Multinational companies in financial distress—including companies based outside the United States, but with debt governed by New York law—face difficult choices in determining where to restructure their debts. This is especially true for companies in jurisdictions without established or effective regimes for complex debt reorganizations. For some time, the “COMI shift”—i.e., moving the company’s “center of main interest”—has been a strategy of choice, with England as the preferred destination and the “scheme of arrangement” in the United Kingdom (often combined with a chapter 15 proceeding in the United States) as the ultimate legal mechanism to achieve a balance-sheet restructuring.
While a COMI shift remains a viable route to access a UK scheme, the recent restructuring of Codere, a large multinational gaming company, presents an alternative method that in some cases will be more efficient and straightforward—namely, the addition of a UK-based co-obligor on the debt to be restructured. As described below, the co-obligor approach permits a non-UK company to access a UK scheme of arrangement, followed if necessary by a U.S. chapter 15, without the complexities and risks associated with a full-scale COMI shift. Companies in distress, especially European companies with debt governed by New York law and a mix of UK and non-UK creditors, can and should consider the creation of a co-obligor as an alternative to a COMI shift.
