Vol 18 (2021) - Issue 2

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Gategroup: UK Restructuring Plans Are Insolvency Proceedings; Classes Split

Synopsis Following the English court's judgment on Gategroup's proposed restructuring plan:
1. The new UK restructuring plan procedure is likely to be held to constitute a bankruptcy/ insolvency proceeding – at least for the purposes of the bankruptcy exclusion to the Lugano Convention, but likely also for other purposes, including the bankruptcy exclusion to the Hague Convention. This makes potential recognition of UK restructuring plans in Europe even more challenging.
2. The use of a co-obligor structure – essentially, to engineer claims into a single entity which effects a compromise via a restructuring plan (or scheme of arrangement) – was broadly endorsed by the court, subject to limits.
3. The court ordered that the single-class structure proposed by the plan company instead be split into two classes.

The court handed down its convening judgment on 17 February. It remains to be seen whether the Gategroup bondholder class will approve the restructuring plan on 19 March and whether or not the court will sanction the plan, on or about 26 March.
This article also considers whether a scheme of arrangement constitutes an 'insolvency proceeding'. This question has yet to be resolved, but we strongly believe a scheme is not an insolvency proceeding.