An early success

Author: | Published: 31 Aug 2010

Elizabeth Fournier Staff writer

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...