A&O leads on significant restructuring in the commodities sector

ED&F Man is a global commodities trader and broker. Like many businesses in the commodities sector, ED&F Man has faced significant pressures arising out of the Covid-19 pandemic and soaring commodity prices.

ED&F Man implemented its restructuring using a UK restructuring plan. The procedure allowed ED&F Man to restructure its borrowing base and revolving credit facilities, its term loan facilities, its private placement notes and its liabilities under a settlement agreement, and to amend its constitutional documents, under one procedure. This was achieved despite one class of creditors voting against the plan.

The international commodities and export markets face turbulent times. Geopolitical tensions and volatile commodity prices continue to put significant pressure on the sector, and many commodities businesses remain highly leveraged. Faced with these challenges, commodities businesses need access to affordable liquidity to sustain their day-to-day trading activities.

The restructuring provides for an injection of USD300 million of new money, which is crucial to the future success of ED&F Man's trading business. Recognising the importance of liquidity to the trading business, the restructuring plan provided existing creditors with the opportunity to participate in the new money via an elevation mechanism. Creditors that participated in the new money received higher-ranking treatment for part of their existing claims. The elevation mechanism provided ED&F Man better certainty of funding, while reducing the pricing of the new money. Consistent with similar techniques used in other commodities sector restructurings (such as Noble and Stemcor, on which Allen & Overy also advised), the court held that the mechanism was fair and used for "very good commercial reasons".

The USD300 million new money is an innovative bespoke arrangement which combines a borrowing base facility, a margin line facility to support commodity hedging and a trade instruments facility, all within a single master facility arrangement.  The individual facilities can be flexed within the overall USD300 million limit, to allow ED&F Man to take full advantage of the new money, using it across the different facilities depending on seasonal needs and market conditions.

Allen & Overy is delighted to have advised the co-ordinating-committee of ED&F Man's senior creditors alongside Teneo as financial adviser. We are uniquely positioned to understand the dynamics of commodities sector restructurings, and our cross-practice and cross-border strength allows us to support our clients through the challenges that they face. The ED&F Man restructuring is the latest example of our ability to set market precedent in the commodities sector, in pursuit of our clients' goals. This transaction builds on our market-leading experience in this sector, following the restructurings of Stemcor, Metinvest, Nyrstar, Noble and Premier Oil.

The A&O team comprised members from across our restructuring and trade and commodity finance practices, including partners Katrina Buckley, David Campbell, Nick Lister and Catherine Lang-Anderson, counsels Ellis Lawson and Niamh Dennehy-Maher, senior associates Mallika Abidi, Mark Kahn and Eva Maryskova, associates Ellie Aspinall, Julius Greiner, Charlotte Hall, Alastair Neden, Jasmine Norris, Paridhi Poddar, Bruce Rennie, Ella Richards, Zehra Taylor-Gencer and Marianne Mendes Webber and transaction executive Daniele Bossola.  Agency advice was provided by partner Chris Angus and consultant Ian Convey. The Allen & Overy team involved lawyers from our offices in Amsterdam, Brussels, Budapest, Dubai, Frankfurt, Ho Chi Minh City, London, Madrid, Milan, Prague, Tokyo, New York, Perth, Singapore, Sydney and Warsaw.