The Bankruptcy Quarterly Q2 2026: Is the US Losing Its Edge in the Global Restructuring Market? Plus, Unpacking Judge Kaplan’s Watershed DIP Rollup Ruling and the US’ First Weed Restructuring

Welcome to The Bankruptcy Quarterly, Octus’ one-stop shop for U.S. bankruptcy news and trends. In each installment, we profile a few interesting cases and look at important developments in bankruptcy law from the past three months. We also provide data-based insights into companies that filed for chapter 11 or confirmed a chapter 11 plan during the quarter. Today’s issue looks back on the second quarter of 2026.

The U.S. Restructuring Trade Deficit

Not too long ago, U.S. bankruptcy courts seemed to be at the center of the corporate restructuring universe. Major Latin America airlines, foreign oil drillers, Greek shipping companies and others utilized chapter 11’s easy-to-meet jurisdictional requirements to anchor their restructurings in places like New York, Texas and Delaware. Alas, we cannot help but feel that the days of high-volume foreign restructurings are behind U.S. courts.

Instead, it feels as if we are now in an era where U.S. bankruptcy courts are increasingly serving as importers of foreign restructuring plans through chapter 15 of the Bankruptcy Code. Just look at the number of chapter 15 filings across the past four years:
 

Moreover, we now appear to be in an era where U.S. companies may choose to seek to restructure their debt abroad rather than at home.

Case in point: Last quarter, New Fortress Energy, or NFE, a publicly listed U.S. company, chose to restructure its formidable debt stack through a London-based Part 26A proceeding rather than a chapter 11 case. NFE’s case comes in the wake of another publicly listed U.S. company – Fossil – that chose to go to London for a Part 26A proceeding last year.

No doubt, the root cause of the shift in the global restructuring market is the development of modern foreign restructuring regimes. As explained in an article by a well-known industry academic, these regimes were designed by experts and based on the best elements of U.S. restructuring law. In that way, the foreign regimes are arguably more tailored for modern-day restructurings.

Take the United Kingdom’s relatively new English Part 26A restructuring law, which – along with the more established scheme of arrangement proceedings – provides companies with an in-court path to quickly and surgically restructure debt if relevant creditor consent thresholds are met.

English restructuring law generally permits third-party releases, which means that a company does not have to put all of its subsidiaries into the proceeding to achieve the desired deleveraging. For example, a company can have just one “plan company” commence the restructuring proceeding, with the plan providing a release to its nondebtor affiliates of relevant debt.

That is a key difference from U.S. restructuring law (which, after Purdue, nominally only permits consensual third-party releases) and carries the benefit of allowing affiliates to go about their businesses as usual. In NFE’s case, it allowed the company to defuse the risk of derivative contract counterparties terminating their contracts; in Fossil’s restructuring, it had similar benefits for the company’s operating entities.

Another bonus: Part 26A proceedings can, if properly justified, allow for debt restructurings that keep existing equity in place. That outcome is generally unavailable through chapter 11 due to the absolute priority rule – the rule that equity cannot receive a recovery unless all other creditors are paid in full (absent consent). Keep in mind too that Fossil and NFE were able to keep their respective public listing statuses despite their London restructuring proceedings, another benefit over chapter 11.

Even if a company does not have any connection to England, Fossil and NFE prove that the issue is surmountable; it just takes some creative planning and enough consenting creditors. For instance, in Fossil’s case, it obtained sufficient noteholder consents to change the note indenture’s governing law to English law (from U.S. law). Fossil also created a new English company that would go on to serve as the “plan company” for the Part 26A restructuring plan.

The English court did not push back on the strategy, which it actually called “good” forum shopping. U.S. courts have approved the strategy too through favorable chapter 15 rulings – there is a forthcoming opinion due to be issued by Southern District of New York Chief Bankruptcy Judge Martin Glenn in NFE on the issue.

On this basis, we expect to continue to see more companies – including U.S. companies – choose to restructure in London, even if alternatives exist in the United States. If Fossil and NFE are roadmaps, we expect those cases will involve a high degree of consensus for balance-sheet – as opposed to operational – restructurings.

Importing a Weed Restructuring Into the U.S.

There is one more case from last quarter that we think bears mentioning on the topic of how U.S. courts are faring in the global restructuring marketing place: Cannabist Co.

As a publicly listed Canadian cannabis company with operating assets in the United States, Cannabist commenced a Canadian restructuring proceeding in March to complete a sale process. To complement the Canadian case, the company filed an ancillary chapter 15 case before Delaware Bankruptcy Court Judge Brendan L. Shannon.

It bears noting that despite having U.S. operating assets, Cannabist did not have a viable option for a chapter 11 restructuring process. That is because under existing chapter 11 precedent, cannabis cases have generally been dismissed because of marijuana’s classification as an illegal drug in the United States on a federal level.

In fact, up until Cannabist’s case, no cannabis company had ever sought relief under chapter 15. It was therefore a major win for the U.S. restructuring market (at least the chapter 15 context) when Judge Shannon recognized Cannabist’s Canadian proceeding as a foreign main proceeding.

Despite the U.S. Trustee’s typical stance on dismissal of cannabis-related chapter 11s, the UST did not object to chapter 15 recognition for Cannabist but instead merely had its informal comments resolved.

The decision could be a signal that previously icy bankruptcy court attitudes toward marijuana company restructurings could be thawing. At the very least, Judge Shannon’s decision provides a potential strategy for other domestic cannabis companies in need of restructuring but without a path under existing chapter 11 precedent: Restructure abroad, and then import the relief back to the United States through chapter 15.

Judge Kaplan’s Watershed DIP Rollup Opinion

Last quarter, Judge Michael Kaplan issued a watershed opinion in the Del Monte Foods case, answering a novel question concerning what a DIP rollup actually is and whether it could violate a minority lender’s prepetition credit agreement rights.

Despite the fact that rollup DIP financings have been utilized in chapter 11 cases for years, this is the first written opinion on the issue, as we discussed in our last edition, and it could have outsized importance in pending disputes and future transactions.

In his 21-page opinion, Judge Kaplan determined that Del Monte’s $247.5 million DIP rollup transaction was a “cashless exchange” of debt, specifically one that “merged” $247.5 million of the lenders’ existing credit agreement debt into higher-priority rollup DIP facility debt.

The DIP rollup did not immediately give rise to a “payment” or “reduction of” debt, according to the judge; that is important because a “payment or reduction” would have triggered the credit agreement’s “pro rata sharing” covenant. That covenant – common to many credit agreements – generally requires the sharing of any “payment,” or “reduction” of credit agreement debt, among lenders.

There is more though. Judge Kaplan went on to hold that because the rollup “merged” the DIP lenders’ prepetition loans into the DIP, the prepetition loans were not discharged! Instead, the loans essentially transformed into DIP loans.

According to the judge, that means that if the majority lenders receive any payments on the rollup loans – which they likely will in the form of sale proceeds – those proceeds “may” have to be shared under the pro rata sharing covenant.

If the opinion stopped there, it would suggest some type of a win for the minority lenders, but the opinion continues in curve-ball fashion. Judge Kaplan ultimately concludes that while “the eventual satisfaction” of the rollup loans “may constitute ‘payment,’” the “extent to which any such payment must be shared remains to be determined” (emphasis added).

The italicized language is a big caveat, as Judge Kaplan explains (albeit in a solitary paragraph) that he will consider evidence to determine the value of the DIP rollup before requiring any proceeds to be shared.

“The central question to be resolved is fixing the dollar amount for such value, and whether (as well as to what extent if any) such value should be shared with lenders who did not participate in the roll-up transaction,” the opinion states (emphasis added).

The judge notes that part of that exercise will take into account the fact that the DIP lenders funded the new-money portion of the DIP to the tune of $165 million and that the minority lenders were given the opportunity to fund the DIP but declined.

So who is the winner here? Perhaps telegraphing where he is leaning if the litigation continues, the judge writes (albeit in an earlier portion of his opinion) that it would be “nonsensical to suggest that the non-participating lenders, such as Plaintiffs, should secure the benefit [of the rollup]” having not taken the risk of advancing new money to the debtors.

The judge goes on to explain that he “as well as my colleagues in other districts, have witnessed first-hand the unfortunate reality that DIP loans are not always satisfied in full or even meaningful part.” That language suggests to us that Judge Kaplan is leaning toward crediting the DIP lenders for advancing the new-money DIP to the debtors, which the minority lender plaintiffs declined to fund.

If the appellate history is any indication of who the parties think “won” the dispute, consider this: The minority lenders are moving for an interlocutory appeal of the decision; the DIP lenders are opposed to that request and have conditionally cross-appealed the DIP ruling.

As for the opinion’s potential effect outside the Del Monte case, the fact that Judge Kaplan did not hand a 100% win to the DIP lenders means that minority lenders will likely have something to cite in their future negotiations and briefs should they choose to oppose a restructuring involving a rollup DIP. We will also have to wait and see, however, how Del Monte is handled on appeal and how Judge Kaplan resolves the question of what, if anything, the minority lenders should recover (assuming there is no interim settlement).

The opinion’s potential effect for minority lenders opposing nonrollup DIP transactions remains to be seen as well. It bears mentioning that Serta Simmon’s lenders facing claims for breaching a pro-rata sharing covenant in Serta’s 2022 uptier transaction are taking the position that Judge Kaplan’s opinion supports their cause. Read into that whatever you will though as, unsurprisingly, the Serta minority lender plaintiffs take the opposite position.

In Case You Missed It:
 

• Whose mediator is it anyway? – Judge Kaplan made more headlines last quarter when he acted as mediator for his own case in Del Monte. In all fairness to the judge, he took that role with the full consent of the parties. That’s more than what can be said of Judge Marvin Isgur in Barretts Minerals. In May, Judge Isgur ordered feuding parties in the long-running case to participate in mediation before retired judge Robert Drain. That may not seem so bad, but it just so happens that before being tapped as mediator, Drain was acting as a member of the debtors’ special board. To boot, Judge Isgur overruled those that objected to his mediation order.

• Two new PINOs – The trend of prepackaged chapter 11 cases coming in hot continued last quarter. QVC and Trinseo both filed prepackaged plans of reorganization, with overwhelming creditor support, but in each case we witnessed how it only takes a small group of unhappy, well-represented stakeholders to gum up the works. Like Multi-Color’s case last quarter, these cases are prepackaged-in-name-onlys, or PINOs. Judge Alfredo Perez has taken QVC’s contested plan under advisement; Trinseo’s litigation is just getting started.

• Prominent denouements – The dream of a reorganized Spirit died in May when a spike in jet fuel prices led to a cash crunch that the airline debtors ultimately could not hurdle. Spirit is now in the midst of a wind down process. Similarly, the ever-beleaguered First Brands debtors got the nod from Judge Christopher Lopez to begin soliciting their liquidating plan. Judge Lopez noted that First Brands’ DIP lenders agreed to compromise “billions” in claims through the plan.

Balancing out 21 new chapter 11 filings in Octus coverage last quarter, 19 companies confirmed chapter 11 plans.

Check out the tables below for an overview of notable opinions, appeals and more data on companies that either filed for chapter 11 or confirmed a chapter 11 plan in the second quarter of 2026. As always, visit Octus’ Credit Cloud and First Day databases for more.