Overview
Mark Fine, partner at law firm McDermott Will & Emery, said:
“This is the first time we have seen the courts refuse to sanction a restructuring plan and the case provides helpful guidance on the cross class cram-down we have seen developing in DeepOcean and Virgin Active. The “no worse off than” test is a crucial condition to satisfying the ability to utilize the cram-down and in this case, Justice Zacaroli concluded that the group failed to show that none of its shareholders would be any worse off under the plan than in the relevant alternative. Whilst in the case of Virgin Active, the most likely relevant alternative was a trading administration, here the group is likely, in the short to medium term at least, to continue trading profitably.
Additionally, even if both statutory conditions are met to effect the cram-down, the court still has the discretion to refuse to sanction a plan and Zacaroli confirmed that, even if he was incorrect on the no worse than test, he would have used such discretion to block the plan.”
