LME Meets UK Restructuring Plan: Ropes & Gray Advised Supporting Noteholders on High Court-Sanctioned Single-Class Part 26A Restructuring Plan for Fossil Group

Ropes & Gray advised HG Vora Capital Management, LLC and Nantahala Capital Management, LLC as supporting noteholders on an innovative restructuring of Fossil (UK) Global Services Ltd., an English subsidiary of Nasdaq-listed Fossil Group, Inc. This transaction is the first in the UK market to combine an up-tiering solution with a streamlined single-class Part 26A restructuring plan, sanctioned by the High Court.

Faced with challenging market conditions and the difficulty of securing sufficient retail holder participation in a traditional exchange offer, Fossil implemented a court-sanctioned restructuring plan to ensure a durable capital structure and future viability. Ropes & Gray represented noteholders holding a majority of the outstanding principal amount of the Notes (as defined below) in negotiating a Transaction Support Agreement and designing a novel up-tiering framework to maximise recoveries and support Fossil Group by backstopping a $32.5 million new money rights offering.

The Restructuring

Prior to the restructuring, the Fossil group’s capital structure comprised:

1. a $150 million senior secured asset based revolving credit facility (the “ABL Facility”); and
2. a $150 million 7.00% senior unsecured notes due 30 November 2026 (the “Notes”).

The transaction was designed to incentivize participation by all holders of the Notes. Under the restructuring plan, holders of the Notes were invited to participate in a new money rights offering for First-Out Notes (as defined below) pro rata to their current holdings, and to elect to receive, in exchange for their existing Notes, either:  

• 9.5% first out first lien senior secured notes due 1 January 2029 (the “First-Out Notes”) for noteholders who choose to participate in the new money rights offering; or

• 7.5% second out second lien senior secured notes due 30 June 2029 (the “Second-Out Notes”) for noteholders who choose not to participate in the new money rights offering.

All noteholders received warrants on a pro rata basis to purchase shares of common stock or pre-funded warrants. The economics also included a backstop premium to the supporting noteholders backstopping the rights offering, a consent premium to all noteholders consenting to certain amendments to facilitate the transaction, and an exit fee payable on redemption, repayment or maturity of the First Out Notes. New money participants additionally received a common stock premium.

Up-tiering and single-class restructuring plan

The plan facilitated an exchange of existing unsecured Notes into senior secured instruments. Following implementation:

• On ABL‑priority collateral, the ABL Facility ranks first, the First‑Out Notes rank second, and the Second‑Out Notes rank third.
• On Notes‑priority collateral, the First‑Out Notes benefit from first‑lien security and the Second‑Out Notes from second‑lien security, with the ABL Facility having a third-lien security on such assets.
• General unsecured creditors are unimpaired.

All noteholders voted in a single class, with each holder offered the same opportunity to participate in the rights offering (and receive First-Out Notes) or, absent such participation, receive Second-Out Notes. The single class approach streamlined the process, while Fossil undertook considerable efforts to ensure fairness given the number of retail holders in the structure. The restructuring plan’s terms bind all Noteholders, delivering certainty and transparency.

Exchange offer

In parallel, Fossil launched an exchange offer in an effort to provide a consensual route to implement the up‑tiering. The existing dispersed retail noteholder base necessitated that the exchange offer be registered with the U.S. Securities and Exchange Commission, adding further complexity to the transaction. While the exchange offer attracted meaningful engagement, due to its large retail holder base, Fossil had difficulty securing sufficient retail holder participation and the restructuring plan became the definitive pathway for delivering the restructuring. The exchange mechanics and pricing informed the plan elections and final terms for the First‑Out Notes and Second‑Out Notes.

Ropes & Gray’s role in this transaction highlights its expertise in delivering innovative, market-defining solutions while navigating cross-border regulatory complexities. After a series of recent high-profile challenges (Adler, Petrofac, Waldorf), Fossil’s restructuring plan is proof that the English restructuring plan remains a powerful and versatile tool for implementation. It further demonstrates how up-tiering and Part 26A plans can drive successful outcomes in complex capital structures and challenging market conditions.

The Ropes & Gray team was led by UK restructuring partner Matt Czyzyk, UK restructuring counsels Natalie Blanc and Natalie Raine, U.S. finance and special situations partners Leonard Klingbaum and Sam Badawi, U.S. restructuring partner Matt Roose, U.S. capital markets partner Faiza Rahman, and U.S. finance counsel Patrick Prin. They were assisted by UK associates Georgia Papathanasiou and Jasper Millard.