Flaschen Discusses Gwalia Ruling With The Australian

May 12, 2008

Evan Flaschen, dubbed as "one of the world's foremost insolvency lawyers," by The Australian, talked with the continent's leading newspaper about the impact after last year's controversial High Court's ruling in Sons of Gwalia, a decision that elevates the shareholder rights at the expense of creditors in company collapses.

Mr. Flaschen, chair of the Financial Restructuring Group, said that "numerous" US institutional investors had told him they had lowered their assessment of Australian credits after the judgment. "As a result, they will require a higher return (interest rate) in order to lend to them."

"They will also look more critically at the issue of whether they should require security in order to ensure that they come ahead of shareholder claims." Each issue -- higher interest rates and requirements for collateral -- makes it more expensive and more difficult for Australian companies to raise financing, which hurts far more shareholders in far more situations than the few instances where shareholders are harmed by fraud or improper disclosure," he added.

"Gwalia ruling leaves US lenders wary," The Australian, May 12, 2008.