EMEA Schemes/26A Wrap 2023

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Schemes and Restructuring Plans in Deep Dive; What New Precedents Developed? What Is Next?

Reorg has compiled the facts, notable features and court documents for all schemes of arrangement (Schemes) and Part 26A Restructuring Plans (Plans) that were before the English courts in 2023.

Schemes 2023

Key Take Homes

• Borrowers creatively use Schemes to get around Russia-related sanctions restrictions: Nearly two years after the start of the war, Russia-related sanctions still impact the ability of restructuring debtors to deal with their sanctioned creditors. However, the Scheme process remains flexible and utilitarian enough to be used by debtors to distribute proceeds to creditors who may be subject to Russia-related sanctions.
  • Petropavlovsk used a Scheme to make distributions following an administration, avoiding sanctions.
  • Nostrum, in 2022 was also able to use a Scheme (coupled with a trust mechanism) to deal with creditors subject to Russia sanctions.
  • Implementation of Praesidiad’s Scheme of 2023 was subject to the receipt of sanctions license, but the English courts were satisfied they could approve it as the sanctioned lender could not be adversely affected in a manner different from any other lender in the same class.
• Optionality or “Alternate Schemes” for creditors is acceptable to the English courts. Non-Standard Finance, or NSF, provided a Plan A Scheme and a fallback Plan B Scheme if a recapitalization could not be achieved. Plan B, involving the debt-for-equity swap and haircut to compensation claims was pursued.
• Schemes enhance recoveries compared with other restructuring processes. Haya’s 2023 Scheme claimed to repay creditors 40% more than an insolvency would. Lecta’s 2023 Scheme purported 100% recovery versus an expected 44% to 71% in an alternative process.

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