New money and WHOA restructuring proceedings

Abstract

This article explores the critical role of “new money” in Dutch WHOA restructuring proceedings. Based on recent case law and international comparisons, the analysis distinguishes between interim financing – needed to keep operations running during the restructuring process – and new financing, which is essential for implementing the restructuring plan itself and enabling the company to continue operating going concern. The Dutch WHOA, inspired by U.S. Chapter 11 and UK practices, applies a priority rule that requires that any value created through restructuring must be distributed fairly among creditors in accordance with their legal rank. New investors can inject capital and receive returns, but only up to the value they contribute, unless parties agree otherwise or there is a reasonable ground for deviating from this priority rule. Valuation methodologies, such as the Discounted Cash Flow (DCF) model, are used to determine the “reorganisation value” – the total distributable value after restructuring, i.e. “post-restructuring value”. Case law illustrates how Dutch courts balance the interests of existing creditors and new financiers, sometimes permitting changes in creditor ranking or security rights to facilitate investments. Ultimately, the WHOA framework provides a transparent, equitable, and flexible environment for restructuring. After almost five years since its enactment, it is our observation that the WHOA contributes to the success of consensual out-of-court restructurings, as intended by the Dutch legislator when drafting the WHOA. This development not only enables successful recoveries but also strengthens the Dutch insolvency system, offering a robust solution for companies facing financial distress.