And Now, a Few Words About a (Re)structured Investment Vehicle

[WSJ Law Blog]

When we can, we like to expose and elucidate niche or novel areas of legal practice, from space law, to doping law, to foodborne illness law. The mystery of these practices makes them alluring; and, for serious law dawgs, even sexy. They excite us.

And then there’s restructuring. With its strange lexicon of DIP loans, exclusivity periods and stalking-horse bidders, bankruptcy offers its own kind of charm, even if most of it escapes us.

Today, we received a press release from Clifford Chance about a new kind of restructuring, done by a team of lawyers in New York and London. They advised on the restructuring of SIV Portfolio plc, a structured investment vehicle previously known as Cheyne.

We have no doubt that Clifford Chance did superb work on the deal, perhaps even “innovative” work, as the press release claims. But we’re perhaps most admiring of the lawyers’ willingness to share some of the, uh, finer points of their accomplishment in the press release. Courtesy of David Steinberg, a restructuring partner:

The key challenge facing the receivers and the senior creditor population was that the credit documentation underpinning the Cheyne SIV contemplated that, in the receivership scenario, there would be a simple liquidation of the SIV’s portfolio of securities. This would be followed by a distribution of the cash proceeds to the creditors, whereas in fact the more desired outcome was for the senior creditor population to be given a choice between cashing out their investment in Cheyne and remaining invested in the portfolio in the hope that asset values might recover over time. The objective of this restructuring was to make those choices available to creditors whilst respecting the constraints imposed by the credit documentation.

Well done, David (we think)!