Luxembourg Court Approves Restructuring Plan for Ardagh PIK Issuer; PIK Ad Hoc Group Says JRP Process Being Used Abusively in Interests of Wider Ardagh Group

The District Court of Luxembourg approved a restructuring plan for Ardagh’s PIK notes issuer, ARD Finance, despite pitched opposition from dissenting PIK noteholders including Carronade Capital and Deutsche Bank and Crown, according to a May 29 judgment seen by Octus.

The plan, which group counsel Kirkland & Ellis described as “the first-ever large-cap judicial reorganization proceeding [or JRP] in Luxembourg,” is part of the wider restructuring of the packaging group, which was conducted consensually in late 2025 and will result in the equitization of a rump of PIK holders who declined to take part in a private exchange.

The fact that the restructuring of the group was almost entirely conducted outside the plan, and the manner in which the PIK holders were stripped of their security and rendered unsecured creditors has given rise to most of the controversy over the plan, as reported.

An ad hoc group of PIK holders comprising Deutsche Bank, Carronade and Crown Managed Accounts (a fund managed by LGT Capital Partners) challenged the plan on several grounds including that they would be better off in a liquidation and that the JRP procedure was being abused by Ardagh to benefit the wider group. However, the court dismissed all objections and approved the JRP.

The court explained that it has only “marginal discretion” regarding the approval of the plan where the requirements of the legislation have been complied with. The plan will not actually take effect until the appeal window has passed. ARD Finance secured chapter 15 recognition in the United States for the opening of the JRP procedure, as reported. This automatically stayed a $250 million claim for payment by an ad hoc group brought in New York’s Supreme Court. However, Ardagh will have to file a fresh motion in New York if it seeks enforcement of its plan in the U.S.

The Judicial Reorganization Plan

ARD Finance, the issuer of $895 million and €1 billion PIK notes both due 2027, opened JRP on Dec. 3, 2025. Under the terms of the plan, the remaining 12% of PIK notes not already consensually exchanged will be equitized. The equitization of the PIK notes would give noteholders an indirect minority stake in Ardagh Holdings SA, or AHSA, which has agreed to transfer 1% of its shares to the plan company.

In the plan company’s words, the plan allows for ARD Finance, currently an orphaned entity, to “reintegrate” into the Ardagh Group. In November 2025, the plan company was stripped of its assets, namely shares in key group operating companies, following a share pledge enforcement. The enforcement was triggered by Ardagh filing a petition with the Luxembourg court seeking approval of the out-of-court recapitalization as an amicable agreement (accord amiable) as this was an event of default under the PIK indenture. By this time of course, the majority of the PIK notes were held by AHSA as a result of the consensual private exchange thus ensuring that that the plan company could outvote any dissenting PIK holders.

As a result, the plan was approved by the required double majority in the sole class of PIK holders, that is, thresholds of 50% by number and 50% by value. In all, 203 noteholders were identified and contacted by the issuer, with 197 or 86.9% (by value) voting in favor of the plan.

A simplified group structure post-implementation is shown below:
 

Opposition From PIK Ad Hoc Group

The ad hoc group holds about €95 million of the 5% / 5.75% PIK €1 billion notes originally due in 2027 and $152 million of the 6.5% / 7.25% PIK $895 million notes.

In February, the ad hoc group of challenging PIK holders filed a request to have their claims reclassified as secured debt, which would in effect restore their veto right over the plan as no JRP can be approved against the wishes of any individual secured creditor. In a judgment of March 20, the Luxembourg court declined to reclassify the PIK notes, which would be provisionally considered as unsecured.

The ad hoc group also filed a standalone claim in Luxembourg seeking to have the share pledge enforcements unwound. The ad hoc group has adduced the opinion of retired U.S. bankruptcy Judge Christopher Sontchi in relation to the share pledge enforcement. In a provisional judgment of Feb. 20, the Luxembourg court ordered two members of the ad hoc group to pay judicial surety before the case could proceed. This was complied with, however the issue was not resolved before the JRP was due to expire at the end of May and remains ongoing.

At the hearing on May 20, the dissenting creditors raised the following objections to the restructuring plan:
 

• That it is not in best interests of creditors;
• That the plan has no prospect of making ARD Finance a viable commercial entity;
• That it discriminates between creditors in a manner contrary to public policy;
• The plan is being used in a manner inconsistent with its intended purpose of a JRP, in breach of public policy; and
• That the plan is being used to circumvent the 90% threshold requirements in the New York law-governened PIK indenture.

No Worse Off

The court was satisfied that the PIK holders would be better off under the plan than in a liquidation. The only asset ARD Finance would have in a bankruptcy would be some cash. On the other hand the plan awards the PIK holders an indirect minority stake in the group.

According to a report by Xinex Sarl on behalf of the plan company and seen by Octus, in an insolvency the maximum theoretical recovery for unsecured creditors is approximately 0.046%, but in practice is likely to be zero.

Conversely, under the plan, recovery for PIK noteholders is estimated to be approximately 0.34%, with potential additional upside linked to the future performance of the group.

The court considered the Xinex report to be “sufficiently reliable” even though it is not strictly independent evidence. The challengers provided their own valuation report that criticized the Xinex report, in part because of the illiquidity of the shares, but did not argue that it was manifestly inaccurate or exaggerated.

Viability of ARD Finance

The ad hoc group contended that managing an ultra-minority stake in another business does not mean the plan company should be regarded as a genuine holding company. Furthermore the company itself has no real economic prospects.

The court did not accept this. The minority stake, the court noted, is valued at €6 million per the Xinex report, sufficient to be a real economic business.

The court also explained that it is only able to make a limited assessment of the feasibility of the plan and the viability of ARD Finance. Success it said cannot be guaranteed and the possibility that the company may fail is not sufficient to withhold approval of the plan.

Discriminatory Treatment of Creditors

The court considered that the exclusion of other unsecured creditors who are not PIK holders from the plan was not discriminatory. These claims, which include some German tax arrears and amounts owed to an independent director, can be paid for out of cash available to the company and are “negligible” compared to the amounts owed under the PIK notes.

Misuse of the JRP

The ad hoc group argued that the JRP was proposed in the interests of the wider Ardagh group and not for the benefit of ARD Finance or its creditors. This, they said, was an abusive use of the JRP that was not envisioned in the legislation. They also point to a €300 million payment to former owner Paul Coulson in exchange for him walking away from the group.

However the court said it cannot be said that ARD Finance acted improperly by seeking the approval of the plan and taking steps to ensure its survival

Circumvention of Indenture Provisions

The court did not deal with this issue in any great detail in the judgment only to say that it has not been established that the JRP, the provisions of which differ in law from the indenture, is contrary to public policy.