Court of Appeal rules in Adler ‘cross-class cram down’ case
The Court of Appeal has overturned the restructuring plan of German real estate giant Adler, in a ruling that is likely to have major legal significance.
A High Court judge had approved the company’s restructuring plan at a hearing in April, despite opposition from some of the creditors, using a judicial power known as “cross-class cram down”, part of a new tool brought in to streamline restructuring during the Covid-19 pandemic.
Today’s ruling is the first time the Court of Appeal has considered cross-class cram downs under Part 26A of the Companies Act 2006.
The Court of Appeal has overturned the restructuring plan of German real estate giant Adler, in a ruling that is likely to have major legal significance.
A High Court judge had approved the company’s restructuring plan at a hearing in April, despite opposition from some of the creditors, using a judicial power known as “cross-class cram down”, part of a new tool brought in to streamline restructuring during the Covid-19 pandemic.
Today’s ruling is the first time the Court of Appeal has considered cross-class cram downs under Part 26A of the Companies Act 2006.
The judges ruled that the Adler plan should be overturned because it discriminated, without justification, against one of the classes of dissenting note holders.
Inga West, counsel at law firm Ashurst, said: “There is much to digest in the judgment and it will have implications both for domestic restructurings as well as foreign companies looking to forum-shop to the UK to undergo a business-saving rescue.
“The judgment will put some much-needed flesh on the bones of the cram-down power, and how the courts should wield it, which in the medium term will help to shore up the UK’s ability to deliver business-affirming restructurings.”
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Court of Appeal (Lord Justice Nugee, Lord Justice Snowden, Sir Nicholas Patten) 23 January 2024
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