This article explores the strategic use of creative class composition in English restructuring plans, in particular the creation of "anchor" classes to facilitate cross-class cram down.
The introduction of ability to 'cram' dissenting classes has fundamentally changed the approach to class composition, encouraging debtors to create supportive classes that can approve a plan and impose it on dissenting stakeholders. The courts are aware of the risks of class manipulation and artificiality, but have generally sanctioned plans where there is a rational commercial justification and statutory safeguards are met.
We argue there is a difference between permissible ("good") and improper ("bad") artificiality in class creation and in doing so look at three scenarios:
- inclusion of "unnecessary" classes that could be restructured outside the plan
- anchor classes composed of cross-holders or stakeholders with collateral interests
- the purposeful creation of new classes prior to the plan.
In each case, the courts have shown pragmatism, often allowing creative class composition provided there is a commercial rationale and the plan passes key statutory tests.
Key protections against abuse include the "no creditor worse off" test, fairness at sanction, and the pari passu principle. However, the recent spate of appeals demonstrate that these safeguards can be strained in practice, relying heavily on judicial discretion and robust valuation evidence.
This article was first published in the July 2025 issue of Butterworths Journal of International Banking and Financial Law.
Creative class composition: the hunt for the anchor class
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