The majority of all 2023 EMEA restructurings involving an equitisation and/or a maturity extension required the provision of new money. While equitisation can solve for an over-leveraged capital structure, and maturity extensions can provide runway for business recovery and turnaround, those steps alone are often insufficient without there also being a contemporaneous solution for liquidity. This has been the experience on many of our recent matters, and arguably is a symptom of the covenant-lite debt documents which dominate the market, and which often don't default until there is a liquidity crunch.
Significant restructurings will often require high levels of creditor consent under existing debt documents and across multiple instruments, and it will not always be possible to secure the support of sufficient majorities of creditors to implement the restructuring consensually. In this scenario, debtors and supporting creditors often need to turn to a statutory restructuring tool to facilitate implementation; in the UK, typically via either a scheme of arrangement (Scheme) or a restructuring plan (RP).
In this article, we look at some of the key considerations for stakeholders where new money is required in connection with a restructuring that is being implemented via a Scheme or RP, including the parameters for structuring the new money in terms of creditor participation, economics and other incentives. We also reflect on structuring considerations for situations where new money is required on an urgent or interim basis to bridge through to closing of the restructuring.
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