Executive Summary

On 27 February 2024, the High Court sanctioned a restructuring plan (the Plan) proposed by CB&I UK Limited (CB&I), part of the global McDermott construction and engineering group (the Group). This is the first English restructuring plan to be approved after the Court of Appeal judgment in Adler (see our Alert) and follows the guidance in that case.

Background

On 23 January 2024, the Court of Appeal overturned the High Court's sanction of Adler Group's (Adler) restructuring plan (the Plan) (see our alert). This much anticipated judgment provides clarity on the court's discretion to sanction a plan where there are dissenting classes of creditors.

Background

The Plan envisaged:

Introduction

The first stage in any restructuring by way of a scheme of arrangement in the Cayman Islands involves meetings of such classes of creditors or shareholders (as the case may be) to consider, and if thought fit, approve the terms of the scheme. An application to Court is required for orders to be granted for convening such meetings. If, at these meetings, the requisite statutory majorities are satisfied, the second stage involves obtaining Court sanction for the proposed scheme to become effective.

Bermuda, the British Virgin Islands and the Cayman Islands all have legislation that enables a company to present a scheme of arrangement to restructure its debts.

One of the defining features of a scheme of arrangement carried out under the relevant legislation in each jurisdiction is the ability to cram down dissenting creditors or members (or classes of them, as the case may be) if the requisite statutory majorities are satisfied and Court sanction of the proposed scheme is obtained.

Over the past several years, unitranche facilities have become increasingly prevalent. This growth has been driven by the ever-growing class of private credit and direct lenders who initially developed the unitranche facility structure, along with traditional bank lenders now joining this market. The unitranche structure has several advantages, including typically quicker execution for the parties involved and in some cases a lower cost of capital to the borrower.

The Court of Appeal has recently referred to established case law that the court will only interfere with the act of an officeholder “if he has done something so utterly unreasonable and absurd that no reasonable man would have done it”.

While the judge in the lower court had not made any error of law, on the facts there were identifiable flaws in the judge's reasoning that the trustees' decision not to join in the proceedings was perverse.

The judge had failed to recognise that:

A recent judgment of the United Kingdom Supreme Court in Brake & Anor v The Chedington Court Estate Ltd [2023] UKSC 29 (10 August 2023) is likely to be a welcome decision for liquidators and trustees in bankruptcy in setting clear boundaries as to who has standing to challenge their decision-making in corporate or personal insolvency contexts.

Bed Bath & Beyond, the home goods retailer, has filed bankruptcy under Chapter 11 and plans to conduct liquidation sales and close all of its brick-and-mortar stores by June 30, as reported by The New York Times. The retailer points to an inability to adjust to the growth of online shopping as a reason for its downfall.

After a weekend that saw the tech ecosystem unite to fight for its future, on Monday 13 March 2023, the Bank of England (the Bank) effected the sale of Silicon Valley Bank UK Ltd (SVB UK) to HSBC. It used the resolution powers for stabilising failing banks granted by the Banking Act 2009 which were introduced following the 2008/9 financial crisis.

Resolution powers