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Cross Border Insolvency Update - March 2021

The new UK, Dutch and German restructuring tools compared – How competitve will the UK be post-Brexit?

Reforms to the restructuring landscape in England have been on the government's radar for some time, at least from 2016, though became urgent due to the COVID-19 pandemic. As a result, a new tool referred to as a Restructuring Plan was introduced by the Corporate Insolvency & Governance Act 2020 (CIGA) which came into force on 26 June 2020.

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Re DeepOcean 1 UK Ltd [2021] EWHC 138 (Ch)

This case concerned the first consideration of the use of cross class cram down by the court. The case involved three subsidiary companies within the DeepOcean group that had each proposed a similar restructuring plan with their creditors. Two of the companies (DeepOcean1UK Limited and Enshore Subsea Limited) had sufficient approval for the restructuring plans, however, the third company (DeepOcean Subsea Cables Limited “DSC”) only had 64.6% of unsecured creditors voting in favour of the plan which was not sufficient to meet the statutory majority of 75% required. The three restructuring plans were inter conditional and therefore all three plans needed approval.

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Short stories

Virgin Active in restructuring plan talks with creditors

Virgin Active is discussing a £70 million Restructuring Plan of its British clubs with creditors as it seeks to avoid falling into administration. Contingency plans have been drawn up to appoint administrators in June if an agreement is not reached with its lenders, landlords and other creditors.

In the event the Plan is approved by at least one class, Landlords could face being “crammed down”, and forced to accept the terms even if they vote against the Plan if the court agrees it is just and equitable. The Plan would only apply to Virgin Active's UK operations, which is approximately 40 clubs. The group now has 236 clubs in eight countries, including Australia, Botswana, Italy and South Africa.

Heineken to cut 8,000 jobs in restructure as a result of the pandemic

Heineken have announced that they plan to cut nearly 10% of their staff, after a year of difficult trading and pubs closed which has caused a net loss in 2020 of €109m (£96m) compared to €1.15bn profit in 2019.

Brazil and Mexico, two of Heineken's largest markets, are still struggling to deal with the pandemic. Heineken are expecting a gradual improvement as bars and restaurants reopen in Europe following the vaccination rollout.

Low cost airline Norwegian Air proposes scheme of arrangement in Ireland and Norway

Norwegian Air (by its Examiner Kieran Wallace of KPMG Ireland) and four Irish subsidiaries of the group have proposed schemes of arrangement for their financial restructuring which, in the case of Norwegian Air, will be implemented through the Norwegian reconstruction processes. The companies sought protection from the Irish High Court in November; in Norwegian Air’s case as its 140 aircraft are leased through subsidiaries registered in Ireland.

Proposals for the schemes of arrangement have been sent to creditors and shareholders, and can be found here. In the event the schemes are approved by the Irish and Norwegian courts, Norwegian Air will move forward with the capital raise set out in the proposals, with a target completion date of May 2021.

Unsecured creditors who will not participate in the planned capital raise will be entitled to a dividend totalling 5% of their claim from a NOK 500 million (c.£42.4 million) “pool”. Their dividend claims may be converted to shares, in total representing approximately 25% of the company’s share capital following the restructuring. New investors in the capital raise will receive approximately 70% of the post-restructuring share capital, and current shareholders approximately 5%.

Proposals have been put forward to reduce the fleet of 140 aircraft to approximately 50 . Aircraft have already been flown in from Scandinavian bases to Shannon Airport in preparation for their return to the aircraft lessors that supply them.

Norwegian Air has debts in excess of €4 billion. The Norwegian government has announced an additional 1.5 billion kroner (£127 million) loan as long as they are able to raise at least 4.5 billion kroner (£382 million) from other investors.

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