On 9 March 2023, the Rotterdam District Court sanctioned a restructuring plan under the Dutch WHOA (Wet Homologatie Onderhands Akkoord) for the shipbuilder Royal IHC. The WHOA, which offers a legal framework for restructuring aimed at avoiding bankruptcy, does not allow for appeals following the court’s sanctioning of a plan. Consequently, Royal IHC’s restructuring was swiftly implemented.
The sanctioning judgment sparked the interest of the Supreme Court's Procurator General, who initiated a claim in cassation in the interest of law with regard to certain rulings of the district court (ECLI:NL:PHR:2024:346). On 25 October 2024, the Dutch Supreme Court rendered its judgment in response to this claim.
The Dutch Supreme Court’s ruling provides important guidance for the Dutch and international restructuring market. It confirms that the relevant WHOA sections in the Dutch Bankruptcy Act do not allow creditors to be forced to provide new funds under existing credit facilities if the terms are altered (i.e., through a creditor cram-down). Nor can creditors be compelled to provide entirely new funding. The Court explained that the WHOA includes a specific provision for amending existing agreements, which gives creditors the right to opt out if they do not wish to accept more burdensome terms. Consequently, such new obligations cannot be imposed on creditors through a WHOA plan.
The Supreme Court emphasises that if creditors were forced by a WHOA plan to continue funding under changed conditions, they could be worse off than in a liquidation scenario, especially as Royal IHC’s credit facilities were already ‘draw-stopped’ due to an event of default. The outcome may differ if the draw stop is lifted not by the WHOA plan itself but by supportive creditors.
The Court also confirms that a WHOA plan can change the order of priority among creditors, provided it meets the requirements for sanctioning. Specifically, if a dissenting creditor in a dissenting class objects to the plan, the Dutch absolute priority rule applies. This rule allows for deviations from absolute priority if they are reasonably justified and do not negatively impact the interests of dissenting creditors.
Since the Supreme Court’s decision is at the request of the Procurator General in the interest of the law, this ruling will not affect the restructuring of Royal IHC, but solely provides guidance for a proper interpretation of the WHOA going forward.
For more information, please reach out to any member of the R&I group, including Lenneke de Baar, Robert Woudenberg, Bart Wijnstekers, Marc Orval, Barbara Rumora-Scheltema and Saskia Heumakers.