Contents

• EDITOR’S RAMBLE 🗣

• FEATURED REPORT 📰

• IN OTHER NEWS 🗞

• OPEN TABS 🌐

EDITOR’S RAMBLE 🗣

Applications are opening. Some are already live:

• Slaughter and May's training contract is open now (and it’s rolling)

• A&O Shearman's winter scheme closes on 7 September

• Ashurst's winter scheme on 11 September

• Simpson Thacher's on 13 September

• Macfarlanes' winter scheme shuts tomorrow – if you’re interested, go and do it before you read the rest of this email

But 1 September (next Tuesday) is when most applications open – which gives you five days.

You're reading a commercial awareness newsletter on the last Thursday in August. That’s a good sign that you’re in a strong position when it comes to this round of applications. But it won’t be enough on its own.

If your target firms have open applications, then start working on those. If they’re not open yet, this guide helps you prepare for applications before the window opens.

Term starts again in a few weeks and you'll have far more distractions then than you do now. Future you will be grateful you got some focused writing done first.

– Idin

FEATURED REPORT 📰

🇺🇸 How US companies cut their debts in English courts

What’s going on here?

In June, the New York-based energy company New Fortress Energy asked the High Court of England and Wales (not one in America) to approve a restructuring plan for $9.6 billion of its debt. The court said yes.

What is an American company doing in an English court?

New Fortress Energy isn’t the first American company to come to an English court with a restructuring plan. Over the past three years, a small (but growing) group of US businesses has done the same.

An engineering group, a watch designer and an energy company have little in common, but all three did what lawyers call “forum shopping”.

So what does London offer that America can’t?

A struggling company's first move is normally to negotiate privately – for example asking lenders for more time or if they’d accept less money. That keeps the courts out and the directors in control. That route could work when there's just one lender to talk to. It's much harder when the same debt is owed to hundreds of investors at once, as New Fortress Energy's $9.6 billion was (since it borrowed by selling bonds to lots of investors, rather than from one bank).

Any one of them can refuse, keep their full right to be paid, and let everyone else take the hit instead. So, if one refuses, the company needs a formal process. Most of those take the business away from its directors:

1. an administrator steps in to rescue or sell it (we covered this in the Harvey Nichols article last week), or

2. a liquidator sells everything and closes it down.

But sometimes the business is worth saving and the directors want to stay in control. They just need to reorganise debts the company can’t afford anymore. Both countries offer a court process for that.

🇺🇸 America offers Chapter 11. Chapter 11 is a broad bankruptcy process covering the whole company. It can be tailored to restructure debts, but also offers wider powers such as pausing creditor action and ending unwanted contracts.

🇬🇧 England and Wales offers a restructuring plan. It is narrower: a plan under Part 26A of the Companies Act 2006 lets the company change selected debts without the cost and disruption of putting the whole business through a full insolvency process.

Both processes require a proposal and court approval. The important difference is how each system handles a cram down.

Both the US system and the English system set a minimum – creditors who voted “no” can't be forced to accept less than they would have got if the plan failed. The two systems calculate that minimum differently. But Chapter 11 adds a restriction the English system does not: the absolute priority rule.

What’s the absolute priority rule?

The US route – Chapter 11 – does not let a company decide freely who gets what when a group of creditors votes “no”. It uses a fixed order of who gets paid, called the absolute priority rule. If that group has not agreed to the plan and is not being paid in full, the company’s existing shareholders (the people who own it) normally cannot keep any part of the business. Creditors stand ahead of the shareholders in the queue.

Part 26A (used in English courts) has no rule like this. The court here still checks that dissenting creditors (those who voted against the plan) are no worse off than if the plan failed, and that the outcome is fair. But it can sometimes let the existing shareholders keep part of the company even though creditors haven’t been repaid in full.

Imagine a cinema chain owes £100 million to bondholders – investors who have lent it money – and £30 million to a bank, secured on its cinemas. If the cinemas close and everything is sold, the bank is repaid in full, the bondholders get £20 million and the shareholders get nothing.

The company instead proposes a restructuring that keeps the cinemas open, extends the bank’s loan, gives the bondholders £40 million and lets the shareholders keep 20% of the business.

Under either system, the bondholders do better from the restructuring than from closing the company. The bank votes “yes”. But what if the bondholders vote “no”?

🇺🇸 Under Chapter 11: The bondholders voted “no” and are still owed £60 million. The absolute priority rule would therefore normally stop the shareholders keeping 20% of the business. That 20% would go to the bondholders instead.

🇬🇧 Under an English restructuring plan: The shareholders would not automatically be blocked from keeping 20%, because English law has no absolute priority rule.

Two things would still have to be true:

1. The bondholders must be no worse off than the £20 million they would get if the cinemas closed, and

2. At least one class that would get something in that outcome – here, the bank – must have voted “yes”.

Even then, the company would have to persuade the High Court that letting the shareholders keep 20% was fair.

The English court therefore has more freedom over who gets what when a company is saved. That helps explain why US companies whose shareholders want to keep a stake are turning to London.

How does a US company do this in practice?

It’s not straightforward. A US company must persuade an English court to hear its case, then persuade an American court to honour that result.

🇬🇧 Create a connection with England. The High Court will only hear the case if the company or its debt has a real legal link to England. Fossil created a subsidiary in Milton Keynes, made it responsible for $150 million the group had borrowed from investors, and changed the debt's governing law – its chosen legal rulebook – from New York to English law. Those steps gave the High Court the connection it needed.

🇺🇸 Make the plan work in America. An English order does not automatically bind creditors in the US. The company must ask a US bankruptcy judge to recognise and enforce it under Chapter 15, America’s process for deciding whether a foreign restructuring has legal effect there. In New Fortress Energy’s case, the judge checked whether the English route had left any class of creditors worse off. One group of bondholders would recover around 26 cents for every dollar owed, against 13 cents if the plan failed and the business was sold off. On that basis the judge allowed the plan to take effect in America.

A market is forming around this two-step process. Two academics writing in the Duke Law Journal call the growing overlap between legal systems the “global law of debt”. But the trend is still in its early days.

No American court has yet been asked to enforce an English cram down against a creditor that's still fighting it.

Every class approved the Fossil and New Fortress Energy plans, so no cram down was needed. McDermott's was crammed down over two objecting classes in 2024 – but the creditor that fought it settled before an American court had to rule.

Which law firms were involved?

Kirkland & Ellis advised McDermott International, while Davis Polk advised a group of investors who held both its debt and its shares.

Fossil Group’s plan was run by Weil, Gotshal & Manges, with Ropes & Gray advising the investors who supported it.

Skadden advised New Fortress Energy, while Paul, Weiss and Paul Hastings each advised a group of its bondholders.

How can you use this in your applications?

Two ways to use this in your law firm applications.

IN OTHER NEWS 🗞

• 🥤 The Competition and Markets Authority (the UK’s competition regulator) has cleared Danone's roughly £860 million takeover of Huel. Danone (the French group behind Activia and Evian) agreed to buy the meal replacement shake brand in March, and the regulator opened a formal inquiry in July. It was cleared unconditionally, so Danone doesn't have to sell off or change anything to keep the deal. Freshfields advised Danone, with Pinsent Masons acting for Huel.

• ⛓️ Standard Chartered has sold $200 million of bonds that exist only on a blockchain. The three-year notes were created and recorded straight on Euroclear's digital platform (the system that tracks who owns which bonds). That cuts out the usual paperwork, and they now trade on the London Stock Exchange. It's the first such deal by a UK issuer. Clifford Chance advised Standard Chartered as issuer, and Linklaters advised it as sole lead manager, and Citi as trustee.

• 🎟️ Trainline, Virgin Atlantic and RED Driving School are all being investigated over hidden fees. The Competition and Markets Authority says compulsory charges were kept out of the headline price and added later – a tactic called drip pricing. No findings have been made yet. Trainline's fees ran from 59p to £2.79, and Virgin Atlantic's resort fees and holiday taxes can add hundreds of pounds. It's the regulator's first consumer case using powers to find a breach without going to court.

OPEN TABS 🌐

• 📰 Bias check: See how the left, right and centre news outlets covered the same story – here’s a “bias breakdown” of the UK and Ukraine signing an AI defence partnership

• 🧱 Tower: Every live Wikipedia edit means a new brick is added to this endlessly growing skyscraper (it’s hypnotic to watch)

• 🛏️ Nostalgia: London's new museum of youth culture has a recreated teenage bedroom, a wall of old iPods and Walkmans, and everyone from mods to K-pop fans (and it's free)