Content area
Full Text
Editor's Note: Transatlantic restructurings may have just gotten a little easier. Until now, transatlantic companies with New York law-governed debt looking to implement a balance-sheet restructuring enforceable against creditors in both the U.S. and Europe have primarily had two choices: a chapter 11 plan under the U.S. Bankruptcy Code, on the one hand, and on the other hand, a U.K. scheme of arrangement filed under Part 26 of the Companies Act 2006, coupled with recognition under chapter 15 of the U.S. Bankruptcy Code. At times, neither has been the perfect fit. Now, there is a new kid on the block.
The U.K. government has enacted the Corporate Insolvency and Governance Act, which supplements the U.K.'s existing insolvency framework with new restructuring tools. One such tool is the new, but long-awaited, restructuring plan.1 With certain characteristics that bring the position under the traditional scheme of arrangement more in line with that under chapter 11, the restructuring plan could be the versatile solution that transatlantic companies have been searching for under certain circumstances.
Is the Restructuring Plan Just a U.K. Chapter 11?
There certainly are many similarities. As is the case with a scheme of arrangement, both chapter 11 and the restructuring plan are (1) court-sanctioned processes that can be initiated by companies (including foreign companies with an appropriate connection to the U.S. or U.K., respectively); (2) recognized cross-border; (3) used to compromise secured creditors, unsecured creditors and shareholders; or (4) involve a high degree of public disclosure. However, they do not affect the directors' ordinarycourse management powers.
The similarities do not stop there. Unlike a scheme of arrangement, both chapter 11 and the restructuring plan can be used to cram down dissenting classes of creditors and to implement a debtfor-equity swap without shareholder consent.
Both processes can be pre-planned and implemented relatively quickly by early negotiation and, where required, entering plan-support or lock-up agreements. As an indication, a chapter 11 could be implemented in approximately 45-90 days (although recent examples of a "speedy" pre-pack have required just 24 hours). A scheme of arrangement, which should be able to be used as a reasonable proxy for a restructuring plan, can be implemented in a similar time frame following commercial agreement.
In chapter 11, the company must place...