Part 26A Restructuring Trends in the Courts

Virgin Atlantic became the first company to use the Part 26A restructuring tool, in September 2020, when its restructuring plan was sanctioned by the English High Court. The U.K. airline used the tool to implement a financial restructuring valued at £1.2 billion over 18 months. The group’s creditors were split into four classes: RCF plan creditors, operating lessor plan Creditors, connected party plan creditors and trade plan creditors, the latter of which had not committed to vote in favor of the plan at the time the restructuring was proposed. Eventually, the group won the support of all classes, but if the trade creditors had not voted in favor, the court would have the power to bind them to the plan.

U.K. restaurant group PizzaExpress also elected to use a Part 26A restructuring a month later to implement a plan that included a total debt reduction to £319 million from £735 million. The creditors were split into three classes: the senior secured noteholders, the senior unsecured noteholders and Pizza Express Financing 1 plc, the company’s sole shareholder. The group structured its creditor classes under its scheme of arrangement to ensure that the cross-class cramdown can be used if the senior unsecured noteholders did not support the plan. The plan was sanctioned by the U.K. High Court at the end of October, 2020 without the need to use the cross-class cramdown mechanism, as the plan was approved by all creditor classes. 

The Court of the Hague in the Netherlands heard its first case under the WHOA legislation on Jan. 15, 2021. The court ordered a cooling-off period and also the lifting of certain attachments which had been granted over the stock of an unnamed debtor. The hearing was a promising signal for proponents of the Dutch scheme, which is designed to rival the English scheme of arrangement as an efficient and precise restructuring tool.

Read more from our EMEA Core Credit team on the Part 26A restructuring trends as well as issues affecting the leveraged finance and distressed debt markets here

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