Important Guidance on Restructuring Credit Event Triggers Under ISDA Definitions
On 15 December 2025, an External Review Panel of the Determinations Committee of the International Swaps and Derivatives Association ("ISDA") delivered its determination of the first question referred to it by the committee (which had been split on the issue) in almost a decade.
The Panel determined that a "Restructuring Credit Event" within the meaning of the 2014 ISDA Credit Derivatives Definitions had occurred with respect to Ardagh Packaging Finance Plc (the "Reference Entity") by 7 October 2025. This was significant because of the volume of derivative instruments (Credit Default Swaps) impacted by this particular decision with it being estimated that the decision will affect more than $3.5 billion gross notional across 1,100 outstanding contracts referencing the Reference Entity. Even more fundamentally, the Panel addressed for the first time the nature and legal consequence of a key restructuring procedure increasingly used in the market.
The particular multibillion dollar recapitalisation of the Reference Entity took effect by way of a Transaction Support Agreement (more commonly termed a Lock-Up Agreement) through which noteholders agreed to exchange debt for equity and extend maturity terms. The company then launched a Consent Solicitation process through which a majority of noteholders agreed to amendments to the terms of their notes. Importantly, that majority was sufficient to bind the minority of non-consenting noteholders through the operation of relevant amendment provisions within the indentures.
The question on which the Determinations Committee had been split was whether or not a Restructuring Credit Event occurred prior to completion of the debt restructuring on 12 November 2025, because the process remained subject to a number of conditions until that time.
The Panel unanimously agreed with the submissions of the minority "yes" position that a relevant agreement with a sufficient number of noteholders may still bind all noteholders even if that agreement: (i) has not yet been implemented; and (ii) is subject to conditions to implementation (as distinct from conditions precedent to the existence of an agreement at all). The Panel was forced to analyse the nature of a consent solicitation process under English law on which there has not yet been any definitive authority, viewing it as an agreement by noteholders at the stage at which they consent to the process proposed by the issuer (rather than an offer by noteholders to the issuer), even if the restructuring to which they had agreed may, as a matter of fact, not eventuate. The Panel was not persuaded that an analysis of the nature of the conditionality was required or appropriate (it thus being irrelevant whether the conditions were administrative, procedural, or more material).
Applying that construction to the publicly available information, the External Review Panel agreed that there was a Restructuring Credit Event as of 29 September 2025 constituted by a combination of the Transaction Support Agreement and the agreed Consent Solicitations. By that stage, there was agreement between the Reference Entity and the requisite number of noteholders to pursue a consensual solution in respect of those notes by way of the Consent Solicitations and supplemental indentures. The agreement was capable of binding all holders of the notes because the necessary thresholds had been reached and indeed did bind all such noteholders, whether consenting or not. See the External Review Panel's determination here.
Jones Day was advocate for the Yes members and instructed Adam Al-Attar KC and Edoardo Lupi of South Square.
