Challenges remain around the successful implementation of Restructuring Plans and CVAs

News that Hurricane Energy’s restructuring plan has been refused sanction and the temporary suspension of NCP’s restructuring plan highlights some of the ongoing challenges businesses will face when looking to address the financial impact of Covid. With CVAs and the Restructuring Plan both now available to alleviate demands on a businesses finances we are likely to see increasing activity in this space. But, there are certain criteria emerging that can determine the success or failure of either instrument.

RPs are a powerful tool if structured properly and meet the fairness criteria. As with CVAs, crude application with little focus on underlying business transformation and a longer term return to prosperity, will struggle to gain the support needed. And, stakeholder management remains a critical component of both.

Transparent and regular communication with stakeholders is vital, as is an equitable treatment of any long term upside generated through the Plan. We expect to see this become a recurring theme as we see more restructurings take place as Government support packages dissipate. An inability to make this case to creditors and using the instrument to avoid short term liabilities is likely to see plans fail.

Having a credible relevant alternative that ensures that creditors are ‘no worse off’ should a Restructuring Plan be implemented is crucial – especially in situations where a cross class cram down is being sought.

Getting the right advice, using the right instrument and engaging with key stakeholders will be high on the Board and C-Suite agenda as we emerge from the pandemic and a new wave of restructurings appear.