• UK’s Part 26 regime allows debtor to keep operations out of process
• Foreign courts may allow cross-class cramdown, third-party releases
• Chapter 15 recognition subject to US court scrutiny and conditions

US companies are increasingly considering restructuring overseas to take advantage of creative alternatives that may not fly in a Chapter 11 bankruptcy case. But combining a foreign filing with a Chapter 15 filing back home isn’t a blank check to avoid scrutiny.

International filings have become “a more in vogue tool for restructuring professionals” to try to obtain financial relief for US debtors, King & Spalding Partner Thad Wilson said.

Congress created Chapter 15 of the US Bankruptcy Code in 2005 as part of an effort to create a coordinated international legal regime for cross-border insolvency cases. Such cases allow a debtor to seek US recognition of a restructuring executed under foreign law.

The United Kingdom’s Part 26 restructuring regime is a particularly attractive option for debtors, with US companies New Fortress Energy and Fossil Group both electing to file in the country.

“I think the difference is that when you use Chapter 11, the company goes in warts and all,” said Steven Golden, partner at Pachulski Stang Ziehl & Jones LLP. “But when you use a Part 26 plus a Chapter 15 recognition, it’s a pure financial restructuring so you’re able to keep the operations out of the process.”

Management teams for multinational companies are considering alternative restructuring solutions because they realize that they may be able to secure releases in a foreign plenary proceeding, Golden added.

Other maneuvers that are difficult or unavailable in Chapter 11, like cross-class cramdown and reverse vesting orders, may also be available in a foreign jurisdiction. Debtors, in effect, can select the forum with the tool that they need and then use Chapter 15 to make the result effective in the US, Golden said.

Chapter 15s further permit recognition of transaction structures allowed in other jurisdictions, such as a Canadian reverse vesting order, which could draw comparisons to a Texas two-step if used in situations involving mass tort liabilities, said Robin Chiu, a managing director at Portage Point Partners.

Foreign jurisdictions are also evolving to offer Chapter 11-like features, such as DIP-style financing and an automatic stay after a hearing, said Evelyn Meltzer, a partner at Troutman Pepper Locke.

Singapore is working toward becoming the Delaware of Asia for restructurings thanks to the addition of Judge Christopher Sontchi, a former bankruptcy judge in Delaware, several market participants said. Caribbean jurisdictions like the Cayman Islands, Mexico’s insolvency framework, the Ley de Concursos Mercantiles (LCM), and Brazil’s Recuperação Judicial (RJ) are further equivalents to a court-supervised corporate restructuring in the US.

The UK’s two-step framework is gaining traction because of its flexibility and effectiveness in the right circumstances, said Skadden Partner Ron Meisler. Meisler’s team represented New Fortress Energy in the 2026 UK restructuring plans and Chapter 15 recognition proceedings for certain of its affiliates and the related recapitalization transactions.

“This approach was a powerful and novel multinational restructuring tool that resulted in a value-maximizing transaction for all stakeholders. This is why the levels of consent were extraordinary. Notably, the company had the right mix of factors, including the proper jurisdictional basis, that allowed it to implement a holistic transaction,” Meisler said.

Watch group Fossil used the UK filing regime to restructure USD 150m of unsecured bonds governed under US law that were held by many retail investors alongside a few major investors. The plan ultimately secured support from nearly all creditors and preserved the company’s public listing.

“Cross-border restructuring processes are another tool in the toolkit for US companies navigating complex capital structures, presenting a real alternative to traditional Chapter 11 proceedings when creditor dynamics and legal frameworks align,” said Roopesh Shah, who worked on the Fossil filing and is a senior managing director for Evercore’s liability management and restructuring group.

Most Chapter 15 cases have not been contested, but this is changing, attorneys said.

There was talk behind the scenes of the New Fortress Energy case that it was going to be challenged, but in the end, opponents never brought opposition into court, Golden said.

When cases are challenged, Meltzer said that she expects fewer public policy objections under section 1506 and more objections based on whether creditors are sufficiently protected under section 1522, as laid out in the New Fortress Energy case and relied on in the restructuring of Israel’s Papaya Gaming.

In New Fortress Energy, Bankruptcy Judge Martin Glenn of the Southern District of New York ruled that Section 1522(a)’s sufficiently protected requirement is a helpful guardrail to protect creditor interests, Meltzer said.

That standard requires the just treatment of all creditors, the protection of US claimants against prejudice and inconvenience and distributions substantially in line with US priority rules. Judge Glenn said that evidence of insider exploitation, untoward manipulation or the thwarting of creditor expectations could defeat recognition, she said.  

In Papaya’s Chapter 15 case, Delaware Bankruptcy Judge Mary Walrath recently granted foreign recognition to its Israeli restructuring case.

However, the court restricted the foreign representative’s control over US assets. The conditions included 115% pre-funding, reporting requirements and a bar on insider payments. The court also extended the stay to Papaya US and left the existing payment system in place so operations could continue.

“Chapter 15 recognition is not a blank check,” Meltzer said, noting that Papaya is an example of a judge scrutinizing a debtor. In the case, the judge questioned the company’s candor after it moved more than USD 70m out of the US. The judge granted recognition but imposed certain conditions to protect creditors, she said.

An ongoing question of Chapter 15 law is whether parties can secure nonconsensual third-party releases granted by a foreign court without the affected claimants’ consent.

The US Supreme Court’s 2024 ruling in Harrington v. Purdue Pharma limited the ability of bankruptcy courts in Chapter 11 cases to grant such releases, overturning efforts by parties like the owners of Purdue Pharma who wanted to minimize future liability even if they weren’t Chapter 11 debtors.

Bankruptcy judges have in some cases continued to recognize third-party releases in Chapter 15 proceedings, though other courts are divided on the matter.

In a recent decision in Crédito Real S.A.B. de C.V., SOFOM, E.N.R., the US District Court for the District of Delaware affirmed a bankruptcy court’s order granting Chapter 15 recognition to a Mexican “concurso mercantile” proceeding and enforced nonconsensual third-party releases approved by the Mexican court. The Crédito Real decision is now on appeal to the Third Circuit appeals court.

Back in 2012, the Fifth Circuit appeals court – where the popular Southern District of Texas is located – declined to enforce broad nonconsensual third-party releases contained in the contested restructuring of Mexican debtor Vitro, S.A.B. de C.V.