Can A Cayman Islands Company Obtain Chapter 15 Relief If It Conduts No Actual Business In Cayman?
Courts say no [pdf]:
"According to that decision, where an off-shore entity does not have a true business 'establishment' in its state of incorporation but files an insolvency proceeding there, a U.S. bankruptcy court has no discretion: it may not recognize the foreign proceeding as either a 'foreign main proceeding' or a 'foreign non-main proceeding.' The decision drew on the plain language of Bankruptcy Code §1502(5), which authorizes chapter 15 relief only if the foreign proceeding is pending where the debtor has an 'establishment.' The Bankruptcy Code defines this to mean 'nontransitory economic activity,' or, as the court characterized it, a local place of business."Why doesn't Suntech want to reorganize under U.S. court supervision??
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FYI: the deadline for filing an objection in the Chapter 7 case is November 20 and the hearing will take place at 10am EST on Thursday, December 12th.
If STP does file a Chapter 15 bankruptcy petition, it would take place after 12/12 (in order to attempt to stay any ruling in the Chapter 7 process).
The petitioners will likely submit the necessary paperwork to comply with 303(b); they can simply state the obvious: bondholders invest in bonds with the intention of being repaid principal plus interest, irrespective of the settlement price and time, not to seek relief under Chapter 7.
There will be no change of venue, as Suntech and the Petitioners agreed to submit to the jurisdiction of any "...New York State court sitting in the Borough of Manhattan in the City of New York solely for the purpose of any legal action or proceeding brought to enforce their obligations..." (according to the terms of the Indenture Suntech is a Foreign Corporation that has appointed and maintains a Registered Agent "to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York...").
Suntech is "insolvent on a cash flow basis," "balance sheet insolvent," and it is in the best interest of every bondholder, including the Petitioners, to 1. put an end to the company's operation, 2. liquidate any remaining assets, and 3. collect what scrap is left over.
Thus, even if Suntech attempts to file a Chapter 15 bankruptcy petition after the hearing on 12/12, Petitioners will object, win, and an order for relief will then be granted, allowing both the Chapter 7 process to continue as well as the ultimate cancellation of all outstanding STP shares.
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