Supreme Court to hear landmark Waldorf restructuring appeal

The UK Supreme Court has granted permission to Waldorf Production UK to appeal the High Court’s dismissal of its Part 26A restructuring plan, signalling we will soon receive clarity from the UK’s highest court on the potential limits of this important restructuring tool. 

In August, the High Court refused to sanction Waldorf Production UK’s Part 26A restructuring plan on fairness grounds, finding that a proposed 5% cash payment to unsecured creditors was arbitrary, inadequately supported by evidence, and put forward without meaningful engagement with dissenting creditors. Relying on the Court of Appeal’s recent trilogy—AGPS Bondco, Thames Water, and Petrofac—the judge held that out-of-the-money creditors cannot simply be bought off with de minimis payments if the plan fails to show a fair allocation of value across classes.

Last month, Hildyard J granted Waldorf a “leapfrog” certificate enabling it to make an application for permission to appeal to the UK Supreme Court in respect of his decision to decline to sanction the plan. Justice Hildyard accepted that the proposed appeal raised a point of law of general public importance—how fairness should be assessed at the discretionary stage when cramming down out-of-the-money creditors. Although Hildyard J was clear that he remained persuaded by the trilogy and its rejection of the “bright-line” Virgin Active test (measuring fairness solely against the relevant alternative), he acknowledged that the contrary view remains arguable and important enough to merit Supreme Court consideration.

Now, the Supreme Court has granted Waldorf permission to appeal. Reasons have not been released.