ARTICLE
3 November 2021

The Latest On Insolvent Schemes And Restructuring Plans

MF
Morrison & Foerster LLP

Contributor

Known for providing cutting-edge legal advice on matters that are redefining industries, Morrison & Foerster has 17 offices located in the United States, Asia, and Europe. Our clients include Fortune 100 companies, leading tech and life sciences companies, and some of the largest financial institutions. We also represent investment funds and startups.
This update summarises the latest jurisprudence on insolvent schemes of arrangement (schemes) and restructuring plans (RPs), and provides an overview of the key themes that are emerging in this area.
UK Insolvency/Bankruptcy/Re-Structuring
To print this article, all you need is to be registered or login on Mondaq.com.

This update summarises the latest jurisprudence on insolvent schemes of arrangement (schemes) and restructuring plans (RPs), and provides an overview of the key themes that are emerging in this area.

Download the below infographic

1127508a.jpg

Key Concepts and Notes

  • Absolute priority rule – U.S. Bankruptcy Law principle which prevents junior creditors from being paid before all senior creditors have been paid in full.
  • Burning platform – when a company can prove that its insolvency is imminent and unavoidable.
  • Cross-class cram-down – feature of RPs which causes dissenting creditors or members to be bound to a RP, provided that the "no worse off test" is satisfied.
  • DIP financing – 'super priority' lending provided to finance a debtor's operations during a U.S. Chapter 11 bankruptcy case.
  • Low turnout of creditors – does not automatically mean that a scheme will not be sanctioned. It is relevant to the court's fairness assessment whether turnout is fairly representative of creditors.
  • Lugano Convention – the UK is now no longer party to this following Brexit (as of 1 January 2021). It nevertheless applied in Gategroup as the RP in that case was issued before 1 January 2021.
  • "No worse off test" – a test which must be satisfied to use the cross-class cram-down procedure. Must be established that the dissenting class would be no worse off under the plan than they would be in the relevant alternative.

Cases Referenced

Re Provident SPV Limited ("Provident") [2021] EWHC 2217 (Ch)

Re Hurricane Energy Plc ("Hurricane Energy") [2021] EWHC 1759 (Ch)

Re All Scheme Ltd ("Amigo Loans") [2021] EWHC 1401 (Ch)

Re Virgin Active Holdings Ltd ("Virgin Active") [2021] EWHC 1246 (Ch)

Re Gategroup Guarantee Ltd ("Gategroup") [2021] EWHC 304 (Ch)

Re DeepOcean 1 UK Ltd and others ("DeepOcean") [2021] EWHC 138 (Ch)

Julia Kotamäki, London trainee solicitor, contributed to the drafting of this alert.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.

ARTICLE
3 November 2021

The Latest On Insolvent Schemes And Restructuring Plans

UK Insolvency/Bankruptcy/Re-Structuring

Contributor

Known for providing cutting-edge legal advice on matters that are redefining industries, Morrison & Foerster has 17 offices located in the United States, Asia, and Europe. Our clients include Fortune 100 companies, leading tech and life sciences companies, and some of the largest financial institutions. We also represent investment funds and startups.
See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More