The decision of the London Court of Appeal to overturn the debt restructuring of real estate company Adler Group is causing a stir among restructuring lawyers and specialists for several reasons. Firstly, it is highly unusual for a case to go to appeal. "This hasn't happened for decades," says Katharina Crinson, Counsel at the international law firm Freshfields Bruckhaus Deringer. Secondly, the court has set some remarkable guidelines. These requirements for future restructuring plans are now being analyzed and commented upon. Freshfields and Kirkland & Ellis have promptly published detailed analyses on this matter.

What particularly intrigues legal experts is that the 65-page ruling initially has no immediate consequences. This is because the changes to the bond conditions, based on the now overturned Adler restructuring plan, remain in effect. "This is peculiar," states Crinson, an expert in British law, talking to Börsen-Zeitung.

"The changes are recorded with Clearstream. Therefore, they are effective," clarifies Freshfields Partner Lars Westpfahl. "The Court of Appeal's decision does not change that," he asserts. There is consensus on this point. However, the question remains whether the changes are secure. The appeal ruling itself does not address the consequences. The Freshfields blog states that the decision poses "some difficult questions regarding the restructuring" for Adler.

The High Court in London, the first instance, approved the multibillion-dollar debt restructuring in April 2023, clearing the way by rejecting opposition from a group led by the US investment firm Strategic Value Partners, which includes fund company DWS. The opposition group holds bonds with the longest maturity and is concerned that Adler will have no assets left when its claims become due in 2029, while bondholders with shorter maturities will be repaid. This staggered timing of claims was dismissed by the Court of Appeal, stating that the financial restructuring deviates unjustifiably from the principle of fair distribution of assets to all bondholders.

"The opposition group may have won, but they can't gain anything from it", summarizes Crinson. Now, there are essentially two legal options: The appellants can turn to the English first instance to clarify what the appeal ruling actually means, or they can go to a court in Germany to assert their interests. The Freshfields lawyers are reserved about which path is more promising. "These are complex issues that have never arisen like this before," says Westpfahl. This is now the subject of lively discussion in the industry.

The statement from the opposition group, which is represented by the law firms Akin and Gleiss Lutz, sounds ambiguous: "We look forward to working with the company and other stakeholders in light of this judgment." Westpfahl believes: "It is to be expected that the parties will talk to each other because the opposition group is likely more interested in financial interests than being right." However, Adler categorically rejects compensation payments: "We have done nothing wrong." The opposing side did not request a suspensory effect. Therefore, the change in bond conditions was implemented.

Nevertheless, many commentators think that the restructuring will likely need to be renegotiated anyway, as the underlying realization plan was too optimistic. The real estate market has declined further since the initial decision. This means that the targeted sales proceeds may not be achieved.

In this sense, there is much to suggest that a second debt restructuring may be necessary in the foreseeable future. Currently, it is not apparent how Adler can handle the mountain of maturing liabilities in the coming years. Then, the cards would be reshuffled – the opponents would be back in the game. In 2025 alone, 2.2 billion euros is due, followed by 1.9 billion euros in 2026.

With the restructuring, due dates and interest payments were extended until mid-2025, and new loans of nearly 940 million euros were provided, also expiring in a year and a half. The conditions of bonds totaling 3.2 billion euros, distributed over six series and maturing between 2024 and 2029, were modified. Adler's expectation that the English court route provides greater transactional and legal certainty for restructuring has only been partially confirmed. One thing is clear: A comparable case in England is likely to fail in the future under current circumstances.

The guidelines of the Court of Appeal for future restructuring plans primarily concern the timeline. Companies are urged to submit the plan in good time to allow for a comprehensive process and a reasoned decision. English courts have progressively expanded their jurisdiction for non-British restructuring cases, explains Westpfahl. Nonetheless, Germany now also has the StaRUG, a legal framework for pre-insolvency restructurings, and other European countries have similar laws. StaRUG is emerging from its infancy. "Cases that would have previously gone to England will increasingly remain in Germany," expects Westpfahl.