On 1 January 2021, the new Dutch legislation on out of court restructuring plans will enter into force.

The Dutch plan proceedings (also referred to as the Dutch Scheme) will enable distressed debtors to restructure their debts and equity and modify or terminate burdensome contracts without opening insolvency proceedings. Please click here for the full article by NautaDutilh summarising the new legislation.

A restructuring plan is binding on the debtor and all creditors and shareholders with voting rights if approved by the court in the event that 66.67 per cent in value of claims from creditors in an 'in the money' class have voted in favour of the plan. In that sense it aligns with the US Chapter 11, although the Dutch restructuring plan does not use a 'headcount' for voting, but it deviates from the UK Restructuring Plan which requires a majority of 75 per cent.

Under the Dutch Scheme, the absolute priority rule (which determines that the reorganization value of the debtor should be allocated per the applicable 'waterfall') is paramount, but with a difference. The restructuring plan may be confirmed even if the absolute priority rule is derogated from to the detriment of a rejecting class, provided there is a reasonable ground for the derogation and the interests of the relevant class of creditors or shareholders are not harmed.

By introducing a reasonableness test, the Dutch legislature opted for a different approach than the US and German legislation and abandoned the view that, in the event of a derogation from the statutory ranking, it is up to the impaired class of creditors to determine whether acceptance of the plan is nevertheless in its interest. It will, however, provide for more flexibility to implement restructurings than under a more rigid application of the absolute priority rule.

In many cases, the restructuring plan will be a partial one, especially when it comes to private plans. This means that some creditors (and shareholders) can be excluded from the plan. For example, a partial plan may be used to make arrangements for financial creditors, in which case trade creditors will be left out of its scope.


We appreciate the reproduction of the article by Robert van Galen and the assistance of David Viëtor and Marc Orval of NautaDutilh NV with the following discussion of Dutch law, regulation and practice.


The Dutch legal landscape is characterised by stability and the rule of law. The Dutch legal system is based on civil law. Under Dutch contract law, 'freedom of contract' and 'pacta sunt servanda' (agreements must be kept) are leading principles. Various Dutch Supreme Court decisions have made clear that, although a court must consider all relevant circumstances, courts must exercise great restraint in refusing to enforce otherwise binding rules on the basis of standards of reasonableness and fairness. Moreover, the Supreme Court has ruled that in dealings between professional parties, the courts must exercise even greater restraint. Accordingly, the exercise of a contractual right between professional parties will only be unacceptable in exceptional circumstances. Secured creditors traditionally have a very strong position under Dutch insolvency law, with the Netherlands considered to be among the most secured creditor-friendly jurisdictions in Europe.


  • Borrowers are required to be licensed if they accept funds from the public, therefore many loan agreements require a confirmation that the Lender is a “Professional Market Party”. This will generally be satisfied if the loan or transfer is for more than EUR 100,000. Generally no banking licence is required for lending to bona fide Dutch professional parties, unless the loan is to a consumer.
  • Security agents / trustees commonly used in the Netherlands. The security agent generally holds Dutch security interests on the basis of a 'parallel debt' structure.  No security is created in the name of individual lenders.
  • New Withholding Tax Act provisions may apply from 1 January 2021 at the rate of 21.7 per cent to payments of interest made to “related parties” in low income tax rate jurisdictions (less than 9 per cent) or in “non-cooperative states”. Generally, there is no withholding tax on payments of interest made to a unrelated party.


No banking licence is generally required for lending to bona fide Dutch professional parties. However, under the Dutch Financial Supervision Act, it is prohibited to conduct the business of a 'credit institution' without a licence from the Dutch Central Bank.

In addition, it is prohibited for entities other than licensed credit institutions to accept repayable funds from the public. Pursuant to these prohibitions, a borrower may require a licence as a credit institution if it borrows money from lenders that are deemed to form part of the public.

Although the key terms ‘credit institution’‘repayable funds’ and ‘public’ are European law (Capital Requirements Regulation) concepts, there is limited official European guidance as to their meaning. According to the explanatory memorandum to the legislation implementing the Capital Requirements Directive IV ("CRD IV") in the Netherlands, the Dutch law interpretation of these concepts will continue to be taken into account until such European-level guidance is available. This means, inter alia, that the pre-CRD IV Dutch law safe harbour regime allowing parties to accept repayable funds of at least EUR 100,000 (or its equivalent in another currency) will remain relevant until further European guidance has been provided. Consequently, providing the initial loan of any lender to a Dutch borrower is at least EUR 100,000 or the equivalent thereof, the Dutch borrower will fall within the old safe harbour, and the requirement that the borrower obtain a banking licence will not be triggered. Other safe harbours are also available under the old Dutch law interpretation, which likewise allow a borrower to avoid triggering the banking licence requirement. In this context, loan documentation sometimes provides that lenders can only be 'professional market parties' or contains a warning that an incoming lender should 'seek Dutch legal advice' on whether it is part of the public.


If the loan documentation is governed by Dutch law, a lender can transfer its position by way of a transfer of contract (contractsoverneming) or an assignment (cessie) combined with a debt assumption (schuldoverneming). The loan documentation typically provides which method or methods are available.

Transfer of contract:

  • all or a part of the lender's rights and obligations in connection with the loan documents (i.e., the complete or partial contractual position of the existing lender) will be transferred to the new lender; and
  • consent (medewerking) to the transfer from the borrower is required to effect the transfer. Usually such consent is already provided for in advance in the loan documentation.

Assignment combined with a debt assumption:

  • this method is rarely used to transfer loans;
  • lender assigns rights and claims (vorderingen op naam) to the new lender;
  • the borrower must in principle be notified (mededeling) of the assignment to effect the assignment. Usually such notification is already provided for in advance in the loan documentation; and
  • consent (medewerking) from the borrower is required to effect the debt assumption. Usually such consent is already provided for in advance in the loan documentation.

As long as the security agent remains in place and the 'parallel debts' (see below) are embedded in the loan documentation, the Dutch law security will not be discharged by a transfer of commitments or loans by individual lenders.


It is customary to use a ‘parallel debt’ structure (sometimes called a ‘covenant to pay’ structure) in financing transactions where security interests governed by Dutch law will be held by a security agent for the benefit of multiple lenders. Under such a structure, each obligor (borrowers and guarantors) undertakes to pay to the security agent in its individual capacity (i.e., acting in its own name and not as the lenders’ agent or representative) amounts equal to the amounts owed by that obligor to all lenders under the finance documents (a "parallel debt"). The Dutch security interests are created in the name of the security agent (and not in the name of all lenders) and secure payment of the parallel debts. Each lender only has a contractual claim against the security agent for payment of an amount to be determined under an intercreditor arrangement from the proceeds of the enforcement of the security interests. The main reason for this structure is that Dutch law does not provide for the concept of a trust. A foreign trust may be recognised in the Netherlands, but that does not circumvent the issue that Dutch security interests can only be created in favour of creditors whose claims the security interests are intended to secure.A parallel debt structure has two additional benefits. The first is that it facilitates loan transfers and the second is that, if properly drafted, security interests created in favour of the security agent on the basis of a parallel debt will also secure a facility increase by existing or future lenders, or both.


The Withholding Tax Act 2021 will, as from 1 January 2021, require any company to withhold amounts from payments to any ‘related’ parties in low tax rate jurisdictions, i.e. (i) jurisdictions with a statutory rate of less than 9 per cent and (ii) countries on the EU list of non-cooperative jurisdictions (set out here). In 2021 the Dutch withholding tax rate will be 21.7 per cent.

The definition of ‘related’ is not particularly clear but includes in any event the situation where a person or group of persons ‘acting together’ (on which point there is as yet little guidance) are able to vote on more than 50 per cent of the shares; it could also extend to situations where such persons/group have a decisive influence. Given the cumulative requirements of both ‘related’ parties and low tax rate jurisdictions it does not seem likely to apply to merely holding debt, however it should be taken into account in e.g. restructurings which features a debt-for-equity swap.


In light of the ongoing transition to alternative near risk-free reference rates (“RFR”) in each of the LIBOR currencies anticipated to be fully transitioned by the end of 2021, on 23 November the LMA published the below listed documents to assist market participants in documenting such transition mechanics under loan documentation:

Additionally, following the release of the Consultation Paper on impracticability of contractual recognition of bail-in (“CROB”) clauses under Article 55 BRRD on 24 July 2020 by the European Banking Authority (“EBA”), on 23 October 2020, LMA have provided its responses noting that they have produced a model clause to address compliance with Article 55 but also noting their concerns around the inclusion of the requisite wording in “documents which create liabilities that are not capable of being bailed-in or where a bail-in of the relevant liabilities would not improve a firm's loss absorbing capacity”.

The PRA have also passed a Consultation Paper on BRRD II in October 2020 setting out proposals with amendments to CROB, ahead of the requirement that the BRRD II Statutory Instrument (laid in parliament on 15 October 2020) is transposed into the UK law by 28 December 2020. The amendments to CROB include:

  • an exemption for cases in which it would be legally or otherwise impracticable for entities to include CROB clause within certain unsecured liabilities contracts; and
  • a new procedural requirement whereby any impracticability decision made should be notified to and validated by a resolution authority.



Brown Rudnick partners Richard Obank and Colin Ashford advised Clarks, the British-based international shoe retailer originally founded in 1825, on its company voluntary arrangement under Part I of the Insolvency Act 1986 (“CVA”), launched on 4 November. The CVA forms part of a package of rescue measures comprising an equity investment of GBP 100m by LionRock Capital Partners, L.P. (“LionRock Capital”), a seasoned Asian private equity firm with a successful track record of investing in a range of leading consumer companies, alongside a debt and pension restructuring. On completion of the investment, LionRock Capital will acquire a majority stake in Clarks, with the Clark family retaining a stake in the business. The CVA will provide Clarks with financial stability via an adjustment of rents across its UK and Republic of Ireland store portfolio whereby the majority of leases will switch to turnover rents for a period of 3 years and financially unsustainable stores will move to nil rents and/or will be exited and closed. The CVA was approved on 20 November at a virtual meeting with 92 per cent in value of creditors in person or by proxy voting in favour.

Brown Rudnick partners Philip Watkins and Tom Braiden are advising Clarks on the equity investment by LionRock Capital. The GBP 100m will enable Clarks to position the business for future long-term sustainable growth and enable its transformation programme to be fully implemented revitalising the brand as Clarks enters its third century in line with its “Made to Last” strategy announced in May 2020. The investment is subject to shareholder approval and shareholders will be asked to vote on the proposed transaction before Christmas. 

At a time when UK retailers are experiencing significant challenges on the high street exacerbated by the COVID-19 pandemic, the Clarks transaction provides refreshing refreshingly good news for employees, suppliers and customers of this iconic British brand.

Obank said “We are extremely pleased to have supported Clarks over the last 7 months culminating in a positive vote in favour of the CVA by creditors. The focus now is on completing the rescue and restructuring with the support of the equity investor and key stakeholders to ensure Clarks, one of the UK’s greatest retail brands, has a viable business going forward and preserving thousands of jobs in the run up to Christmas.”. Ashford added “having only joined Brown Rudnick in March this year we are delighted with the strength and depth that the London team was able to offer on what must surely be the retail rescue of 2020”.

Other members of the Brown Rudnick team included Tracy FisherVictoria RodleyMax BinneyTobias Plowman and Helena Clarke.


As earlier reported in our Issue 31 Trade Alert, the French car rental company, Europcar, similarly to many other companies, has been impacted by the Covid-19 crisis and commenced debt restructuring procedures (including for the appointment of Mandataire ad hoc) in October along with discussions with its main corporate debt creditors following the release of relatively successful Q3 results.

On 26 November 2020, Europcar announced that these discussions have led to an Agreement in Principle (the “Agreement”) supported by the company and various other parties representing different groups of noteholders (amongst which are: Anchorage Capital Group, L.L.C, Attestor Limited, Diameter Capital Partners LP, King Street Capital Management, L.P. and Marathon Asset Management, L.P.). To commit to supporting, implementing and consummating the Agreement, on 25 November 2020 these parties entered into a lock-up agreement.  The Agreement considers the following restructuring proposals:

  1. EUR 1,100mreduction of Group’s corporate indebtedness through the conversion of its 2024 Senior Notes, 2026 Senior Notes and Credit Suisse Facility into equity;
  2. new money injection(EUR 250min equity (EUR 50m rights issue and EUR 200m share capital increase) and up to EUR 225m in new revolving fleet financing); and

iii. the EUR 670m RCF refinancing, through granting of a EUR 170m RCF and EUR 500m term loan facility maturing June 2023 to various entities within the Group. 

The steps under the Agreement are anticipated to be consummated no later than 31 March 2021 along with the subscription, payment and delivery of the new money injections, provided all conditions which are currently in place are satisfied or waived.


Hertz, the holding company which operates through its various subsidiaries, offering, amongst others, car renting and leasing services globally, was forced to file for Chapter 11 bankruptcy in May and commence financial restructuring processes to secure its future as a going concern. It has since secured court approval for USD 1.65bn DIP financing maturing end of 2021 from various lenders including Apollo Global Management, Diameter Capital Partners and Silver Point Capital (USD 1bn to be used on vehicle acquisitions and USD 800m on working capital and general corporate purposes), as well as USD 4bn of fleet financing. On 25 November 2020, Hertz announced that it had entered into a stock and asset purchase agreement selling substantially all of the assets of its subsidiary Donlen Corporation (fleet leasing and management company) to Athene Holding Ltd (“Athene”) (financial services company) with an estimated purchase price (as at closing) of USD 875m. This agreement will be reviewed by the court at a hearing scheduled for 16 December 2020, and if approved, will not only set the minimum sale price but also “will serve as the "stalking horse bid" in a court-supervised sales process” and Hertz intend to follow the bidding procedures to secure the highest offer possible.

In the meantime, Athene, are making c. USD 1bn upfront investment (and are prepared to provide further incremental capital) as a means of supporting the business, which is a strong vote of confidence in its future investment.

Hertz must file a Chapter 11 reorganisation plan by 1 August 2021.


Since the publication of its Q3 results in October (as further reported in our Issue 31 Trade Alert), Carnival filed a supplemental prospectus on 10 November whereby it may offer and sell shares of its common stock through a USD 1.5bn offering.

On 17 and 19 November it priced direct offerings of 49.2m shares and 10.4m shares (at USD 18.05 and USD 17.59 per share respectively) of its common stock, and closed on 19 and 23 November respectively. The proceeds were used to repurchase USD 427.9m and USD 90.8m respectively of the principal amount of its 5.75 per cent convertible senior notes due 2023.

On 20 November, Carnival upsized its USD and EUR 7.625 per cent senior unsecured notes due 2026 to USD 1,450m and EUR 500m respectively (previously USD 1,000m and EUR 300m), closing on 25 November with the intention to use the proceeds for general corporate purposes


Please contact Louisa WattAndrew Baker or Natalie Radcenko with any queries regarding this month's Trade Alert.