Explore the recent appeal process of Adler Group and its significance for UK Restructuring Plans. Learn about the challenges faced during the implementation of a solvent wind down and the arguments made by dissenting classes. Discover the differences between UK restructuring plans and other processes, including a new feature called 9-fin AI. Understand the concept of paripasset treatment and the discretion of the judge in sanctioning the plan. Delve into different approaches used in schemes and CVA's, including the allocation of restructuring surplus.
The Adler Group case sets a precedent for future UK Restructuring Plans, highlighting the importance of the no worse off test and the departure from the paripassu principle.
The judge's discretion in sanctioning restructuring plans is a topic of debate, with the need for a defined framework to evaluate fairness, including considerations of contractual rights and existing commercial interests.
Deep dives
The importance and impact of the Adler Group case on UK Restructuring Plans
The podcast episode discusses the significance of the Adler Group case as a landmark case for the UK Restructuring Plan. The case has implications for future restructurings and how they will be implemented by the courts. The case revolves around Adler, a distressed German real estate asset manager and developer that faced scrutiny and investigations due to alleged inflated valuations and related party transactions. Adler announced a deal with representative bondholders involving new super senior financing and the plan for a managed wind down of the company. However, dissenting bondholders opposed the plan, leading to the launch of the UK restructuring plan. The episode delves into the novel use of the restructuring plan procedures and the treatment of different classes of creditors. The appeal hearing, which took place over three days, focused on the departure from the paripassu principle and the fairness of the plan. The judgment is yet to be announced.
Key concepts: No worse off test, relevant alternative, and paripassu principle
The podcast episode explores several key concepts relevant to the Adler Group case. First, it discusses the no worse off test, which determines whether the dissenting class would be worse off under the restructuring plan compared to the relevant alternative of liquidation. The judges emphasized that the satisfaction of this test alone is not sufficient to sanction the plan. Second, it addresses the relevant alternative, which is the counterfactual scenario of liquidation where unsecured creditors would receive paripassu treatment. The departure from the paripassu principle became a central point of contention in the case, with arguments focusing on the fair allocation of the restructuring surplus and the risks borne by different classes of creditors. The judges also questioned the level of detail provided in the plan's explanatory statement regarding the justification for deviating from the paripassu principle.
Judge's discretion and potential future implications
The podcast episode dives into the judge's discretion in sanctioning the restructuring plan and discusses potential future implications. The judges debated whether there should be a more defined framework for exercising discretion and determining fairness in cross-class cramdown cases. They explored questions surrounding the evaluation of fairness, including the honest and reasonable person approach and the treatment of contractual rights and existing commercial interests. The episode also highlighted Justice Snowden's concerns over the tight timeline imposed on the court and the need for a detailed chronology of events leading up to the case. The judgment is expected to be delivered in the coming weeks, and while it may not establish rigid rules, it may provide a starting point for evaluating future restructuring plans in terms of departure from the paripassu principle and justifications for different treatment of classes.
On 21 April this year, the High Court sanctioned Adler Group's UK Restructuring Plan, enabling the group to pursue a solvent wind-down of operations and sale of assets over a two-year period.
But one group of creditors was pretty peeved by the plan (understatement of the century).
In this week's episode of our Cloud 9fin podcast, 9fin editor Chris Haffenden and restructuring lawyer Freddie Doust do their best to explain some of the key themes from the Adler hearing in the Court of Appeal last week and what it might mean for UK Restructuring Plans in the future.
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