On June 6, 2017, Australian-based mining equipment supplier Emeco Holdings emerged from chapter 15 proceedings in the Southern District of New York following an Australian court’s sanctioning of the company’s scheme of arrangement.
The scheme of arrangement was a component of an innovative, comprehensive restructuring that provided for a three-way merger of three large Australian mining service companies and a restructuring of A$680 million of debt through a debt-for-equity swap, rights offering, and full refinancing.
Emeco originally obtained recognition of a similar scheme of arrangement in November 2016, but the recognition order was vacated by the US bankruptcy court in January 2017 when the scheme failed to achieve 75% creditor support in Australia. The US bankruptcy court allowed the case to remain open, however, for Emeco to make the necessary amendments to the scheme to obtain the requisite creditor support in Australia. A revised scheme of arrangement was recognized on March 9, 2017 and a final order enforcing the sanctioned scheme was entered by the US bankruptcy court on March 22, 2017.
Because the scheme creditors included a number of bondholders and distressed debt funds that were based in the United States, Emeco and its creditors sought chapter 15 recognition to make sure that its scheme of arrangement could be enforceable against such creditors. Therefore, recognition in the United States was a crucial component of the deal. The cooperation between the two foreign courts to allow for the proceedings to remain open while Emeco negotiated with its stakeholders was a key factor in the successful restructuring.