Do you manage or invest in a company based in LatAm and would like to explore the benefits of filing for Chapter 11 or reorganization bankruptcy in the U.S.?

A significant number of companies in Latin America have experienced an expansion of international business transactions as technology allows for cross-border business development and interconnection. 

Global businesses facing liquidity challenges may benefit from the U.S. Chapter 11 or reorganization bankruptcy, as it allows them to continue to operate without disruption while the company and/or its debts are restructured so as to achieve profitability. The company does not need to be a U.S. company and it does not need to principally conduct business in the U.S. in order to file for Chapter 11 or reorganization bankruptcy in the U.S.

To the extent your company needs to restructure its balance sheet, it would be helpful for you to learn about the advantages of filing for Chapter 11 or reorganization bankruptcy in the U.S., which include:

• The requirements for non-U.S. companies to file bankruptcy in the U.S. are very low, and in some circumstances can amount to merely holding a bank account in the U.S.  
• U.S. Bankruptcy courts offer predictability, as many companies file for Chapter 11 or reorganization bankruptcy in the United States so the case law is extensive. As a result, the relevant parties can foresee how a case will likely play out, and reasonably anticipate what to expect when negotiating a reorganization plan.
• The U.S. offers a well-developed bankruptcy system, allowing parties to easily navigate through statutes, code, and case law to find answers to any challenges they may face. 
• U.S. Bankruptcy laws place emphasis on preserving the company. This is arguably the biggest advantage. Uniquely, the U.S. bankruptcy system is focused on preserving the value of the company ensuring that the company remains intact. U.S. Bankruptcy judges focus on managing the process towards that end, ensuring that a company can restructure and continue as an employer and productive member of its community.
• An effective bankruptcy needs global effect. Actions against the company and attempts to seize its assets need to be halted worldwide and all issues centralized in the bankruptcy proceeding.  The “automatic stay” provisions of U.S. law have been repeatedly interpreted as having worldwide effect and U.S. courts have been effective in enforcing the relevant pause.  
• Companies that need to file for bankruptcy protection generally have run out of liquidity: even if the underlying business is worth “keeping alive” little will be left if money cannot be found to pay employees and critical vendors. In that regard, the so-called “Debtor in possession financing” or “DIP Financing” is a regular feature of a U.S. Chapter 11 process, where the company can secure new financing (generally senior to its existing financing) to fund the bankruptcy case and keep its business alive, on an expedited basis – generally these facilities are approved on an interim basis at the first hearing in the case. DIP financers are very comfortable with providing this type of financing within U.S. Bankruptcy courts.
• In the U.S. companies have shown a distinct preference for filing in states with a long history of administering complicated bankruptcy proceedings, such as New York and Delaware, even if they do business elsewhere in the U.S. or other countries. 

Although the U.S. Chapter 11 or reorganization proceeding is often faster than its equivalent in other countries and thus less costly, it is important to consider upfront potential legal fees and also have U.S. and local counsel work together so as to structure the U.S. proceeding taking into account the requirements of all the legal systems involved. 

In addition, if a company is reorganizing in its home country but needs the assistance of U.S. courts for certain aspects of the case, such as having meaningful assets or creditors in the U.S., it can file a “Chapter 15” proceeding which allows the company to obtain certain benefits of U.S. Bankruptcy law while explicitly deferring to the non-U.S. Bankruptcy proceeding.

If your company faces liquidity challenges and you are interested in exploring how a U.S. Chapter 11 or Chapter 15 proceeding can help ensure the continuity of your business, please let us know! Our experienced lawyers are positioned to handle any domestic or cross-border restructuring and can help all stakeholders navigate the complexities of a financially distressed business with a view to ensuring continuity and maximizing value.