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Riding the new wave of insolvency: Podcast 3
Jennifer Ball, Partner, Litigation
Paul Billingham, Grant Thornton
Jennifer Ball
Hi, I'm Jennifer Ball, a partner of the Insolvency and Commercial Litigation Team at Clayton Utz in Sydney. Welcome back to our third podcast about INSOL Shanghai, INSOL's International Regional Conference which will run from 14 to 16 September in Shanghai. I am joined today by Paul Billingham of Grant Thornton, the main sponsor of INSOL Shanghai.
Paul, today we are going to discuss with you the breakout session in relation to the winding up of insolvent hedge funds. Can you tell me and our listeners a little bit about the session?
Paul Billingham
Thanks Jennifer. Well as we have seen in recent months the US sub-prime fuelled credit squeeze has had a disastrous effect on a number of global financial institutions and all of those institutions have an exposure either directly or indirectly to the structured credit products offered by hedge funds.
Now when a hedge fund fails, the challenge for practitioners and for the banks themselves is to deal with those complex financial instruments across the board and the jurisdictional complexities of administering the insolvent estate.
Jennifer Ball
And Paul, what will the breakout session provide for our insolvency professionals attending?
Paul Billingham
Well we will start off Jennifer with a review of how hedge funds are structured and how they have investment advisers, investment managers and funds managers and also the type of investments they typically hold - CBOs, CLOs and asset-backed securities - how they acquire and sell them and how the fund makes its investment decisions.
We will undertake a brief review of the impact of sub-prime on carrying value of those investments within the hedge fund and also analyse how they are structured particularly with regards to offshore financial centres.
We'll then move on to identify the warning signs that bankers can look out for when a hedge fund becomes insolvent or becomes distressed and the options available to both the firm and its lenders in those circumstances.
Jennifer Ball
And of course Paul, as a lawyer from my point of view the legal aspects of dealing with a distressed hedge fund are particularly complex. Are you going to be considering those issues in the session?
Paul Billingham
We are Jennifer, yes the jurisdictional centre of main interest of cross-border issues are particularly relevant for hedge funds. We will also have some first-hand experience of insolvency professionals and lawyers with regard to their actions on appointments and their obligations and responsibilities when a hedge fund becomes insolvent, and examine the latest situation with regard to UNCITRAL and of course the use of Chapter 15 in the United States.
Jennifer Ball
Well Paul the session sounds extremely relevant to what's actually world-wide in the economy. How do you plan to conduct the session?
Paul Billingham
Well, clearly there's a lot of ground to cover in the hour that we have been allocated by INSOL for this session so we plan to use a panel-style sort of open forum discussion format where delegates will be encouraged to raise questions with the panel and join them in recounting their first-hand experiences of hedge fund insolvency and distress.
Jennifer Ball
And Paul can you give us a sneak peek about who is going to be on the panel for the breakout session?
Paul Billingham
Yes, we've been quite fortunate in attracting a global panel of experts for the session. Douglas Wilson from Deutsche Bank in Hong Kong is in charge of looking after all of Deutsche Bank's global hedge fund exposures. He will be joined by Sandy Corbett of Walkers in the Cayman Islands (the Caymans of course is where the majority of hedge funds have their headquarters), and then finally Marcia Goldstein from Weil, Gotshal in the United States will focus in particular on the Chapter 15 issues and the developing case law in that country.
Jennifer Ball
Thank you Paul for the insight into details of your breakout session. In our next podcast we focus on another one of the breakout sessions that is also sure to attract a lot of interest: workouts in the retail sector.
