Link; Chapter 11 under fire
Shipping company Cenargo applied for the protection in the US but was then faced with complications when its main creditor, Lombard, called in Alan Bloom of Ernst & Young in February to take the company into administration.
A US court ruled that this action ignored the protection of Chapter 11 and held that both E&Y and Lombard were in contempt. Mark Andrews, partner at Denton Wilde Sapte, the law firm acting for E&Y and Lombard, said it was ‘a mess’.’We are hoping the court will drop the contempt charges,’he added.
He said the crisis arose because debtors were put in complete control by the Chapter 11 order, while UK creditors were shut out of the restructuring of the company.
The case has thrown up the problems caused by trans-jurisdictional insolvency cases and experts are now concerned that law firms championing Chapter 11 as a new way of restructuring European companies are ignoring the dangers.
Simon Freakley, Kroll’s global head of corporate restructuring, said that if a company did not have agreement from UK creditors, they would ‘take remedial action’.
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies
Smith & Williamson has been appointed administrators of charity 4Children