Wednesday, August 21, 2013

Suntech Sued Again For Bond Default ($STP)

The case is Dugaw et al v. Suntech Power Holdings Co., Ltd. (1:13-cv-05608-RPP), now in the SDNY Federal Court under judge Robert P. Patterson.

Apparently, this is an investor who owns 10 bonds! Maybe he is sick of being shut out of the restructuring process?

By the way, there are some interesting possibilities for what could take place if and when any of the bondholders win a judgment against the company. In addition to voluntary or involuntary bankruptcy filings, there is always the possibility that creditors could seek to appoint a receiver.

Here is a must read article, "Federal and State Court Receiverships as Alternatives to Bankruptcy" written by the ABI:

  • "a single creditor or interest holder can seek the appointment of a receiver, as compared to the three unsecured creditors generally required to commence an involuntary bankruptcy proceeding pursuant to Bankruptcy Code section 30"
  • "weighing in favor of a receivership is the reduced likelihood that a creditor will be subject to liability for unsuccessfully seeking appointment of a receiver than for filing an involuntary petition under the Bankruptcy Code that is later dismissed."
Also with good food for thought are these two articles, an outline of "Judgment Enforcement in Federal Courts" and "Post-Judgment Receiverships Enhance the Collection Process". The first one presents some interesting possibilities for judgment creditors:
  • FRCP 69 "allows broad discovery". From the rules: "In aid of the judgment or execution, the judgment creditor or a successor in interest whose interest appears of record may obtain discovery from any person—including the judgment debtor—as provided in these rules or by the procedure of the state where the court is located."
  • "There is no accountant-client privilege in federal cases."
The second one offers another advantage of receiverships:
"A post-judgment receiver often acts as a forensic accountant, and may quickly investigate, locate and seize a judgment debtor's assets within days of appointment. A judgment creditor standing alone may not be able to attain the same results, even after several months of investigation, subpoenas, levies, seeking and obtaining turnover orders, assignment orders and conducting judgment debtor examinations. A post-judgment receiver can immediately seize and review a judgment debtor's bank accounts, business equipment, financial records, computer data and even mail. While a judgment creditor's bank records subpoena takes weeks (or months) to elicit a response, a post-judgment receiver can immediately access the debtor's bank records with a copy of the court's order."
So it sounds like a company with various judgments against it is going to be the subject of: attempts to seize assets and discover (from the company and third parties) information about where assets are as well as the financial history of the company, and also the possibility of involuntary bankruptcy filings or receivership.

No comments: