Law firm takes advantage of distress

(CNS): As Walkers Head office in Cayman re-opened for business on Monday, the offshore law firm was reporting a rise in distressed funds work in the first half of 2008. The firm, which has dedicated distressed funds groups in its Cayman, British Virgin Islands (BVI), and Jersey offices, has seen an increase in demand for its services in this area.

"Weare seeing a lot of new instructions from distressed funds in our BVI office," said Richard May, a partner on the Distressed Funds team in BVI, which was launched in March 2008. "It is important that hedge funds ensure that they get their redemption provisions right from the beginning and structure their funds appropriately to protect themselves against potential liquidity issues that might crop up in the future. By paying attention to the details at the start, they can save themselves and their investors a lot of headaches later."

Walkers says that the Distressed Funds group was developed to help investment funds best serve the interests of their investors. The team has broad-ranging experience across funds, litigation, and insolvency work to provide a full range of services for the entire lifecycle of a fund. The firm has found that by integrating these practices early on, the funds are more aware of their options — especially when jurisdictions such as the U.S., Cayman, BVI, and Jersey can have differences in how funds can be liquidated and the rights of investors.

"When funds go into distress, it is important that the actions taken are in the best interests of the funds themselves and the investors, and that other parties are not permitted to obstruct what is most favourable for the funds," said David Steenson, a Jersey litigation partner on the Distressed Funds team. "The goal is to work with the funds directly, where possible, to help them assess their options and put the best strategy in place to benefit both the funds and the investors."

Walkers said it can counsel funds on how best to deal with suspensions and illiquidity issues, contractual rights, and pre-emptive actions or threats from investors. Because of the multi-practice approach, the team is skilled at handling contentious and non-contentious situations.

"Our goal is to help our clients navigate through difficult situations," said Sandie Corbett, a Cayman insolvency partner in the Distressed Funds group. "That includes both ensuring that their fund is built on a solid foundation and that they fully understand how their fund operates from the outset so that they are best placed to cope with problems in the event that they end up in litigation. The better prepared they are both as a fund structure and from an education standpoint, the better chance they have of winning in court, if the situation advances to that stage."