Raising the bar: Virgin Active restructuring plans sanctioned in landmark decision

Key Points

On the "relevant alternative":

• The Court is not required to satisfy itself that a particular alternative would definitely occur nor is the Court required to conclude that it is more likely than not that a particular alternative outcome would occur – the critical words in the section are what is “most likely” to occur.
• There is no absolute obligation to conduct a market testing process.
• The strength of the evidence is key.  To challenge the “no worse off” test, creditors should consider adducing their own valuation evidence.

On Court discretion: 

• Where conditions A and B are met, the Court still needs to consider all relevant factors and circumstances that it would ordinarily take into account.  The Court cautioned against reading too much into the “fair wind behind it” comment from DeepOcean.
• The Court’s assessment should be confined to the plan that is before the Court, and not consideration of whether some other or better plan might have been possible had it been done differently. 
• Votes of “out of the money” dissenting creditors will carry little or no weight at all in the sanction process.
• It is for the “in the money” creditors to determine how to divide up any value or potential future benefits following the restructuring (i.e. the restructuring surplus).  However, where compromised dissenting classes of creditors are in the money then the treatment as between such classes would need to be looked at much more closely.   

Read the full article here. 

Authored by Tom Astle, James Maltby and Isabel Langlois