The Dutch Supreme Court clarified both the possibilities and the limitations of a WHOA plan in a recent judgment regarding Dutch shipbuilder Royal IHC’s restructuring.
Background
On 9 March 2023, the District Court of Rotterdam approved the WHOA plan of Royal IHC. That decision raised many eyebrows, as the plan ordered lenders to continue providing funds under undrawn facilities, while the conditions of the credit facilities were no longer met, the maturity date had to be prolonged and the most profitable division of Royal IHC was sold as part of the same WHOA plan.
The decision of the District Court was final and non-appealable for Royal IHC and the lenders involved. The Attorney General however requested a judgment from the Dutch Supreme Court in the interests of the law.
Key measures
In the ruling of 25 October 2024, the Dutch Supreme Court clarified that (in short):
- A WHOA plan cannot impose new obligations on creditors.
- Lenders thus can’t be forced (via an adoption and court approval of the WHOA plan) to provide new funds under existing facilities if the terms of the facilities agreement will be altered.
- It is possible to change the order of priority among creditors as part of a WHOA plan, for example by granting a security interest to a new financer and lowering the rank of the security interests of existing creditors.
Find out more
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.
