Clifford Chance

Clifford Chance advises banking consortium on the restructuring of Rodenstock by an English scheme of arrangement

The international law firm Clifford Chance advised the coordinating committee of senior lenders, comprising The Royal Bank of Scotland, HSH Nordbank, Harbourmaster Capital Management and M&G Investment Management, on the successful restructuring of Rodenstock GmbH's debt facilities implemented by an English scheme of arrangement.

Rodenstock is Europe's fourth largest manufacturer and distributor of spectacle lenses and frames, employing over 4000 people in over 80 countries.

The sanctioning of this scheme of arrangement is crucial as it provides the first fully reasoned judgment of the English courts as to the availability of an English scheme of arrangement for a non-English borrower where the primary connection to England was rooted in an English law governed facility agreement. Schemes of arrangement are versatile tools that, broadly speaking, enable creditor classes to implement far-reaching restructuring steps – including release of debts owed to that class - without being held hostage by minorities within that class.

Partner Stefan Sax concludes as follows: "This decision has been eagerly awaited in Germany. Schemes of arrangement make it a lot easier to restructure the debt portfolios of German companies outside of insolvency proceedings. German law currently only allows for debt restructuring at the behest of a majority of lenders within the framework of insolvency proceedings. This ruling highlights the urgent need for current German restructuring reforms to come into effect."

Partner Loren Richards notes: "The English courts being satisfied as to the recognition and  effectiveness of the scheme in Germany was crucial in this case."

To this end the English court considered opinions from a leading German professor on international private law and a retired senior judge of the arm of the German Supreme Court that would normally deal with insolvency issues. Whilst there is an unresolved dispute before the German courts that may ultimately require reference to the European Court of Justice (ECJ) if settlement is not reached, these experts considered it unlikely that the scheme should not be capable of general recognition in Germany.

Loren Richards adds: "The open point in Germany is whether an English court's sanctioning of a Scheme of Arrangement constitutes a "judgment" within the meaning of applicable EU regulations. If so, the German courts would generally by required to recognise such sanctioning. For reasons also referred to by the learned judge and the experts, we think the better view is that such sanctioning is to be seen as a "judgement". However, this question could also be considered academic. Purely by application of rules of private international law, the German courts would generally be required to apply English law to the question of whether the senior lenders' rights under an English law credit agreement had been effectively varied by the scheme. This has to be the better approach in such cases."

The Clifford Chance team was led by partners Dr. Stefan Sax (Restructuring & Insolvency, Frankfurt) and Loren Richards (Banking & Capital Markets, Frankfurt), together with Philip Hertz (Insolvency Group, London). The core team also comprised counsel Oda Lehmkuhl (Restructuring & Insolvency, Frankfurt) and associates Andreas Seip (Banking & Capital Markets, Frankfurt), Rafael Lamlé (Banking & Capital Markets, Frankfurt), Dr. Menso Engelmann (Corporate, Frankfurt), and David Towers (Insolvency Group, London) as well as local teams in Frankfurt, Bangkok, Luxembourg and Prague.