A court decision in the DX Services restructuring has set a
useful precedent for UK schemes of arrangement, determining
that reasonable early-bird fees do not affect creditor classes
and voting rights.
Early-bird fees are often offered to creditors once a
restructuring deal has been agreed with the company and
coordinating committee. To encourage prompt agreement and stop
lenders trying to force better terms, a percentage of the
facilities to be restructured are offered as an incentive.
If 100% of lenders agree and enter a lock-up agreement, then
a fully consensual restructuring can go ahead, saving time and
money for the struggling company.
The early-bird option is offered to all lenders, and paid to
those that agree to the restructuring terms by the deadline. In
DX Services, it amounted to 0.5% of the restructuring, with a
further 2% that would potentially be available dependent on
terms such as extending the facilities....