Report: Foreign Companies Are Turning to U.S. Bankruptcy Courts

The U.S. Bankruptcy Code isn’t just for companies in the U.S.

A new report from scholars Oscar Couwenberg of University of Groningen Faculty of Law in the Netherlands and Stephen J. Lubben of Seton Hall University School of Law in New Jersey identified 49 corporate bankruptcy filings between 2005 and 2012 that included foreign debtors. Of those, 15 had no U.S. parent company.

The U.S. Bankruptcy Code has been interpreted to qualify companies with as little as a U.S. bank account and will reorganize assets anywhere in the world. So with the explosion of high-yield debt in Europe, European companies burdened with bond debt are expected to come to the U.S. to reorganize with increasing frequency, according to the report.

The only European country with a bankruptcy law to rival the U.S.—the United Kingdom with its “scheme of arrangement”—isn’t good at dealing with bond debt, Mr. Lubben told Bankruptcy Beat Wednesday. Plus, the U.K. is trying to discourage forum shopping to its country, which will almost certainly send distressed European companies to U.S. courts, Mr. Lubben added.

Read the full report here.

Write to Stephanie Gleason at [email protected]. Follow her on Twitter @stephgleason.