Amicus Finance: Key takeaways from the Sanction Judgment
The full written judgment of Sir Alastair Norris in respect of the sanction of the Part 26A restructuring plan for Amicus Finance PLC (in administration) was belatedly handed down last week. As we reported in August (linked here), Amicus is the first company in administration to implement a Part 26A restructuring plan, which was fiercely contested by one of the creditors of the Group, Crowdstacker.
Norris’s judgment sets out in detail his reasoning for sanctioning the plan. The majority of the commentary focuses on the specific challenges raised by Crowdstacker, and is relatively fact specific.
In our view, the key takeaways for parties planning a restructuring plan both relate to the first condition for the exercise of cross-class cram down, being the 'no worse off' test.
- For the court to be 'satisfied' that a creditor is no worse off (so that, subject to satisfaction of the second threshold condition, cross-class cram down is available), Norris confirmed that the word ‘satisfied’ is to be interpreted as ‘satisfied on the balance of probabilities’. It was for the administrators to satisfy Norris, in the face of all challenges by Crowdstacker, that on the balance of probabilities, Crowdstacker would not be any worse off under the scheme than it would be in the event of an immediate liquidation.
- Antecedent transactions or so-called 'clawback claims' should be considered as part of the 'no worse off' test when asking the court to exercise its jurisdiction to override the views of a dissenting class. However, a judge cannot “(within a scheme sanction hearing) conduct a mini-trial of ‘clawback’ claims without disclosure or evidence". Norris was of the view that a sanction hearing was "not the occasion to examine the prospects of" any clawback claim in detail, but that did not mean that the substance of the claims could not be examined in alternative proceedings.
The first point is clearly of broad application, and in relation to the second, it will be interesting to see whether the same rationale applied by Norris to clawback claims will be applied to other types of claims (including commercial claims). We anticipate that this is an area that could see further jurisprudence in the future. In the meantime, we expect to see the restructuring plan gain more traction in the mid-market as businesses seek to right-size their balance sheets with the further withdrawal of government support.
Watch this space for future thought leadership from the DLA Piper Restructuring team.