Restructuring Plans: Examining the evolution of the valuation debate

Three years in, how is the RP valuation debate evolving?

Since the inception of Restructuring Plans (RPs), it has been evident that valuation would play a crucial role. The Relevant Alternative, defined as: whatever the court considers would be most likely to occur in relation to the company if the compromise of arrangement were not sanctioned, should naturally require a compelling body of valuation evidence to support the notion that no party is worse off under the Plan, vis-à-vis the counterfactual.

The uncertainty around what is indeed most likely to occur in the absence of a proposed Plan, and what recovery of value that would result in, puts valuation front and centre of the judgement process.

Each proposed Plan has unique characteristics and adds new content to a growing body of case law, but as we pass the third anniversary of the Plan’s inception, what themes have recently developed and how has the valuation aspect evolved?

Taking the last six months as a snapshot

Six RP proposals have been heard by the court. Four have been sanctioned and two rejected. Of the four sanctioned cases, one had an extensive valuation dispute (warranting around 50 pages of commentary in the judgement), whilst for the other three the valuation analysis was accepted, without formal challenge, by both the opposing creditor classes and the judge.

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