570 B.R. 687
Bankr. S.D.N.Y.2017Background
- Four Ocean Rig holding companies (UDW, DRH, DFH, DOV) facing severe distress filed Chapter 15 petitions after Cayman Islands provisional liquidations and proposed schemes of arrangement; JPLs (Appell & Fisher) seek recognition as foreign main proceedings.
- The group’s business: owners of deepwater drilling rigs with most rigs idle; aggregate Scheme Indebtedness is predominantly U.S. dollar debt governed by New York law.
- UDW migrated from the Marshall Islands to the Cayman Islands in 2016; boards, officers, bank accounts, minute books, creditor meetings, and public notices were moved or held in the Cayman Islands before the Chapter 15 filing. A $1 million total retainer sits in New York counsel’s trust account.
- Objector Wiener (purported UDW shareholder) challenged recognition and venue but offered no evidentiary proof of shareholder status; Highland reserved rights to oppose future enforcement of any sanctioned scheme.
- The court held an evidentiary hearing, admitted declarations from the JPLs and counsel, and considered COMI, section 109(a) eligibility, foreign representative status, and public policy under §1506.
Issues
| Issue | Plaintiff's Argument (JPLs) | Defendant's Argument (Wiener) | Held |
|---|---|---|---|
| Whether the Cayman proceedings qualify as foreign main proceedings (COMI location) | COMI shifted legitimately to Cayman; boards, officers, meetings, bank accounts, books, and public notices are in Cayman | Argued improper venue/COMI manipulation and asserted standing as shareholder | Court held COMI was in the Cayman Islands for each debtor and recognized the Cayman proceedings as foreign main proceedings |
| Section 109(a) eligibility (property in U.S.) | Debtors have property in U.S.: New York-law debt and $1M retainer in NY counsel’s trust account satisfy §109(a) | Challenged venue and eligibility indirectly via COMI and standing claims | Court found §109(a) satisfied by New York-law governed debt and retainers; venue in SDNY proper |
| Whether the JPLs qualify as foreign representatives | Cayman Court appointed JPLs and authorized them to seek Chapter 15 relief | Wiener disputed standing generally but offered no proof to contradict appointment | Court found JPLs are proper foreign representatives under §101(24) |
| Whether recognition would be manifestly contrary to U.S. public policy (§1506) | Recognition furthers cross-border insolvency goals; narrow §1506 exception not implicated | Asserted public policy/venue concerns | Court held §1506 not implicated and recognition not manifestly contrary to U.S. policy |
Key Cases Cited
- Drawbridge Special Opportunities Fund LP v. Barnet, 737 F.3d 238 (2d Cir. 2013) (Chapter 15 eligibility and requirements)
- Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.), 714 F.3d 127 (2d Cir. 2013) (COMI ascertainability and timing of COMI analysis)
- In re Millard, 501 B.R. 644 (Bankr. S.D.N.Y. 2013) (recognition requirements under §1517)
- In re Berau Capital Resources Pte Ltd., 540 B.R. 80 (Bankr. S.D.N.Y. 2015) (New York-law-governed debt and retainers can satisfy §109(a))
- In re Suntech Power Holdings Co., 520 B.R. 399 (Bankr. S.D.N.Y. 2014) (Cayman provisional liquidation qualifies as foreign proceeding and COMI factors)
- In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325 (S.D.N.Y. 2008) (caution against "letterbox" companies and COMI presumption)