Aggregate / Furst – Successfully disputing recognition of Restructuring Plan

Project Fürst purported to restructure its liabilities of over EUR 1 billion, for which the developer relocated to London in order to implement a “Restructuring Plan” under the English Part 26A regime. The Restructuring Plan provided that certain creditor claims (including KVH's claims) would be subordinated and maturity extended without KVH's consent. Project Fürst, KVH, and the underlying assets are all in Germany, and the underlying loan is German law and jurisdiction.

The German court held that the English Part 26A proceeding is not eligible for recognition in Germany, and ordered the developer to repay KVH's claims under the relevant loan. The ruling was issued under a special court procedure allowing only certain documents as evidence. The case will now proceed to a full hearing with other forms of evidence, and legal representatives for the developer have already declared they would appeal the judgement.

This ruling has nonetheless already been covered by leading media outlets such as Bloomberg and Handelsblatt and constitutes a landmark decision. It is the first court decision in Germany addressing the highly debated issue of post-Brexit recognition of UK Restructuring Plans (and by analogy, UK Schemes of Arrangement) in Germany, and specifically the ability to bind local creditors with local law claims on local assets into what is ultimately a foreign proceeding. Many such restructurings have been proposed (and implemented) in recent months and years relating to debtors with German law claims (or indeed with claims under other EU laws), necessarily on a footing that there were good prospects of recognition in all relevant jurisdictions. This initial decision from a German court casts doubt on that point, and will be a significant consideration for any party considering cross border restructuring. 

Hogan Lovells act for KVH.

Authored by Tom Astle, James Maltby, Dr. Julian Fischer, Dr. Olaf Gaertner, and Lennart Lautenschlager.