On 13 January 2021, the English High Court sanctioned three interconditional Part 26A restructuring plans for the subsidiaries of DeepOcean Group Holding BV.

The plans for two of the companies were approved by the required 75% majority. While the third plan received 100% approval by secured creditors, only 64.6% of unsecured creditors voted in favour.

Consequently, at the sanction hearing the court was required to consider whether the cross-class cram down mechanism in the restructuring plan should be engaged for the first time in the UK.

The court may cram down dissenting creditors and sanction a plan if certain requirements are met:

• Condition A – dissenting creditors would not be any worse off under the plan than the relevant alternative (in this case, most likely liquidation), and
• Condition B – another class of creditors with a genuine economic interest in the event of the relevant alternative has approved the plan.

Once satisfied that the two conditions are met, the court has discretion to refuse to sanction a restructuring plan if it is not just and equitable, however, there is little guidance on this in the legislation.

Key factors

Some of the factors the court considered in DeepOcean:

• The overall support for the plan.
• The composition of and turnout at the meetings, to check whether creditors were fairly represented and had been able to engage properly.
• "Horizontal comparability" or any differences in treatment of creditors across all classes and are they justified.

The DeepOcean judgment gives helpful guidance on the court's approach to the satisfaction of the requirements of Part 26A and the exercise of the court’s discretion to sanction a plan using cross-class cram down. Nevertheless, this case involved high levels of creditor support and no active opposition for the plans and clear financial benefits. Future cases may be less straightforward.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.