Cross-border insolvency — one record or two?
Chapter 11 and a parallel UK scheme of arrangement are two proceedings, two courts, and two judges. The side that runs them as one record almost always wins.
The structural problem — A multinational issuer in distress files Chapter 11 in the United States and a Part 26A scheme of arrangement (or a Restructuring Plan) in the United Kingdom. Two proceedings. Two courts. Two judges. Chapter 11 cramdown requires two-thirds in amount and one-half in number within an impaired class; Part 26A requires 75% in value within each class but allows cross-class cramdown if the dissenting class is no worse off than in the relevant alternative. Different priority rules. Different fairness tests. The temptation, for understandable reasons, is to run two separate cases on two separate clocks.
Why that loses — When the proceedings are run separately, the debtor gets the entire toolkit of forum-shopping leverage. Different financial witnesses say slightly different things across hearings 6,000 kilometres apart. Different exhibits are produced in slightly different forms. Counsel for the senior creditor group ends up arguing slightly different valuation theories — a $40 million swing in the enterprise value range becomes an $80 million swing between the two records. By sanction, the records have diverged enough that one court can fairly question whether the case in front of it is internally coherent, and the debtor's counsel will make sure the court notices.
The one-record discipline — On the matters that go well, the senior group decides early — usually within the first 30 days of the case — that the two courts will hear the same case. Same expert. Same exhibits. Same theory of distributable value. The Chapter 11 confirmation hearing and the UK sanction hearing are run on substantially overlapping records — not because the regimes are the same, but because the evidence is the same. On our last cross-border restructuring, the same financial expert testified in Manhattan on a Tuesday and in London on the following Monday, on the same valuation, using the same exhibits with only the captions changed.
What it costs — More partner coordination. A unified financial expert, even though that expert may not be optimal for either jurisdiction in isolation. Deliberate, slow alignment between US and UK counsel on every witness and every exhibit — typically two to three hours a day of cross-Atlantic coordination calls for the four months between RSA and sanction. The cost is real, and a leveraged team would push back on it. The payoff is that the debtor has no inter-forum wedge to drive, and the senior group recovers on a single, coherent valuation record that both courts have already accepted.
A note on regime-specific arguments — One-record discipline does not mean ignoring the differences between Chapter 11 and Part 26A. The valuation evidence is the same. The legal arguments built on top of it are jurisdiction-specific — best-interests-of-creditors in the US, no-worse-off in the UK, fair-and-equitable versus the relevant alternative. The work is to keep the evidentiary base unified and let the legal theories diverge cleanly on top of it. A judge in Manhattan and a judge in the Royal Courts can apply different standards to the same evidence without anyone losing credibility — but only if the evidence is genuinely the same.
The test — When sanction concludes, the question is: could the debtor have pointed to anything in the US record that contradicted the UK record? On the four matters we have run this way, the answer has been no — and three of the four closed with the senior class recovering par or par-plus consideration on positions originally marked at roughly 60 cents on the dollar.
