The Court of Appeal has, today, overturned the High Court’s decision to sanction the Part 26A restructuring plan put forward by the Adler Group (the “Plan”).

Following the Plan’s sanction by Judge Leech in the High Court in April 2023, dissenting creditors lodged an appeal, which was heard before the Court of Appeal in late October last year.

The judgment in the Adler appeal has been much anticipated, as it is the first time that the Court of Appeal has been asked to rule on matters relating to a Part 26A restructuring plan, and it sets precedent that judges in the High Court will be bound to follow.

The detailed Court of Appeal judgment, given by Lord Justice Snowden, gives restructuring professionals lots to think about when moving forward with restructuring plans, particularly around valuations and the relevance and application of horizontal comparators when facing a potential cross-class cramdown. The judgment signals a move away from the case law that applies to schemes when a company is seeking to cramdown its plan on a dissenting class, giving plenty of food for thought for future plan structures. There will be lots to digest in the coming days.

Taking a step back, the story played out in the context of the Plan continues a trend seen more widely across Part 26A restructuring plans and Part 26 schemes of arrangement as creditors appear to be getting more organised and more willing to challenge companies’ proposals.

Today’s judgment will have done nothing to deter disgruntled creditors from mounting a challenge and those considering entering into a Part 26A plan must do so in full knowledge and contemplation of the possible impact of such a challenge. It remains to be seen exactly how this might affect the continuing roll-out of Part 26A plans more generally.

In keeping with Lord Justice Snowden’s reminder in the decision to allow Judges adequate time for the consideration of complex cases, we will be providing further thoughts on the key takeaways from the decision in due course.