. Its litigation and insolvency department in the BVI is more than twice the size of any other firm’s, Harneys notes.
In addition to its BVI expertise, the firm is well known for advising on Cayman Islands law. It has expanded its presence in Cayman in recent years through the addition of Paul Smith from DLA Piper in London in 2017 and the promotion of Paul Madden to its partnership.
BVI-based partner Phillip Kite is global co-head of the firm's litigation, insolvency and restructuring team, alongside Peter Ferrer, who was promoted to global co-head in the BVI in May 2021. Partner Andrew Thorp leads the BVI litigation, insolvency and restructuring practice and Nick Hoffman plays the same role in the Cayman Islands, with Bermuda-based Jayson Wood heading the firm’s Bermuda litigation, insolvency and restructuring practice.
The Asian restructuring practice is led by partner Chai Ridgers in Hong Kong.
The firm has full-time insolvency and restructuring staff based in the BVI, the Cayman Islands, Cyprus, Hong Kong, London, Singapore and Shanghai.
Harneys’ 2017 launch in Shanghai made it the first offshore law firm to establish a full-service legal team in China. Partner Nicola Roberts, who joined Harneys from Ogier in Hong Kong in 2019 and specialises in asset tracing, fraud and regulatory work, heads up restructuring and insolvency matters in the Singapore office, which launched a year earlier.
Who uses it?
A range of financial movers and shakers with offshore business interests have enlisted Harneys in the past, including Deutsche Bank and investment group Everest Capital.
The firm is also regularly instructed by its international peers to advise on offshore matters, including by Akin Gump, Allen & Overy, Cleary Gottlieb and Kirkland & Ellis.
Chinese technology heavyweight Huawei, the Virgin Group and Bank of St Petersburg are also clients; as are defunct Russia oil company Yukos and UK property mogul Robert Tchenguiz.
But Harneys is most often hired by liquidators of all types. Among those it has been advising are FTI partners as the liquidators of BVI entity Pacific Andes Enterprises – a member of a vast Chinese-owned fisheries conglomerate that is also in Chapter 11 proceedings.
Historic track record
The firm has worked on many matters that have developed the rules around Hong Kong and Chinese restructurings managed through offshore jurisdictions in the Caribbean, where the top companies of Chinese corporate groups are often registered.
In 2015, Harneys acted for bondholders in the celebrated US$2.78 billion multi-jurisdictional restructuring of LDK Solar via interlinked schemes of arrangement in Hong Kong and the Cayman Islands, Chapter 15 recognition in the US and several pre-packed Chapter 11 cases for its guarantor companies. However, the Chinese energy group’s domestic restructuring in China the following year led to its liquidation by the Grand Court of the Cayman Islands in April 2016.
Undeterred by LDK Solar, the firm tried a similar strategy in 2016 acting for Chinese property developer Kaisa Group in a successful restructuring of US$2.5 billion in offshore debt, working with partner firms to implement parallel schemes in Hong Kong and the Cayman Islands again, and to secure Chapter 15 recognition in New York.
In the Cayman Islands, Harneys acted for a shareholder of international construction group China Shanshui in 2015, helping it to strike out a winding-up petition and appoint joint provisional liquidators on the grounds that a resolution of the company’s shareholders had to be obtained before liquidators were appointed under Cayman insolvency law. This interpretation of the Cayman Islands’ 2013 Companies Law later led to discussions over a potential amendment of the statute.
Also in Cayman, Harneys was counsel to the joint official liquidators of Saad investment vehicle SIFCO5 in what was the biggest-ever litigation in the Cayman Islands courts. Saudi investment group AHAB accused Maan Al-Sanea, the owner of the Saad group and its former head of investment, of causing a massive US$9.2 billion fraud. The case culminated in a May 2018 judgment finding that AHAB knew of and authorised the fraudulent borrowing in what was described as “one of the largest Ponzi schemes in history”. AHAB appealed; but later settled some of the claims.
After three years of unsuccessful attempts to restructure Hong Kong-listed electronics manufacturer Z-Obee Holdings under local laws, a team led by Ridgers had the idea of seeking the appointment of PwC partners as joint provisional liquidators in Bermuda, where they could take advantage of a more flexible regime. The plan worked and the Supreme Court of Bermuda appointed the joint provisional liquidators in February 2017, with the Hong Kong court recognising them soon after. Harneys advised the PwC partners and Australia and New Zealand Banking Group in the matter.
The firm acted for the liquidators of agricultural company China Agrotech, which restructured via parallel schemes, a relisting on the Hong Kong stock exchange and a new share subscription and public offering. In July 2019, a judge issued the first-ever Cayman conditional scheme sanction decision in the case, noting that the scheme would become effective only once the Hong Kong scheme was also sanctioned. Months later, the Hong Kong courts obliged – though the judge noted that the parallel scheme practice was “outmoded” since the company’s EY liquidators had already been recognised in the Cayman Islands, a practice intended to prevent ancillary proceedings. The group managed to disqualify the votes of a dissenting shareholder to see the restructuring through.
In another headline-making case, the firm acted as Bermuda counsel to Asian commodities trader Noble Group’s coordinating committee of lenders and Deutsche Bank AG. Noble restructured by shifting its centre of main interests to the UK and carrying out parallel English and Bermudian schemes, but its plans to shift its Singapore-listed status to a new holding company were scuppered by Singaporean authorities amid concern about its financial position. To overcome the setback, the company implemented its pre-packed restructuring plan by appointing a joint provisional liquidator in Bermuda.
In addition to Ferrer’s promotion to co-leader of the practice, Harneys elevated five BVI lawyers in 2021, with Hazel-Ann Hannaway, Christopher Pease and John McCarroll SC all becoming partners, and Kimberly Crabbe-Adams and Marcia McFarlane appointed to counsel. The firm’s Cayman office also promoted Gráinne King to counsel.
BVI partner Stuart Cullen left Harneys to join Dentons in June 2021.
Harneys hired counsel Olga Osadchaya in the BVI from Maples Group in October 2021 but saw Cyprus counsel Michael Harakis depart to found Triskelion Chambers. BVI counsel Lucy Hannett also left the firm to join Eversheds Sutherland (and has since moved to Burges Salmon).
Past the research period, in January 2022, Harneys promoted Francesca Gibbons in London and hired partner Wenhao Han in Shanghai from Chinese firm Zhong Lun.
Later in 2022, partner Katie Pearson left to set up Claritas, a new boutique law firm in the Cayman Islands, and Harneys also lost counsel Sarah Thompson in July 2022, to Campbells.
Top cases of the research period
Partners Ferrer and Pease in the BVI, Ridgers in Hong Kong and Wood in Bermuda have been advising Chinese fertiliser company Century Sunshine Group since 2020. Cayman, BVI and Bermuda courts have appointed the same three “light-touch” provisional liquidators from EY over several of Century Sunshine’s entities, with the company trying to implement a holistic restructuring of its US$500 million debt pile. According to Harneys, Century Sunshine is one of the first cases in which provisional liquidators have been appointed across three jurisdictions in a coordinated manner. The liquidators have also been recognised in Hong Kong and in Singapore, since the company has Singapore-law governed bonds, and the judges overseeing the case have implemented the JIN Guidelines to enhance communication between them. The company’s restructuring is expected to be completed in early 2023.
Elsewhere, Harneys continued to represent a group of 2024 noteholders as majority creditors of Constellation Oil & Gas, working with Milbank in the US and E. Munhoz in Brazil. Constellation’s US$1.6 billion Brazilian judicial reorganisation proceedings were recognised in the US in May 2019, though two subsidiaries were excluded on account of the Brazilian court ousting them from the reorganisation process. One of the excluded companies, BVI-incorporated note guarantor Olinda Star, entered the first-ever “light-touch” provisional liquidation instead, while the other, Luxembourg-incorporated Arazi, successfully appealed the Brazilian court’s exclusion – and they both obtained recognition of their proceedings in New York in April 2020. Constellation restructured for a second time in 2021 in Brazil, successfully seeking recognition in the US again. Olinda followed suit, mirroring the Brazilian restructuring with a BVI scheme, for which it sought Chapter 15 recognition in October 2022.
In June 2021, Harneys published a set of “schemarios” or scenarios where parallel schemes of arrangement are necessary to give effect to a foreign restructuring, in the wake of criticism from a Hong Kong court for advising the EY provisional liquidators of Cayman-incorporated oil group China Oil Gangran Energy Group Holdings to pursue a parallel scheme in the Cayman Islands. Despite the criticism, the judge nevertheless sanctioned China Oil Gangran’s Hong Kong scheme at the same time.
The firm also advised China’s Luckin Coffee on its Cayman Islands scheme of arrangement that was approved in December 2021, which restructured US$460 million worth of senior notes. The scheme received Chapter 15 recognition the same month, as one of the conditions for it to become effective was for its terms to be enforced in the US.
Harneys has also been working on a slew of Chinese property developer restructurings, in particular, advising an ad hoc group of bondholders to China’s Evergrande. Evergrande recently disclosed it would provide a restructuring plan to its creditors by March 2023.
The firm also advised Chinese property group RiseSun, which secured sanction of a British Virgin Islands scheme restructuring New York law-governed notes in April 2022, together with recognition in the US in March – even though the BVI judge overseeing it remarked it was “not necessarily clear that the scheme will be enforceable everywhere internationally”.
Finally, Harneys advised the Bermuda-incorporated holding company of Malaysian-controlled cruise operator Genting Hong Kong, and a Bermuda subsidiary, on a US$3.4 billion “holistic” debt restructuring and recapitalisation, which was completed in July 2021. But six months later, the firm helped the Genting entities apply to enter provisional liquidation in Bermuda, after a German court declined to award it access to an US$88 million lifeline.
Harneys is a global offshore law firm with entrepreneurial thinking. The firm’s service is built around professionalism, personal service, and rapid response. Spanning all major transactional, contentious, and private client disciplines, the firm advises on British Virgin Islands, Cayman Islands, Cyprus, Luxembourg, Bermuda, Anguilla, and Jersey* law.
Corporate, trust, and fiduciary services are offered through the firm’s associated corporate and private wealth services business, Harneys Fiduciary.
The firm’s dedicated global Restructuring group is a leader amongst offshore law firms in offering the specialist expertise required to navigate the complexities which can arise for a distressed company in a cross-border environment. The group works closely with the firm’s other practices, providing clients with a seamless service and bespoke legal advice.
Harneys has acted on some of the largest and most complex cross-border restructurings over the past decade. Consequently, whether the nature of the restructuring is confined to a debt compromise or a redomiciliation or extends to capital reductions or reorganisations, the firm’s team leaders will have seen it before.
Litigation & Insolvency
Harneys has been at the forefront of the development of offshore jurisprudence for decades and has been involved in the most significant global disputes winning keynote victories for its clients and often helping shape the law.
- Luckin Coffee - advising Luckin Coffee Inc. in connection with provisional liquidation proceedings in the Cayman Islands and the holistic restructuring of Luckin Coffee’s liabilities, including the restructuring of New York law governed US$460 million 0.75 per cent convertible senior notes due 2025 by way of a scheme of arrangement in the Cayman Islands; and a US$175 million settlement of a US Federal Class Action commenced by certain purchasers of the Company’s NASDAQ listed American Depositary Receipts.
- Evergrande Group - acting on behalf of the most significant group of debt holders for Evergrande Group (in excess of US$15 billion) in the Cayman Islands.
- Risesun Real Estate Development Co Ltd - assisting the BVI company RongXingDa Development (BVI) Limited with a successful restructuring by a BVI scheme of arrangement in relation to offshore US$ Chinese notes in the collective sum of $800 million.
- Kaisa Group Holdings Limited - acting as BVI and Cayman counsel to the Hong Kong-listed PRC property development firm in its US$2.77 billion debt restructuring via a scheme of arrangement. The restructuring involved schemes of arrangement in the Cayman Islands and Hong Kong, and recognition under Chapter 15 of the US Bankruptcy Code early 2022.
- Pacific Andes Group - acting for certain lenders and subsequently the liquidators of a number of Pacific Andes entities connected with the high-profile US$2.8 billion debt restructuring which involved multiple proceedings in the US, Hong Kong, Cayman Islands, and Bermuda.
- Noble Group - acting for the largest creditor group in the company’s US$3.5 billion debt restructuring in Bermuda in conjunction with a parallel scheme in England and recognition under Chapter 15 of the US Bankruptcy Code. The restructuring was described by the English court as being “of the utmost complexity”.
- Century Sunshine Group Holdings Limited - acting as lead Bermuda, British Virgin Islands, and Cayman Islands counsel for the provisional liquidators of Century Sunshine Group Holdings Limited who are working with the Company to promote a restructuring deal in respect of creditor claims totalling approx. US$430 million.
- Seadrill Limited - acting as Bermuda Counsel to the Committee of Unsecured Creditors in the US$10 billion parallel debt restructuring of Seadrill Limited in the US and Bermuda.
- C&J Energy Services Limited - advising the Bermuda provisional liquidators in the US$1.4 billion parallel debt restructuring of C&J Energy Services Limited in the US and Bermuda.
- Virgin Group - advising on Virgin Atlantic’s £1.2 billion private-only solvent recapitalisation of the airline and holiday business.
*Jersey legal services are provided through a referral arrangement with Harneys (Jersey), an independently owned and controlled Jersey law firm.