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Court grants protection over US assets of Cayman Islands fund

Court grants protection over US assets of Cayman Islands fund

The US Bankruptcy Court for the District of Delaware has granted protection over the US assets of a Cayman Islands exempted company in liquidation.

The company, SIFCO5, is subject to official liquidation proceedings in the Cayman Islands, which the Bankruptcy Court found was eligible for relief under chapter 15 of the US Bankruptcy Code.

US law firm Schulte Roth & Zabel, which represented the joint official liquidators Kinetic Partners in the proceeding, says the decision is significant given earlier decisions of other bankruptcy courts to deny or limit the availability of similar protection to other Cayman exempted companies in liquidation.

The debtor, SIFCO5, is a privately owned investment company organised as an exempted company under the laws of the Cayman Islands. SIFCO5 is essentially a fund of funds in that its primary assets consist of limited partnership interests in a number of private equity vehicles and a hedge fund. The funds are located in different countries around the world, with the largest concentration being in the Cayman Islands and the US.

SIFCO5 has two classes of equity: one held by Saad Investments Company, a Cayman Islands exempted company, and the other by Barclays Bank.

On 19 August 2009, Barclays petitioned the Grand Court of the Cayman Islands for a winding up order over SIFCO5. The court granted Barclays’ petition on 19 September 2009 and ordered the appointment of Geoffrey Varga and Nicolas Matthews of Kinetic Partners as the joint official liquidators over SIFCO5.

On 11 November, the joint official liquidators filed a petition with the Bankruptcy Court under chapter 15 of the code seeking recognition of SIFCO5’s Cayman liquidation and winding up proceeding.

On 4 December, the Bankruptcy Court granted the joint official liquidators’ petition, finding that the record had established that SIFCO5’s COMI was in the Cayman Islands and that therefore the Cayman liquidation would be recognised as a foreign main proceeding.

Brian Pfeiffer, Schulte Roth & Zabel business reorganisation partner, says it should come as “welcome news to investors, managers, administrators, liquidators and receivers of funds in foreign insolvency proceedings who may have seen earlier decisions as closing the door to obtaining the assistance of US courts in connection with the liquidation of fund assets.”

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