Beyond chapter 11: How US companies are using UK restructuring plans

As a result of a well-developed recognition regime in the United States and the adoption of accessible restructuring laws in jurisdictions around the globe, new options for restructuring global businesses have emerged. In particular, the rising popularity of liquidity management exercises (LMEs) has accelerated opportunities to pursue cross-border restructuring without the full chapter 11 process.

While chapter 11 remains an option for distressed businesses, the growing ability for companies to use foreign restructuring frameworks – and to have that restructuring recognized in the US – highlights opportunities to craft bespoke solutions under foreign law that would be otherwise unavailable under chapter 11.

The recent restructuring of US fashion retailer Fossil Group serves as a reminder to US debtors and investors to consider options outside the US, including those now available in Europe. The UK Restructuring Plan (UKRP), in particular, is a powerful and flexible tool capable of implementing LME solutions, offering potential benefits for US debtors and their stakeholders.

Our alert explores key considerations for US debtors and investors evaluating the UKRP.

Why choose a UKRP for US restructurings?

The UKRP offers the following for US restructuring and LME candidates:

1. UKRPs are “open for business” for distressed US businesses, and the UK courts are supportive of “good forum shopping.” There are a variety of established techniques available to bring US-based situations within the UK jurisdiction.
   
   
2. UKRPs may be used to restructure US company debt, including where some or all debt is governed by New York law. Provided that debt does not violate US public policy, UK restructuring judgments are likely to be recognized by US courts under chapter 15 of the US Bankruptcy Code, which addresses recognition of foreign insolvency proceedings.
   
   
3. UKRPs allow companies to be flexible and focus on specific parts of the capital structure without addressing all creditor constituencies or requiring broad disclosures.
   
   
4. A single 75-percent-by-value approval threshold applies, with no numerosity test (as opposed to chapter 11’s 67-percent numerosity threshold). As in chapter 11, the UKRP permits cramdown, meaning that a class of financial creditors may be required to accept a proposed restructuring even if they voted to reject it.
   
   
5. UKRP transactions may be designed to retain sponsor equity, even where the current equity holder is not proposing to make further new money available as part of the recapitalization.

Fossil Group: A brief overview

• Fossil Group restructured USD150 million of senior unsecured notes due 2026 (2026 Notes) using a UKRP, targeting a single tranche of debt rather than the group’s full capital structure.
  
  
• The 2026 Notes were issued by Fossil Group, a US-listed parent company that launched a tender and exchange LME. Noteholders could participate in either:
  
  
  • A USD 32.5 million new-money financing, offering 9.5 percent first-out senior secured notes, or
    
    
  • Receiving 7.5-percent second-out secured notes, if not participating in the new money.
    
    
• However, with a 90-percent consent threshold test needed to affect the transaction consensually under the 2026 Notes, a UKRP (with its lower 75-percent approval threshold) was launched as a backstop to the consensual LME process.
  
  
• Fossil Group established UK jurisdiction by incorporating a new English intermediate holding company, which acceded as a guarantor of the 2026 Notes. To further support UK jurisdiction, Fossil Group amended the governing law of the 2026 Notes from New York law to English law with majority noteholder support.
  
  
• Fossil Group deployed long-standing English restructuring techniques to permit full releases of all issuer and guarantor debt connected to the 2026 Notes, as well as additional non-consensual related-party releases.
  
  
• The LME initially achieved 75 percent support (increasing once the UKRP commenced), but not the 90 percent required. Accordingly, the UKRP was needed to sanction the transaction. Ultimately, 82 percent of total noteholder debt voted in favour of the UKRP.
  
  
• One feature of the Fossil Group case was the large number of retail investors in the 2026 Notes, which made satisfying chapter 11’s numerosity threshold highly uncertain. A UKRP does not require this test.
  
  
• US chapter 15 recognition was granted shortly after the completion of the UKRP, based in part on a recognition opinion from former US Bankruptcy Court Judge James M. Peck. Judge Peck characterized the use of a UKRP as an example of "good forum shopping" and as providing better outcomes for creditors as a whole than the otherwise likely chapter 11 alternative.

Good forum shopping

The increasing trend of US recognition for UKRPs is notable. Two recent examples include Mega NewCo (involving a shift in the center of main interests (COMI)) and now Fossil Group (incorporating a UK restructuring special purpose vehicle (SPV) and amending the governing law of the 2026 Notes). This follows a line of restructuring cases obtaining recognition under chapter 15 in connection with the UK Scheme of Arrangement.

While Fossil Group is not the first example of cross-border forum shopping, it does highlight the flexible approach of the judiciaries in both the UK and the US. Prior to its UKRP, Fossil Group had limited pre-existing UK connections. Its connection to the UK was manufactured to harness the benefits of the UKRP and backstop a narrowly targeted and streamlined LME process.

The case demonstrates that, while there are limits to cross‑border forum shopping, both the UK and US judiciaries continue to take a flexible, pragmatic approach. Investors and debtors should consider early the viability of:

• The UKRP as a restructuring tool to facilitate US company workouts and LMEs
• COMI shifts
• The creation of UK SPVs
• Governing law amendment

UKRPs as a tool for US LMEs

As LMEs increase across the US and Europe, sponsors, existing lenders, and opportunistic credit firms are seeking greater execution certainty. Using a UKRP to implement an LME solution has precedent – in 2024, DLA Piper advised a European debtor on one of the stand-out contested new money uptier LME transactions using a UKRP.

However, Fossil Group illustrates a less common trend: a US public company using a UKRP to address a single group of bondholders rather than overhaul its entire debt structure.

The UKRP, as a “backstop,” also has valuable implementation leverage: although Fossil Group pursued a consensual outcome under the 2026 Notes as its “Plan A,” the presence of a contemporaneous, executable “Plan B” in the form of a UKRP increased deal certainty. In future cases, the prospect of a backstopped UKRP may provide debtors with additional leverage to help drive higher levels of participation in a consensual process under a US-governed law indenture.

However, prepackaged chapter 11 plans remain a viable option in the right circumstances, and the establishment of a worldwide moratorium (which is not available in a UKRP) will likely remain attractive in highly contested cases.

Additional considerations

1. What about traditional Schemes of Arrangement? US debtors and investors may be more familiar with the UK's Scheme of Arrangement as an international restructuring tool, given its history of recognition under chapter 15 in the US. However, Fossil Group opted for the UKRP largely because it does not have a numerosity test, unlike a UK Scheme of Arrangement, and under US chapter 11.
   
   Like chapter 11 – but unlike Schemes of Arrangement – the UKRP allows cross-class cramdown, making it potentially preferred for single-class cases (such as Fossil Group) and reducing the likelihood that a UK court will divide the class composition analysis. Beyond Fossil Group and the US context, Schemes of Arrangement may still be preferred for European and offshore restructuring situations, as there are potentially more well-established recognition routes available in Europe when compared with the newer UKRP process after Brexit.
   
   
2. The Rule in Gibbs. Once debt has been amended to English law (as was done by the Fossil Group), the “Rule in Gibbs” generally provides that only English courts may compromise debts governed by English law. However, there are exceptions to this.

Learn more

For more information on LMEs, UKRPs, chapter 11, chapter 15, or any global workout process, please contact the authors.