The Supreme Court of Bermuda has authorised the sale of US Holdings Ltd’s key asset before formal liquidation, despite strong objections from its largest creditor.

Puisne Judge Shade Subair Williams approved the sale of shares in Madagascar Oil Ltd and Madagascar Oil SA to BMK, the majority stakeholder. The deal, worth about $2.04 million, was structured to cover only the liquidators’ fees and legal costs, leaving unsecured creditors such as Outrider Master Fund LP with nothing.

Outrider argued that the deal undervalued the assets, benefited insiders and violated bankruptcy terms it held under a $58 million guarantee. It also claimed that the move was oppressive and risky given the existing lenders’ agreement. Mrs Justice Subair Williams said the court must respect the work of insolvency practitioners unless they act irrationally, in bad faith or unreasonably.

The judge found that the joint provisional liquidators had followed a proper market process, taken reasonable steps and had no viable alternatives given the asset’s poor financial standing. Importantly, she ruled that no evidence showed the JPLs were biased or self-serving.

Noting that insolvency law allows liquidators to reject burdensome contracts, Mrs Justice Subair Williams decided the sale preserved more value than delaying for winding-up, which would likely have led to bigger losses.

In the ruling, the judge said the court will defer to "skilled insolvency practitioners unless bad faith or irrationality is established".

Rhys Williams, director at Conyers, representing the liquidators, said the judgement shows how courts should balance oversight with commercial realism in insolvency.