UK restructuring plans on radar as US debtors scan beyond Chapter 11

UK restructuring plans on radar as US debtors scan beyond Chapter 11

Jean-Marc Poilpré

Mon, August 3, 2026 at 6:13 PM GMT+3 11 min read

A year on from the Court of Appeal's Petrofac decision — which many read as a blow to the UK's Part 26A restructuring plan (RP) process — the regime appears to have emerged stronger rather than weakened. As practitioners adapt to heightened judicial scrutiny, the English restructuring plan is increasingly being embraced by US-linked debtors seeking an alternative to Chapter 11.

"A lot of people were quick to cast Petrofac as the end of the rapid uptick in the use of RPs, but for us it was all part of its natural evolution of the RP as developed by the judges," says John Houghton, co-chair of Greenberg Traurig's Global Restructuring & Special Situations practice and chair of the London Restructuring & Bankruptcy practice.

Key points:

• Concerns arising from the 2025 Petrofac judgment have eased, and the UK's restructuring plan regime has regained its footing.

• Part 26A proceedings remain too expensive and resource-consuming for UK mid-caps, but are attractive to US corporates looking for an alternative to Chapter 11.

• Three Nasdaq-listed issuers — Fossil, Argo Blockchain and NFE — opted for UK RPs rather than Chapter 11, opening up a cross-border restructuring route for US-listed groups.

• Obtaining recognition of English proceedings in the US through Chapter 15 requires careful adherence to US recognition requirements, newly spelt out in a New York court's July opinion.

Inflection point
The flexibility of the UK restructuring plan, particularly its ability to deliver outcomes that may be unavailable under Chapter 11, is making it an increasingly attractive option for US-connected debtors. So pronounced is this trend that a New York bankruptcy court in mid-July published a lengthy opinion outlining the guardrails for Chapter 15 recognition of UK restructuring plans — signalling both acceptance of this transatlantic route and increased scrutiny of how it is used.

"We are at an inflection point. UK RPs are now considered a genuine alternative to pre-packaged Chapter 11 for US companies," said Jifree Cader, partner at Davis Polk and co-lead of the firm's restructuring practice in London. "RPs are now very much on the table as a potential solution."

Through a series of rulings — including for Adler and Thames Water, but most clearly Petrofac — the Court of Appeal has set out what it now expects. Judges want genuine attempts to negotiate a reasonable compromise among all stakeholders, evidence that the pricing of new money has been market-tested, and consideration of the submissions of out-of-the-money creditors. That approach upended a presumption settled since Virgin Active in 2021: that out-of-the-money creditors had no claim on new-money returns, and that plan companies bore only a light burden to justify them.

In the summer of 2025, the courts' message on fairness was patent, but details on what constituted a fair allocation of the restructuring benefits were lacking, lawyers said. Some practitioners also feared that the rulings had strengthened the hand of dissenting creditors, while there was even speculation that uncertainty over implementing RPs would push some corporates toward LMEs instead. "RPs were not in a good place back then," a lawyer commented.

During the past few months, English judges have had many opportunities to say what they like and what they dislike. English judges like the assistance provided by a detailed plan benefits report, for example, while mediation was also viewed favourably in the Waldorf 2 case.

Conversely, English courts reject attempts to "impose arbitrary compromise terms upon creditors with a view to extracting advantage in a critical situation," as stated in the River Island case, and will pay close attention to the way retail investors are treated.

Judges will assess the "overall fairness" of the plan in question, but the US absolute priority concepts are not relevant to the English statutory fairness test.

Tool of the trade
Plan benefits reports quickly emerged as a key tool to help assess whether the benefits and burdens of the restructuring are fairly shared — which was at the heart of the Petrofac case, and led to the overturning of a first RP that had previously been approved by the High Court.

The judgment upholding the appeal brought by Petrofac's dissenting creditors was published on July 1, 2025. Other cases were underway and had to quickly adjust to the decisions. Among them was UK retailer River Island.

"We'd already launched the River Island restructuring plan when the Petrofac Court of Appeal decision dropped. We realised we needed to give the court far more granular information about how the restructuring surplus had been calculated and distributed," says Greenberg Traurig's Houghton.

This was done "from a blank sheet of paper because there weren't any clear guidelines in Petrofac," he recalls. PwC was asked to produce a plan benefits allocation report, looking at each stakeholder class to assess who received value, why they received it and how they had contributed to the restructuring.

The structure of this River Island plan benefits report has been adopted, almost unchanged, in a number of subsequent RPs, Houghton adds.

Judges have welcomed these reports, while also noting their limits. In the case of Poundland, for example, the court commended one report's thoroughness but observed it "piles assumption upon hypothesis."

Mediation spotlight
Another tool that can help plan companies to demonstrate meaningful engagement with all stakeholders — including dissenters — is mediation.

In the Waldorf Production UK judgment, handed down on May 5, the steering committee's lawyers, Milbank, had proposed a two-day mediation open to all plan and target-group creditors. The court welcomed the move, noting that the "use of mediation in these circumstances to find agreement among the stakeholders is to be encouraged."

Waldorf, the plan company, and Harbour Energy, which had agreed to buy the company, supported the mediation. This was for the oil company's second attempt to have an RP approved, after the rejection of the first plan in August 2025. "Mediation is a well-known tool in litigation, but this was the first time it was used in this way," says Mona Vaswani, a partner at Milbank and a member of its Litigation & Arbitration group.

UK tax authority HMRC was one of the target group creditors, but declined to participate in the mediation. The judge found the reasons provided for not attending the mediation unconvincing. "The consequence of Waldorf 2 is that a party will have to think very hard before it decides not to engage with the mediation," says Vaswani.

Ollie Winters, an associate at Milbank and a member of its Financial Restructuring group, noted there was no incentive to negotiate before the Court of Appeal trilogy. "Now, given the limited time parties have and the expectation that a plan company and creditors negotiate, a mediation is a sensible way to address the court's concerns and demonstrate that there has been a bona fide and structured attempt to reach common ground," he said.

Mediation proved effective in Waldorf 2, but may remain the exception rather than the rule, sources cautioned. Aaron Harlow, a shareholder in Greenberg Traurig's London Restructuring & Insolvency practice, questions whether mediation adds much in cases where the parties have already negotiated properly in formulating the plan. "In a restructuring, there are winners and losers," he says. "You must show the court that you've given everybody a fair chance to be heard and to negotiate, and that can be achieved through pragmatic engagement with stakeholders."

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Forum shopping
Genuine creditor engagement is precisely what US judges will look for when asked to enforce more UK RPs through Chapter 15 proceedings.

In July, Chief Judge Martin Glenn of the US Bankruptcy Court for the Southern District of New York set out — in the New Fortress Energy (NFE) case — the "analytical framework that the Court applied" before granting recognition, mindful that the releases and exculpation provisions permitted under English law "push the boundaries of available relief in a Chapter 11 case."

Kirkland lawyers wrote that, "in doing so, the court has effectively set out what the next transatlantic restructuring will need to show."

The English judge who sanctioned NFE's RP in June called it "an example of good forum shopping," on the basis that the alternative would have left creditors across the group "much worse off" than a mechanism no other connected jurisdiction could deliver.

Judge Glenn granted NFE's plan Chapter 15 recognition and said he did not disagree with the outcomes of other UK plans recognised in the US in recent years, citing Fossil, Mega Newco and Codere. In the 57-page opinion, however, he stressed that the court is particularly alert to "bankruptcy tourism" and its potential abuse — shifting a company's centre of main interests (COMI) to a more favourable regime in a way that could disadvantage some creditors.

That concern is legitimate, sources said, but should be largely allayed by the rigour of English court process, and all the more so by the emphasis the English courts have recently placed on fairness.

US guardrails
Mark Knight, partner at Davis Polk and co-lead of the firm's restructuring practice in London, thinks the opinion was helpful because it confirms that RPs can provide an effective restructuring solution for US companies — provided appropriate guardrails are in place to ensure the cooperation of the US bankruptcy court. "In practice, advisors will need to work closely together on both sides of the pond to respect these guidelines when designing and implementing RPs for US companies," he adds.

One important area of uncertainty is how a genuinely contested English cross-class cramdown would fare at the Chapter 15 recognition stage. No such case has yet been fully tested in a US court.

John Houghton doubts such cases would undermine Chapter 15 recognition: "I don't think that will move the dial, because any party can turn up at the RP sanction to argue their case. We did the Smile Telecom case and in his judgement Justice Snowden (as he then was) criticised creditors who shouted from the sidelines and told them instead to 'step up to the plate'."

Creditors who choose not to argue their case at the sanction hearing, and then later turn up at the Chapter 15 hearing and argue the merits of the RP, are unlikely to get much sympathy from a US judge, adds Houghton.

US courts have recognised English RPs even where they carry features unavailable under Chapter 11 — non-consensual third-party releases, for example, or departures from the absolute priority rule — a latitude UK lawyers say leaves London well placed. The key differences are set out in the table below.

A significant advantage England holds over the US as a forum is that a company can keep its Nasdaq listing throughout Part 26A proceedings.

This point was examined at length in the case of Argo Blockchain, where retaining the listing was central both to the restructuring and to Argo's takeover by fellow crypto-miner Growler Mining Tuscaloosa. The judge questioned whether the Nasdaq panel had fully grasped the English jurisprudence, but after further submissions and dialogue between the parties, the Nasdaq listing panel concluded that, under its own rules, a Part 26A plan is neither a bankruptcy nor a business combination requiring a delisting.

On that basis, the judge was satisfied that "the concerns I expressed have been answered," and that the plan was "not of such a character as to preclude continued Nasdaq listing."

The next chapter
London's growing pull as a restructuring forum has stirred concern among some US practitioners about losing business. This competitive pressure has revived across the Atlantic the idea of creating a streamlined, debt-focused proceeding — a so-called "Chapter 16" — that could be completed in weeks rather than the months that a Chapter 11 process typically takes.

For their part, London lawyers report a surge of interest from the Americas. The Fossil RP drew intense interest from US-centric businesses attracted by a court-approved restructuring outside the US at a fraction of Chapter 11's cost, says Matthew Czyzyk, the head of Ropes & Gray's London Business Restructuring group. For Czyzyk, this case was a "beam of light in the restructuring world in the second half of 2025."

Optimism should be tempered, though — the two tools are not interchangeable, and each still does what the other cannot.

Cader at Davis Polk pointed out that "some distressed companies need a global stay on creditor actions that is only available through Chapter 11 proceedings, for instance."

"Chapter 11 is a fantastic tool, but in such cases, it's akin to using a sledgehammer to crack a nut," notes Davis Polk's Knight. "RPs are particularly well suited to cases that enjoy relatively broad creditor support and a surgical balance sheet restructuring rather than an operational overhaul."

The transatlantic route to English restructuring plans now looks well-trodden, while the track from continental Europe does not. In Germany, for example, a Frankfurt court's refusal to recognise Aggregate's English plan — now under appeal — is a situation that's being closely watched by the market.

Featured image by Natnan Srisuwan/Getty Images.

This article originally appeared on PitchBook News