Vol 16 (2019) - Issue 6

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Reorganisation Value and the Dutch Bill on the Confirmation of Private Plans

Synopsis

Valuation is an important element of financial restructurings. In this article we analyse the provisions related to valuation, as prescribed by the recently adopted EU Restructuring Directive, in particular in the best interest of creditors test and the cross-class cram down provision. We discuss 'liquidation value' and 'reorganisation value', the latter of which differs from 'enterprise value', a leading valuation concept in the field of mergers & acquisitions. Subsequently, we analyse reorganisation value by means of a conceptual analysis and an illustrative example. We first provide in paragraphs 1 and 2 a high-level overview of the cram down and valuation provisions prescribed by the EU Restructuring Directive. The Netherlands is one of the first member states to follow up the EU Restructuring Directive, with the recent submission of a bill to the Dutch parliament, the Bill on the Confirmation of Private Plans (BCPP), seeking to introduce a scheme or pre-insolvency procedure. We briefly explain the proposed Dutch restructuring framework in paragraph 3 in order to show how the bill incorporates the cram down and valuation provisions included in the EU Restructuring Directive. Subsequently, we provide a conceptual analysis of reorganisation value in paragraph 4. Paragraphs 5 and 6 elaborate on enterprise value and its relation to reorganisation value and illustrate these with examples and figures. Our conclusions are summarised in paragraph 7.