U.K. Court Boosts Global Restructuring Role With Codere Ruling

  • Judge approves plans to reorganize 1.2 billion euros of bonds
  • Case posed jurisdiction questions because of limited U.K. ties

A U.K. court approved a debt restructuring at Spanish-based Codere SA, cementing London’s role as a legal hub for troubled companies worldwide.

Judge Guy Newey ruled that the case fell within the court’s jurisdiction. A preliminary ruling questioned whether Codere could restructure 1.2 billion euros ($1.3 billion) of bonds issued under New York law in the British capital, as the gaming company historically had no U.K. operations.

The ruling supports a decade-long trend of judges relaxing rules on whether companies with few links to the U.K. can restructure in London. More than 30 overseas businesses, based in countries including Vietnam and Ukraine, have used U.K. courts for debt reorganizations since 2009, drawn by the stability of London courts and the ability to more easily amend loans and bonds without filing for bankruptcy.

Codere added connections to the U.K. by incorporating a holding company in the country last year. Still, its bonds aren’t governed by local law and its main economic interests remain overseas. The Madrid-based company ran into trouble because of losses in Latin America.

The case “is at the edge of what an English court can do,” Judge Christopher Nugee said in the Oct. 29 preliminary ruling. If Codere can get a ruling in the U.K., “you could do it with any company anywhere in the world,” he said.

Governing Laws

In previous cases involving overseas companies, such as Apcoa Parking AG and DTEK Finance Plc, creditors voted to change the governing law to English before applying for a U.K. restructuring procedure, known as a scheme of arrangement.

The ruling means Codere will be able to reduce its debt and transfer control to creditors including Silver Point Capital LP and M&G Investment Management Ltd. The plan, which followed two years’ of negotiations, won unanimous support from bondholders at a meeting on Dec. 14.

Following the completion of the scheme of arrangement, Codere will reduce its debt to the dollar equivalent of 675 million euros of new bonds maturing in 2021. Part of the interest will be paid with more debt. The company will also have 200 million euros of dollar-denominated senior private notes.

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