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Schemes of Arrangements, Restructuring Plans & Chapter 11

A practical guide to the key legal and commercial issues of Schemes of Arrangement and Restructuring Plans

Fundamentals of Mezzanine and Leveraged Debt Finance

A half-day live webinar

  • The trainer has deep experience of restructuring, having been involved in restructurings for over 30 years across a wide range of jurisdictions.
  • Through the trainers' role as a Senior Advisor to Grant Thornton, he retains exposure to current trends and developments in the restructuring market.
  • The trainer has had exposure to the subject from a global perspective, having been involved in restructurings in the UK, Europe and Africa and through his programmes for both EBRD and EIB gains exposure to developments across a broad range of jurisdictions.
  • The trainer has provided training to a wide range of blue-chip clients involved in restructuring (including Deloitte, Simpson Thacher Bartlett, Baker & McKenzie, Cadwalader, Triton, ROBECO, FTI, Zolfo Cooper) and he can provide additional insight into current trends and developments.
  • The trainer has been involved in restructurings from both the debtor and the creditor sides and his career also includes stints in commercial and investment banking, accountancy, tax and law thus enabling him to provide insight from a wide range of perspectives.

  • Schemes (your flexible friend) – Whilst Schemes are a creature of statute, over many years English courts have expanded their application in ways perhaps not originally envisaged by Parliament by adopting a commercial approach, thus expanding the application and usefulness of Schemes (e.g., Metinvest’s ‘Standstill’ and the ‘stay’ in Vinashin Shipping).
  • Broad jurisdictional reach of Creditor Schemes – the flexibility of Schemes coupled with English courts’ willingness to entertain schemes on ‘foreign’ firms has seen Schemes being widely used for companies around the world; a variety of German, Spanish and Italian companies have used Schemes but firms from further afield have also made use of the flexible benefits inherent in Schemes (Vinashin and Synchreon).
  • Member Schemes have wide application and have been used for Takeovers, Reduction & Return of Share Capital as well as Demergers and Removal of minority shareholders.
  • The composition of ‘Classes’ – this represents one of the most contentious aspect of Schemes and features numerous cases on a wide range of issues affecting “Class”.
  • Cross-class cram-down may not matter – whilst the absence of a CCCD is a potential impediment, landmark decisions have mitigated this impediment to some extent by excluding creditors who either have no economic interest or whose rights are not affected by the Scheme.
  • Valuation matters – the proliferation of laminated debt structures together with the exclusion of out of the money creditors from a class vote has pushed this aspect up the agenda; the programme reviews the two key judgements on this matter and considers the pros and cons of how to approach this issue.
  • Restructuring Plans (Part 26A of the Companies Act) – the programme will provide participants with an insight into the recently unveiled Restructuring Plan and the lessons from the Virgin Atlantic restructuring.
  • Relevant & Recent cases – the programme highlights the key issues in Schemes of Arrangement (“Schemes”) with reference to relevant and recent cases (Matalan, Swissport Super Senior RCF Scheme).

Schemes Generally

  • The key requirements of the Companies Act 2006 [§895 et seq.]
  • Creditor schemes
  • Member schemes
  • Takeover schemes
  • Restructuring Plans
  • Varied application - Summary of ways schemes have been used 

Schemes - The General Requirements

  • The Process ➜ the 3 main stages
    • Convening Hearing
    • The “Class” Meetings
    • Sanction Hearing
  • The two key thresholds for Schemes [§899(1)]
    • The Value test
    • The Numerosity test
  • Key concepts
  • Meaning of “Compromise”
  • Meaning of “Arrangement”
  • Meaning of “Creditor”
    • Constitution of the “Classes” of creditors and members
    • A company need not include creditors whose rights are not altered by the scheme
    • Influence of In re British & Commonwealth Holdings
  • The influence of In re Tea Corporation scheme ➜ meaning of “no economic interest”
  • Exclusion of members (trade and unsecured) creditors from a class ➜ Perusahaan case
  • Record dates & times to assess the classes
  • Review key issues in Revised Practice Statement [26.6.2020] 

Relevant Parties (who can apply)

  • The relevant parties
  • Application to foreign companies/jurisdictions
  • EU Judgements Regulation – founding jurisdiction in England in Creditor Schemes
    • Art 8 (how many creditors must be in England) review of relevant cases
    • Relevant cases re ‘foreign’ companies: Garden Products & Codere [2015], Hema
    • Art 25 (the English jurisdiction clause) relevant cases on problem areas
    • Review Van Gansewinkel Groep approach
  • Interaction with the U.S. (Chapter 15)
    • Review: The Synchreon scheme
  • CoMi issues & Changes in Governing law
    • Review DTEK Notes
  • Can schemes bind (release) third parties
    • Guarantors ➜ Codere (2015) scheme
    • Intercreditor parties 

Role of the Court

  • The Convening Hearing
    • The two key factors considered by the Court
    • Notice periods required
    • Distress cases
    • Compare: Swissport Fuelling vs Indah Kiat scheme
    • Schemes with retail creditors
    • Re Instant Cash Loans scheme
  • Disclosure and the Explanatory Statement 

Different Types of Schemes

  • Secured Debt transfer
    • Review: Bluebrook (IMO Car wash)
  • Unsecured debt transfer
    • Review: Telewest cases
  • ‘Standstill’ schemes
    • Metinvest scheme
    • Lessons from Vinashin Shipping scheme
  • Member Schemes (overview) 

Issues Relating to the Constitution of Creditor “Classes”

  • What constitutes a “Class” – the Classic Test in Equitable Life case
    • Review: In RE Hawk Insurance; Sovereign Life
  • Distinction between ‘Rights’ vs ‘Interests’
    • Review Apcoa & Telewest cases
  • The role of the ‘relevant’ Comparator
    • Review  Re Van Gansewinkel Groep
  • Can creditors vote in more than one class?
  • Issues that can fracture a Class
  • Impact on ‘Class’ of Lockup Agreements & other financial/voting incentives/exit fees
    • Key considerations
    • Primacom, Seat cases
    • Fees in Re Noble Group approach
  • Manipulating the Classes
    • Review Apcoa & PrivatBank cases
  • Manipulating the Value test
    • Dealing with contingent and unliquidated claims
  • Manipulating the Numerosity test
    • Review Dee Valley case 

Valuation Issues in the Context of Schemes

  • Why and how valuation matters in schemes
  • The key issues
    • Liquidation vs Going concern value
    • Intrinsic vs Market value
  • Landmark cases on valuation
    • Review Stabilus re valuation
    • Review Bluebrook IMO Car wash re valuation approach
  • Analysis of the various valuation methods used in IMO and Stablilus
  • Review a more practical approach to valuation 

Restructuring Plans (Part 26A of the Companies Act)

  • Outline of the main provisions
  • Pros and cons vs Schemes & CVAs
  • Similarity to Schemes
  • Differences to Schemes
    • Voting Requirments
    • Cross-Class cram down
    • Lessons from Hurricane Energy (plan rejected)
    • The ”Just and Equitable” requirement
    • Can applicants present a competing Plan?
    • Lessons from the Virgin Atlantic Plan
    • Court’s approach to Class ‘splitting’
    • Take-aways from Amicus Finance, gategroup and Hurricane Energy 

Chapter 11 Overview

  • Use and application of Ch 11
  • Types of Ch 11 – pre-packs, free-fall, pre-negotiated plan
  • Choosing the forum / Who is eligible?
  • Which entities may access Ch 11
  • Key benefits
    • Automatic stay – ‘global application?
    • DIP financing
    • Rejection of executory contracts & leases
    • Sale of property (free of collateral) & absolute priority rule
    • Cross class cram-down - requirements
  • Disadvantages of Ch 11

The trainer is a consultant, public speaker and author with expertise in private equity, debt advisory, restructuring and infrastructure. He is a Senior Advisor to KPMG Finland, a Senior Advisor to Reorg EMEA Covenants, the leading provider of information to the European High Yield community, and a Senior Consultant to Grant Thornton UK.

Training programmes are provided to a wide range of blue-chip clients in Europe, Africa, the Middle and Far East, North America and Australasia. In-house clients include banks (BNP Paribas, Société Générale, ING, Barclays Capital, Bank of China, RBS, SEB); lawyers (Baker & McKenzie, Skadden Arps, Sullivan & Cromwell, Cadwalader, Latham & Watkins, Weil, White & Case); advisory firms (Lazard, PWC, M&A International, KPMG, EY, Deloitte); PE firms (Cinven, Advent, Barings Asia, Waterland); corporates (Siemens, Airbus, Turkcell, Candy Crush, Gunvor, Statkraft) and governmental bodies (the UKLA, the EBRD, the ECGD, Omani Oil Corp.)

He qualified in South Africa both as a Chartered Accountant, with Deloitte, and as a lawyer with Hofmeyr where he was involved in structuring a number of high-profile project financings including BMW 3 Series, Ford Sierra, GM, Sappi and Mondi.

When he moved to London and joined Lazard Brothers as a corporate finance executive he was involved in a wide range of public and private transactions. Subsequently, he joined Hoare Govett as an assistant director where he acted as an advisor to smaller listed companies and was involved in several syndicated Euro-Equity Initial Public Offerings.

In 1991 he joined ABN Amro’s cross border M&A team prior to being transferred to MeesPierson Corporate Finance as a Director in Cross-Border M&A where he was also involved in a number of deals in Central Europe. During this time he was a member of the EU-PHARE programme and advised the Estonian government on their privatisation programme.

He is the Programme Director at the City Business School, London, for Infrastructure Finance for the M. Sc. programme in Business Administration and Finance.

He is a member of the Institute of Chartered Accountants in England & Wales and the South African Institute of Chartered Accountants. He completed a BA and an LLB at the University of Natal and a B. Compt. (Hons) at UNISA.

The programme covers the key legal and commercial issues of Schemes of Arrangement and Restructuring Plans (recently used by Virgin Atlantic). English Schemes of Arrangement have long been a widely used pathway for restructurings in a wide variety of jurisdictions abroad. Schemes offer a number of benefits that promote the preservation of value; first, despite being a creature of Statute the Act does not proscribe the terms so Schemes have been used in restructuring, demergers and for take-overs to mention a few examples; secondly, this flexibility has been enhanced significantly through the commercial approach which English courts have adopted to facilitate Schemes (e.g. by disregarding creditors whose rights are not affected); thirdly, Schemes are not a formal restructuring process so are attractive to firms whose business could be terminated via a formal process (e.g. Codere); finally, Schemes have been available to foreign companies provided there is “sufficient connection” with England and Schemes have also been enforceable in these local jurisdictions. The absence of a cross-class cram down is one notable disadvantage of Schemes and this has been addressed in part by the recent introduction of Restructuring Plans which, whilst broadly following Schemes, do include some additional tools (imported from Ch 11) not available in Schemes (e.g. the cross-class cram down) which will be useful in the waves of restructuring which, doubtless, lie ahead.

Restructuring Plans have gained significant traction since their introduction and the recent restructuring of Amicus Finance was the first mid-market company to make use of a Restructuring Plan. Amicus is notable for a number of interesting features, including a cross-class cram down of a senior creditor class; the first time an insolvency official (i.e. the Administrator) proposed a Restructuring Plan which facilitated a solvent exit from administration (the court appears to have taken a more liberal approach than was evident in prior cases e.g. Virgin Active). One notable difference in Restructuring Plans (vis-à-vis Schemes) is the court’s willingness to split the classes and this was another feature of Amicus Finance (see also Hurricane and Gategroup).

  • The course has given me a better understanding of the different restructuring instruments available in the UK and the United States.
Number of places:

£695.00

Per participant
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