UK and European Restructuring Tools: Choosing the Optimal Forum for Creditor and Shareholder Cramdown

Posted in Restructuring

Debtors and investors have an enhanced choice of restructuring venues as the EU Restructuring Directive is rolled out in Member States

A number of key European jurisdictions have now implemented the EU Preventive Restructuring Directive, the broad thrust of which is to introduce harmonised out-of-court restructuring procedures across Member States to address financial difficulties at an early stage of distress. These measures include the introduction of cross-class cramdown (including of shareholders) and a moratorium to provide a debtor with breathing space to propose a restructuring. Germany (StaRUG) and the Netherlands (WHOA) were first movers, with each procedure coming into force in early 2021. The French revised conciliation and accelerated safeguard process became law in October 2021. Italy and Spain are expected to implement and/or consolidate their equivalent procedures to meet the extended deadline of July 2022, but other Member States may need further extensions. Although no longer bound to do so, the UK enacted its own cross-class cramdown and standalone moratorium tools in 2020. Therefore, there are now genuine choices for debtors, and a healthy competition is emerging between the different regimes. Continue Reading

Restructuring With Regulators: Where Law and Policy Collide

Posted in Restructuring

Balancing the urgency of delivering a restructuring with regulatory requirements in a regulated sector.

Restructuring a company in a regulated sector is always challenging. Navigating directors’ duties is difficult enough in an unregulated sector, but the additional layer of oversight and statutory compliance required in regulated sectors often places directors proposing a restructuring in the invidious position of balancing the interests of the company’s creditors with their wider regulatory duties. Continue Reading

Schemes and Restructuring Plans: Where Are We Now?

Posted in Restructuring

The forecast for the English scheme and plan looks set fair despite concerns around Brexit turbulence.

The restructuring market’s appetite for Part 26 schemes of arrangement and Part 26A restructuring plans shows no signs of diminishing, with some debtors (Smile Telecoms and ED&F Man) even taking a second bite of the cherry. In this article, we explore recurring themes identified in the market throughout the past 18 months. Continue Reading

Report Identifies Weaknesses in UK Companies’ Modern Slavery Act Statements

Posted in ESG

A recent report concluded that modern slavery considerations are still not a mainstream concern for many companies.

By Clare Nida

In April 2022, the Financial Reporting Council, the Independent Anti-Slavery Commissioner, and Lancaster University published a report on Modern Slavery Reporting Practices in the UK (FRC Report), which concluded that reporting on modern slavery in both modern slavery statements and annual reports lacks the information needed for shareholders and wider stakeholders to make informed decisions as to the adequacy of companies’ anti-modern slavery practices. Continue Reading

PE Goes to Hollywood

Posted in M&A and Private Equity

The film, television, and digital content production industries are ripe for PE investment, thanks to shifting revenue structures and European quotas.

By Tom D. Evans, Farah O’Brien, Libby Savill, David J. Walker, Rachael Astin, Jon Fox, and Catherine Campbell

Camera lensThe extraordinary growth of entertainment streaming platforms over the last decade has made investments in the film, television, and digital content production industries more attractive than ever. Large-cap buyout firms have competed with strategic acquirers to invest heavily across the sector, with Amazon’s US$8.45 billion acquisition of MGM underscoring the level of interest. Unlike many industries that were adversely affected by COVID-19, the film, television, and digital content production industries have grown. This growth is driven not only by the “streaming wars”, with more and more platforms vying for eyeballs and subscriptions, but also by a now truly-global sector, leveraging online platforms to reach a worldwide audience. Continue Reading

Rising Regulation of Fintech Innovation — Implications for PE Investments

Posted in M&A and Private Equity

Assertive regulators are bringing greater clarity and new challenges as they step up oversight of fintech innovation.

By Stuart Davis, Tom D. Evans, Nicola Higgs, Christian F. McDermott, David J. Walker, Brett Carr, Catherine Campbell, and Charlotte Collins

As the fast-growing fintech industry thrives, the sector has begun to attract greater regulatory scrutiny. We expect new legal and regulatory focus and oversight of those players operating on the unregulated perimeter of financial services.

While the level of supervision is set to increase and pose challenges for industry participants, a more robust regulatory environment could play into the hands of PE buyers and create opportunities for portfolio companies best able to navigate this rising regulation. In our view, PE firms must pay heed to the tone of more assertive regulators, but that approach coupled with new regulation will create a space in which firms in nascent fintech verticals can legitimately pursue their aims with greater certainty, no longer looking over their shoulders.

While the UK government is keen to stress that the new regulation will be applied proportionately, proposals are likely to result in the redirection of resources and attention of firms, and buyout firms should remain alert to changes that may impact a range of fintech investments. Continue Reading

Pension Consolidator Vehicles — A New Solution for PE

Posted in M&A and Private Equity

Pension consolidators are emerging as an effective solution to manage defined benefit pension plan risk.

By Tom D. Evans, Victoria Sander, David J. Walker, Shaun M. Thompson, Paul R. Lawrence, and Catherine Campbell

As inflation soars and market uncertainty creates additional volatility for UK defined benefit pension (DB) plans, PE firms now have a new option at their disposal to manage portfolio company pension risk — to transfer a portfolio company’s DB plan to an external consolidation vehicle.

A novel solution?

The first pension consolidator has emerged in the UK market, offering PE owners the option to transfer portfolio company DB liabilities. In December 2021, the UK Pensions Regulator cleared Clara-Pensions as the first pension consolidator, or “superfund” (for the purposes of companies transferring responsibility for DB funding obligations to a third party consolidator) paving the way for the fund to absorb UK DB assets and liabilities. We expect other superfunds to follow, widening the options for managing DB liabilities for PE owners.

This method of managing pension risk is especially welcome following the introduction of the Pension Schemes Act 2021, which was a game-changer for companies that sponsor a DB pension plan, and any shareholder of such a business. The new regime grants enhanced “moral hazard” powers to the Regulator and provides for criminal liability (punishable by up to seven years’ imprisonment and/or an unlimited fine) for acts or omissions deemed detrimental to a DB plan in circumstances where appropriate mitigation has not been provided. Shareholders of a portfolio company that sponsors a DB plan thus face greater theoretical risk from the Regulator’s powers. Continue Reading

The Reproductive Sector — Fertile Ground for PE Deals

Posted in M&A and Private Equity

The fertility sector is likely to present growing opportunities for PE as an emerging, multifaceted industry.

By Heather B. Deixler, Tom D. Evans, Elizabeth M. Richards, Linzi Thomas, Eveline Van Keymeulen, David J. Walker, Betty C. Pang, Stuart McRobbie, and Catherine Campbell

The global fertility sector, which has grown significantly in recent years as demand continues to soar, is expected to be valued at more than US$30 billion by 2023, up from approximately US$16 billion in 2016. While the global market is growing, fragmented European fertility regulatory regimes and complex US regulations necessitate specialised legal counsel to successfully deliver deals. Recent transactions highlight the breadth and international reach of the investment opportunities that exist, from clinic-focused businesses to those that specialise in medical device development. Continue Reading

FCA Finalises Rules to Improve Transparency Around Diversity of Boards and Executive Management

Posted in ESG, Finance and Capital Markets

The new rules provide issuers with flexibility to report on representation of women by reference to either gender identity or sex.

By Chris Horton, James Inness, Anna Ngo, Nicola Higgs, David Berman, Rob Moulton, and Johannes Poon

On 20 April 2022, the FCA published its final policy decision on the proposals set out in CP 21/24 “Diversity and inclusion on company boards and executive committees”.

New diversity reporting requirements

The updated Listing Rules require in-scope issuers (broadly, premium or standard listed companies, excluding OEICs and “shell companies”) to incorporate into their annual reports certain disclosures on the diversity of their boards and executive management, including:

  • A “comply or explain” statement setting out whether they have met the following diversity targets:
    • At least 40% of the board are women
    • At least one of the senior board positions is held by a woman (Chair, CEO, Senior Independent Director, or CFO)
    • At least one member of the board is from a minority ethnic background (defined by reference to categories recommended by the Office for National Statistics (ONS), excluding those the ONS lists as coming from a White ethnic background)
  • Numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions, and executive management in a standardised table (with issuers able to add to the fields “men” and “women” to include “non-binary” or other gender identities)

Continue Reading

The Economic Crime (Transparency and Enforcement) Act 2022 Receives Royal Assent

Posted in Dispute Resolution

New legislation introduces further sanctions powers and aims to tackle financial crime by revealing identities of overseas beneficial owners of UK property.

By Stuart Alford QC, Robert Price, Thomas Lane, and Harriet Slater

Following the UK government’s successive sanctions packages, which are the subject of recent Latham & Watkins Client Alerts,[1] the response to Russia’s invasion of Ukraine has been extended to cover wider financial crime measures.

The Economic Crime (Transparency and Enforcement) Act 2022 (Act) received royal assent on 15 March 2022, introducing a new register of overseas entities (Register) holding UK property assets, alongside changes to the unexplained wealth order (UWO) and sanctions regimes. Reforms to the role of Companies House are expected to follow in subsequent legislation. Continue Reading