The era of the "all-American" corporate bankruptcy is dying. For decades, if a massive U.S. corporation found itself drowning in debt, the playbook was simple: head to Delaware or the Southern District of New York and file for Chapter 11. It was the gold standard for restructuring—predictable, powerful, and uniquely American. But a quiet migration is underway. Today, some of the most complex financial battles involving U.S. companies aren't happening in Manhattan or Wilmington. They're moving across the Atlantic to the High Court in London.
This isn't just a change in scenery. It’s a calculated legal arbitrage. Companies like the Texas-based retailer Fossil are bypassing the traditional U.S. bankruptcy process in favor of the UK’s Part 26A Restructuring Plan. Why? Because the English courts now offer tools that Chapter 11 either can’t match or makes too expensive to wield. If you're a shareholder or a creditor in 2026, you'd better get used to the idea that your financial fate might be decided under English law.
The death of the Chapter 11 monopoly
Chapter 11 has historically been loved for its "automatic stay"—the immediate freeze on all creditor lawsuits—and its "cramdown" powers, which let a judge force a deal on dissenting creditors. But Chapter 11 is also incredibly "unwieldy," as Fossil’s legal team recently put it. It’s a public, messy, and often ruinous process for equity holders. In a standard U.S. bankruptcy, the "absolute priority rule" usually means shareholders get wiped out completely unless every single creditor is paid in full.
London is offering a different path. Through a mechanism called a "stapled exchange" or a Part 26A plan, companies can restructure their debt without the "free-fall" chaos of a U.S. filing.
Look at the numbers. In Fossil’s UK-based restructuring, shareholders didn't just survive—they thrived. The value of their equity reportedly jumped from $80 million to $250 million. Under a traditional Delaware Chapter 11, those same shareholders likely would've walked away with zero. When you can triple your equity value by simply changing the governing law of your debt to English law, the flight to London stops looking like a trend and starts looking like common sense.
Why the UK Part 26A is the new power move
The UK introduced the Part 26A Restructuring Plan in 2020, basically as a response to the pandemic. It was a "best of both worlds" creation. It took the flexibility of the classic English Scheme of Arrangement and added a "cross-class cramdown" power—the very thing that once made Chapter 11 unique.
But the English version is leaner. It doesn't require the same level of granular disclosure that U.S. courts demand, and it’s often much faster.
- The 75% Threshold: In the UK, you only need 75% of a debt class to agree.
- The Fairness Test: While U.S. judges are bound by rigid statutory rules like the "absolute priority rule," English judges have broader discretion to decide what's "fair and equitable."
- Liability Management: U.S. companies are finding they can "switch" the law governing their debt contracts from New York law to English law relatively easily. Once that switch is made, the door to London swings wide open.
This isn't just theory. We’re seeing a rise in "contentious restructurings" in the UK for companies that have little physical presence in Britain. The "forum shopping" of the past involved moving from one U.S. state to another. Now, it’s a transatlantic leap.
The Chapter 15 loophole
You might wonder how a UK court order can stop a creditor from suing a company in Texas. That’s where Chapter 15 of the U.S. Bankruptcy Code comes in. It’s the "bridge" that allows U.S. courts to recognize and enforce foreign insolvency proceedings.
Historically, U.S. judges were wary of foreign "interference." But recently, the tide has turned. Courts in the Second Circuit (New York) have shown an increasing willingness to grant "comity"—legal respect—to UK proceedings. Even when those UK deals include things like "third-party releases" (which the U.S. Supreme Court has recently made much harder to get in domestic cases), U.S. bankruptcy judges are often letting them slide if they're part of a sanctioned UK plan.
Essentially, London has become a "safe harbor" for deals that might get blocked by a skeptical judge in Delaware.
The hidden risks of the London migration
It’s not all easy wins and equity bumps. The UK courts are starting to push back. Judges like Lord Justice Snowden have recently signaled that they won't just rubber-stamp every plan that comes across their desk. They’re demanding better valuation evidence and more transparency.
There's also the "public policy" risk. While the "public policy exception" in Chapter 15 is a high bar, it isn't impossible to clear. If a UK deal is "manifestly contrary" to U.S. policy, a U.S. judge can refuse to enforce it. For now, this is rare. But as more American companies flock to London to bypass U.S. creditor protections, expect to see U.S. creditors fighting back harder in the New York courts.
How to play the new restructuring game
If you're an investor or a corporate treasurer, the old rules don't apply anymore. You can’t just look at the Delaware court docket to see where the trouble is brewing.
- Check the Governing Law: Look at the indentures and credit agreements. If there’s a move to change the governing law from New York to English law, a restructuring is likely imminent.
- Watch the "Center of Main Interest" (COMI): Companies are increasingly setting up "shell" offices or moving bank accounts to London to establish jurisdiction. These small moves are the early warning signs of a "London flip."
- Prepare for the "No Worse Off" Test: In the UK, a dissenting class can only be crammed down if they are "no worse off" than they would be in the "relevant alternative" (usually liquidation). This puts a massive premium on accurate, defensible valuations.
The shift of bankruptcy fights to London isn't a fluke. It’s a sophisticated evolution of global finance. As long as the UK provides a faster, cheaper, and more equity-friendly environment than the U.S., the "London flip" is here to stay. Don't get caught looking at the wrong side of the ocean.
