On 18 September 2025, the Chancellor of the High Court, the Rt. Hon. Sir Julian Flaux announced the long-awaited publication of the updated Practice Statement in relation to schemes of arrangement and restructuring plans (the "New Practice Statement"). Revision of the existing Practice Statement was, in large part, driven by the rise in contested schemes and restructuring plans which, in turn, has put significant pressure on the Court system.

The English High Court has sanctioned a restructuring plan in respect of EUR 3.2 billion of bonds issued by the German real estate business, Adler Group. The main objective of the plan was to avoid Adler's imminent insolvency by facilitating access to EUR 937.5 million of new money funding and thereby providing a stable platform from which Adler Group can pursue a solvent wind-down by asset sales over time in recovered market conditions. This represents a novel use of the restructuring plan procedure, which has previously been seen exclusively as a corporate 'rescue' tool.

Pre-packaged administration sales (where a sale of key assets is agreed prior to the appointment of administrators and then implemented by the administrators immediately following their appointment), have been a widely-used and highly successful tool to rescue businesses, or parts of businesses, that may otherwise have languished in administration interminably.

The economic impact of the COVID-19 pandemic led to a wave of creditor schemes of arrangement ("schemes") and restructuring plans ("RPs") in the second half of 2020, which shows no sign of abating in 2021. For the uninitiated, the scheme (a long-established tool) and the newer RP process are court led UK restructuring options that a company can use to bind a minority of creditors into a restructuring. An RP can also be used to "cram down" an entire dissenting creditor class into a deal where certain conditions are met.

HEADLINES

• In March 2020, credit insurer Euler Hermes forecast a 43% increase in insolvencies in the UK in 2021, as well as a 26% uptick in France and 12% in Germany
• By December 2020, ratings agency S&P was forecasting European defaults rising to as much as 8% by the end of 2021

There have been fewer European insolvencies and restructurings than anticipated during the COVID-19 pandemic, but distressed deal activity may accelerate as soon as economies are finally able to reopen.

High yield bond and leveraged loan issuance for restructurings across the United States and Western and Southern Europe has climbed 65% year-on-year, up from US$29.1 billion for the first nine months of 2019 to US$48 billion over the same period this year.

HEADLINES

• Default levels remain historically low at 1 per cent to 2 per cent
• Prevalence of cov-lite loans in Europe may be concealing some underperformance, but there are no conventional triggers for lenders to act

Despite concerns that the economic cycle is peaking, and the impact of geopolitical and trade volatility on corporate earnings, leveraged finance default rates show little sign of rising during the next 12 months.

The Bankruptcy Code’s cramdown provisions are a powerful tool for debtors in the plan confirmation process. Pursuant to section 1129(a)(10) of the Bankruptcy Code, a plan may be confirmed if, among other things, “at least one class of claims that is impaired under the plan has accepted the plan.” Once there is an impaired accepting class, and assuming certain requirements are met, the plan may then be “crammed down” on all other classes of impaired creditors that reject the plan and those creditors will be bound by the terms of a plan they rejected.

Recoupment is an equitable remedy – not expressly addressed in the Bankruptcy Code – that permits the offset of mutual debts arising out of the same transaction or occurrence. Unlike typical setoff, if recoupment applies, prepetition debts can be set off against postpetition debts. A recent decision from the Delaware bankruptcy court demonstrates that the availability of recoupment often depends on how the court defines the contours of the “same transaction or occurrence” requirement.

The Bankruptcy Court for the District of Delaware recently faced a question of first impression: whether an allowed postpetition administrative expense claim can be used to set off preference liability. In concluding that it can, the court took a closer look at the nature of a preference claim.

Facts and Arguments