Innovative Uses of Chapter 15: Energy Coal and Vneshprombank

Mainbrace | March 2017 (No. 2)

Michael B. Schaedle and Rick Antonoff

Blank Rome has the distinction of representing the foreign representatives in two recent chapter 15 bankruptcy cases that broke new ground in U.S. law by being the first to recognize foreign insolvency proceedings under the newly revised insolvency law of Italy and a bank insolvency proceeding in Russia.

Revised Italian Insolvency Law (Concordato Preventivo)

Energy Coal is a petroleum coke and specialty fuel merchant and supplier based in Genova, Italy, with substantial business in the United States as well as a complex capital structure. When the Delaware Bankruptcy Court recognized Energy Coal’s concordato preventivo proceeding in Genoa, it was the first U.S. bankruptcy court to recognize a concordato preventivo since the recent amendments to the Italian Insolvency Law that were enacted to facilitate debt restructurings and distressed investing, while binding dissenting creditors to homologated arrangements.

Energy Coal has obtained the homologation of its concordato and has successfully reorganized on a stand-alone basis. The foreign representative is seeking to implement the Energy Coal restructuring plan in the United States by motion.

Russian Bank Insolvency Law

Vneshprombank (also known as Foreign Economic Industrial Bank) was one of Russia’s largest banks until it collapsed in December 2015 when audits uncovered a more than two-billion-dollar shortfall leading to allegations that its founder and president embezzled tens of millions of dollars. The president was arrested, the bank was declared insolvent, and a Russian governmental agency was appointed trustee for the bank.

In March 2016, the trustee learned that the former bank president may have used the embezzled money to purchase several New York City apartments. The trustee in the Russian insolvency proceeding engaged Blank Rome to commence a chapter 15 case in the U.S. Bankruptcy Court in New York for the purpose of obtaining recognition of the Russian insolvency proceeding and additional relief.

On February 10, 2017, the U.S. Bankruptcy Court granted recognition of the Russian insolvency proceeding as a foreign main proceeding and granted additional relief permitting the trustee to take certain actions in the United States in aid of the foreign proceeding. The Vneshprombank case is the first Russian insolvency case to be fully recognized by a U.S. Bankruptcy Court.1

1. In 2006, the receiver for Yukos Oil Company filed a chapter 15 petition seeking recognition of a Russian insolvency proceeding. However, the case was dismissed on motion of the receiver prior to a hearing on recognition. See, Order Denying Motion to Close Chapter 15 Case and Dismissing Chapter 15 Case, In re Rebgun (Yukos Oil Co.), Case No. 06-10775 (RDD) (Bankr. S.D.N.Y. Feb. 28, 2008) [ECF #145].

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