The UK and Europe appear poised to provide unprecedented opportunities in distressed debt in 2012.  A variety of factors are expected to force banks in the UK/Europe to delever their balance sheets by a colossal sum of €1.5 to €2.5 trillion over the next 18 to 24 months.  Analysts anticipate, as a result, a spate of distressed bank loans coming to market.  In order to capitalize on this unique opportunity – which some have characterized as “the next great trade” – hedge fund managers will need to be well-versed in local law, particularly local insolvency law.  In a guest article, Solomon J. Noh discusses legal considerations that can impact the outcome of investments by hedge funds in UK and European distressed debt.  Noh is a Partner in the Bankruptcy & Reorganization Group at Shearman & Sterling LLP, currently resident in Shearman’s London office.  For related analysis by Noh, see “Treatment of a Hedge Fund’s Claims Against and Other Exposures To a Covered Financial Company Under the Orderly Liquidation Authority Created by the Dodd-Frank Act,” Hedge Fund Law Report, Vol. 4, No. 15 (May 6, 2011).