UK restructuring plans sanctioned to give effect to parallel Italian law restructurings

The judgment ([2023] EWHC 2193 (Ch), link below) caps nine months of work to recognise the Italian restructuring proceedings (concordato preventivo, CPs) in the UK and to promote parallel RPs to deal with the disputed English law derivative claims against the companies:

• On 29 December 2022, Fancourt J granted interim relief to the companies’ foreign representative pending the hearing of the recognition application under the CBIR ([2022] EWHC 3472 (Ch)).  The interim relief granted applied the administration moratorium to stay litigation and enforcement action in the UK, allowing the companies to focus their resources on promoting a parallel restructuring in Italy and England.
• On 19 April 2023, Rajah J granted recognition and final moratorium relief ([2023] EWHC 923 (Ch), link below).  He rejected the opposing creditor’s submission that there was no jurisdiction to grant relief in the form of a pre-restructuring stay in the face of English law claims in respect of which creditors had not submitted to the foreign insolvency proceedings.  He held (at [30]-[33]) that OGX and Chang were not authority for the proposition that there was no jurisdiction to grant a stay in those circumstances.
• On 14 July 2023, Trower J convened meetings of the companies’ plan creditors ([2023] EWHC 1819 (Ch), link below).  As the CPs and RPs were not fully inter-conditional (the RPs being conditional on the corresponding CPs, but not vice versa), he accepted (at [40]) the submission that the comparator to the RPs for class purposes was the CPs.  On that footing, the rule in Gibbs meant that a class distinction existed between English law creditors not bound by the CPs and creditors who were so bound in any event (at [48]-[50]).  The difference in applicable law was a material difference in rights in this scenario or (at least) a difference in ‘interests proceeding from rights, such as were contemplated by Lord Millett in his judgment in Re UDL Holdings Ltd’.  He further held that, on the facts, there was an objective distinction to be drawn between disputed and undisputed claims, in particular, in view of the companies’ counterclaims and the incentive for certain creditors (who might in fact be debtors) to deal with a liquidator, rather than be pursued by a restructured going concern (at [51]-[54]).
• In his later sanction judgment, Trower J noted that the assessment of the statutory ‘relevant alternative’ for the purposes of the no worse off (NWO) test was ‘a very similar exercise, although not identical to, ascertaining the appropriate comparison for class purposes’ (at [39]).  He held (at [43]) that the English law creditors would be NWO under the RPs because, on the evidence, it was speculative that they might recover more than offered under the proposed restructuring by exercise of their English law rights by means of ad hoc enforcement.  This was because the overwhelming majority of assets were in EU member states or in the US, all of which would recognise the CPs even without the RPs.  He rejected (at [41]-[43]) the argument that recovering even a nominal amount by enforcement would mean the NWO test was not satisfied because an enforcing creditor would have to show that they could take the fruits of that enforcement and retain the return under the CPs as if a mere part payment, rather than a return under a restructuring in which the creditor would have to participate in order to take the benefit.

Links to referred judgments:

Cimolai Interim Relief Judgment

Cimolai Final Recognition Judgment

Cimolai Convening Judgment

Cimolai Sanction Judgment

Adam Al-Attar and Lottie Pyper are pleased to have worked on this novel and engaging case throughout.  It is a useful example of how the English court can adapt to assist and give effect to a foreign law restructuring that would have been given effect under the Recast Insolvency Regulation pre-Brexit.

It was great to have worked with the teams at Kirkland & Ellis (Thomas Jemmett, Mallika Abidi, Ken Au and Georgina Vale) and Quinn Emanuel (Yasseen Gailani, Leo Kitchen and Daniel Freund) to deliver this result.