The High Court has sanctioned the restructuring plan of ED&F Holdings Ltd, providing further clarity on the exercise of its discretion to sanction a plan using cross-class cram down.

Background  

At the convening hearing, the court ordered that five creditor and two member class meetings be held. All but one of the creditor classes approved the plan by large majorities. 

Sanction hearing 

The court was satisfied that the dissenting class would not be any 'worse off' under the plan than the 'relevant alternative' and the consenting classes of creditors had a 'genuine economic interest' in the event of the relevant alternative. The court then used its discretion to sanction the plan. 

Key takeaways

• The directors are normally in the best position to identify what will happen if a restructuring plan is not sanctioned (the relevant alternative). Their view should only be challenged by the court if it does not reflect a rational and considered view.  
• Clear evidence about the financial consequences, in the form of reports that ED&F commissioned, demonstrated that none of the dissenting creditors would be any worse off under the plan than in the relevant alternative.  
• Elevation structure which enables those who lend new money to obtain a higher-ranking return in exchange for their existing debt made commercial sense and was entirely reasonable. 
• Deed of contribution was an effective device to render the plan company a co-obligor as it was done with a view to achieving the best possible outcome for creditors as a whole. 
• Recognition of the plan should be a reasonable prospect in the jurisdictions where 'any material member of the group has material assets or carries on a material business'.

Find out more

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