New York Bankruptcy Court: Premature Allegations of Creditor Mistreatment Insufficient to Deny Chapter 15 Recognition of Foreign Restructuring Proceeding

As chapter 15 enters its third decade since enactment, U.S. cross-border bankruptcy jurisprudence has matured rapidly, leaving relatively few issues unaddressed by U.S. bankruptcy courts. Even so, courts considering whether to grant chapter 15 recognition to foreign bankruptcy cases still occasionally encounter uncharted or less-explored territory. One such case is In re ARD Finance, S.A., 2026 WL 817458 (Bankr. S.D.N.Y. Mar. 25, 2026), where the U.S. Bankruptcy Court for the Southern District of New York considered a petition seeking chapter 15 recognition of a judicial reorganization proceeding under Luxembourg's recently enacted bankruptcy law.

The court granted the petition and rejected a creditor group's objections that recognition should be denied based on alleged unfairness in the Luxembourg proceeding that would make recognition manifestly contrary to U.S. public policy. According to the bankruptcy court, recognition was warranted because: (i) the rules and procedures governing the proceeding under Luxembourg law were fundamentally fair; (ii) the petition otherwise satisfied chapter 15's recognition requirements; and (iii) the creditor group's allegations were premature because the Luxembourg court had not confirmed a restructuring plan and all creditors retained the right to participate fully and raise objections in the proceeding, including the right to appeal an order approving a plan.

Procedures, Recognition, and Relief Under Chapter 15

Chapter 15 was enacted in 2005 to govern cross-border bankruptcy and insolvency proceedings. It is patterned on the UNCITRAL Model Law on Cross-Border Insolvency and is premised upon the principle of international comity. Under section 1515 of the Bankruptcy Code, the representative of a foreign debtor may file a petition in a U.S. bankruptcy court seeking "recognition" of a "foreign proceeding." The basic requirements for recognition are outlined in section 1517(a): (i) the proceeding must be a "foreign main proceeding or foreign nonmain proceeding" within the meaning of section 1502; (ii) the "foreign representative" must be a "person or body"; and (iii) the petition must satisfy the requirements of section 1515. A foreign "main" proceeding is a case pending in the country where the debtor's center of main interests ("COMI") is located. 11 U.S.C. § 1502(4). A debtor's COMI is presumed to be the location of its registered office. See 11 U.S.C. § 1516(c).

Section 101(23) of the Bankruptcy Code defines "foreign proceeding" as: 

[A] collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.

A "collective" proceeding—a requirement for recognition—considers the rights and obligations of creditors generally, rather than a proceeding instituted for the benefit of a single creditor or class of creditors. See Armada (Singapore) Pte Ltd. (In re Ashapura Minechem Ltd.), 480 B.R. 129, 136 (S.D.N.Y. 2012). Hallmarks of a collective proceeding include adequate notice to creditors, provisions for the distribution of assets in accordance with statutory priorities, and a mechanism for creditors to seek court review of developments. Id. at 137. 

Section 1506 of the Bankruptcy Code provides a "public policy exception," stating that "[n]othing in this chapter prevents the court from refusing to take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States." The exception requires a "narrow reading" and is reserved for actions that are "manifestly contrary" to "the most fundamental policies of the United States." In re Fairfield Sentry Ltd., 714 F.3d 127, 139 (2d Cir. 2013); accord In re ABC Learning Ctrs. Ltd., 728 F.3d 301, 309 (3d Cir. 2013); In re Vitro S.A.B. de CV, 701 F.3d 1031, 1069 (5th Cir. 2012).

ARD Finance

ARD Finance, S.A. (the "debtor"), a financing and investment holding company incorporated and headquartered in Luxembourg, is part of the Ardagh Group ("Ardagh"), a global metal and glass packaging conglomerate. The debtor had no material business operations of its own; it served as a holding and financing vehicle within the Ardagh corporate structure. The debtor is the majority shareholder of the Ardagh Group, S.A. ("AGSA") and a 100% shareholder of ARD Group Finance Holdings S.A. ("AGFH"), both of which are also Luxembourg companies. The indirect parent corporation of AGSA is ARD Finance S.A. ("ARDF"). The debtor's directors reside in Luxembourg, where the debtor conducts board meetings, has bank accounts, and maintains its books and records.

In 2019, the debtor issued two series of euro- and dollar-denominated senior secured payment-in-kind notes (the "PIK notes") under an indenture governed by New York law with a New York forum-selection clause. As of 2025, approximately €860 million and $986 million of the PIK notes remained outstanding.

Through various subsidiaries, Ardagh had also issued a series of senior secured and senior unsecured notes (the "Ardagh notes").

In July 2025, AGSA announced that it would implement a recapitalization transaction (the "Ardagh restructuring") to address Ardagh's financial difficulties. Under the transaction, Ardagh would deleverage in a debt-for-equity exchange and receive a $1.5 billion new capital infusion. Under a July 28, 2025, transaction support agreement (the "TSA") among Ardagh, creditors holding both Ardagh notes and PIK notes (the "cross-holders"), and Ardagh's majority shareholder ("EquityCo"), but excluding the debtor and PIK noteholders who were not cross-holders, substantially all of Ardagh's new equity would be given to cross-holders, $300 million would be paid to EquityCo, and PIK noteholders who were not cross-holders would receive only 7.5% of Ardagh's new equity.

The TSA also provided that, if the debtor were unable to attain the necessary threshold for PIK noteholder consent to the restructuring (90%), the debtor would commence an English scheme of arrangement to bind nonconsenting creditors, but without the debtor's support.

In September 2025, the debtor and certain affiliates initiated a consent solicitation for the Ardagh restructuring, but they were unable to obtain the required PIK noteholder consent. The debtor instead signed a restructuring implementation agreement with its subsidiaries, its shareholder ARD Securities Finance Sarl ("ARD"), and its subsidiaries' creditors under which the indenture trustee for the PIK notes would foreclose on the debtor's equity interests and commence a judicial reorganization proceeding ("JRP") under Luxembourg's newly enacted insolvency law (effective November 1, 2023).

On November 12, 2025, Ardagh launched a private exchange pursuant to which approximately 80% of the PIK noteholders agreed to swap their notes for 7.5% of Ardagh's new equity as part of the Ardagh restructuring, after which the PIK noteholders' security interest would be extinguished.

That same day, the debtor filed an application in a Luxembourg court to commence a JRP (the "Luxembourg proceeding") to restructure its liabilities under the PIK notes. Under the debtor's proposed restructuring plan: (i) the PIK notes would be exchanged for equity; (ii) ARD would take all necessary actions to facilitate the exchange; and (iii) EquityCo would transfer certain equity interests to the debtor for nominal value, thereby providing former PIK noteholders with an indirect economic interest (as future shareholders of the reorganized debtor) in Ardagh.

On November 13, 2025, certain PIK noteholders sued the debtor in a New York state court seeking $250 million in damages arising from an alleged default under the PIK note indenture (the "state court action").

The Luxembourg court granted the debtor's application to commence the Luxembourg proceeding on December 3, 2025.

On December 14, 2025, after the debtor opened a bank account in New York in which it deposited an attorney retainer, the debtor's foreign representative (the "FR") filed an application in the U.S. Bankruptcy Court for the Southern District of New York (the "bankruptcy court") seeking chapter 15 recognition of the Luxembourg proceeding as a foreign main proceeding. The FR also sought pre-recognition provisional relief in the form of an order enjoining continuation of the state court action. The parties later agreed to suspend that litigation until the bankruptcy court issued its decision on the chapter 15 recognition petition.

An ad hoc group of PIK noteholders (the "AHG") objected to chapter 15 recognition of the Luxembourg proceeding. According to the AHG, the Luxembourg proceeding was the "culmination, rather than the consummation" of the debtor's restructuring because the Luxembourg proceeding was commenced after the completion of the Ardagh restructuring, which occurred without any court supervision. According to the AHG, as a consequence of the Ardagh restructuring, the debtor no longer held any equity interests (which it had exchanged for little or no consideration) when it commenced the Luxembourg proceeding, and the proceeding lacked any equitable, economic, or legal justification.

The AHG contended that the debtor had refused to provide the AHG with information regarding the terms of the Ardagh restructuring, including the cancellation of the PIK noteholder's security interest. Without this "lien stripping," the AHG maintained, the PIK noteholders would qualify as "extraordinary" creditors, whose consent was required for the approval of a restructuring plan in the Luxembourg proceeding. 

In addition, the AHG argued that the Luxembourg proceeding threatened the PIK noteholders' due process rights because that proceeding would not address the legitimacy of the $300 million payment made to EquityCo as part of the Ardagh restructuring. The AHG also contended that awarding value to existing equity—EquityCo—while wiping out structurally senior debt—the PIK notes—is contrary to the "absolute priority rule" mandating the payment of creditors in full before equity can receive any value. 

According to the AHG, this senior creditor wipeout was orchestrated in the nonjudicial Ardagh restructuring because it would likely not be permitted in the Luxembourg proceeding under applicable law. The AHG also claimed that chapter 15 recognition of the Luxembourg proceeding would be manifestly contrary to U.S. public policy because it was premised on the consent of insiders to outvote the PIK noteholders and would permit the debtor to place its equity interests beyond the reach of its creditors. 

Finally, the AHG argued that the Luxembourg proceeding should not be recognized under chapter 15 because it was not a "collective proceeding" within the meaning of sections 101(23) and 1517 of the Bankruptcy Code. The AHG asserted that the Luxembourg court could not examine the circumstances of the Ardagh restructuring and forbade intervention by creditors directly affected by that restructuring. The AHG argued that these limitations curtailed creditor participation and upended creditor protections that are fundamental to "collective" procedures under the Bankruptcy Code. In the AHG's view, the Luxembourg proceeding failed to provide creditors with meaningful court review of their treatment and classification under any restructuring plan, including as unsecured creditors whose rejection votes could be overridden by insider creditors. 

The Bankruptcy Court's Ruling 

The bankruptcy court granted the petition for chapter 15 recognition of the Luxembourg proceeding as a "foreign main proceeding." 

Initially, in accordance with relevant Second Circuit precedent holding that the eligibility requirements for debtors in cases under other chapters of the Bankruptcy Code also apply to chapter 15 debtors, Chief U.S. Bankruptcy Judge Martin Glenn ruled that the debtor was eligible for chapter 15 relief because it had property in the United States in the form of an undrawn attorney retainer in a U.S. bank account and contract rights governing U.S. dollar-denominated debt subject to a New York choice-of-law and forum-selection clause. Ardagh Finance, 2026 WL 817458, at **12–13, 18. He also concluded that venue of the chapter 15 case was proper in the Southern District of New York pursuant to 28 U.S.C. § 1410. 

The bankruptcy court then determined that the Luxembourg proceeding should be recognized as a foreign proceeding. In so ruling, Judge Glenn rejected the AHG's argument that the Luxembourg proceeding was not a "collective" proceeding within the meaning of section 101(23) of the Bankruptcy Code. Among other things, he explained that the proceeding was judicially supervised and administered under statutory requirements governing creditor classification, voting procedures, and local and international creditor safeguards. 

He also concluded that the AHG's objections to the Luxembourg court's preliminary refusal to review the treatment of the PIK noteholders in the Ardagh restructuring did not show prejudice to creditor interests. Rather, the PIK noteholders and other creditors retained the right to participate in the Luxembourg proceeding, challenge the proposed treatment of their claims under a restructuring plan, vote against the plan, and appeal any order confirming a plan over their objections. Id. at **18–19. 

In concluding that the Luxembourg proceeding should be recognized as a foreign main proceeding, the bankruptcy court found that the debtor's COMI was in Luxembourg—its country of incorporation and the location of its registered office, books and records, directors, board meetings, and some of its bank accounts. Id. at *19. The court also held that the FR was a "person or body" as required by sections 1517(a) and 101(41) of the Bankruptcy Code and otherwise satisfied chapter 15's requirements for recognition. 

Finally, the bankruptcy court held that chapter 15 recognition of the Luxembourg proceeding was not manifestly contrary to public policy within the meaning of section 1506 of the Bankruptcy Code. According to Judge Glenn, the AHG's argument that recognition would offend U.S. public policy because the Luxembourg court would not examine the facts and circumstances of the prior Ardagh restructuring was premature because the Luxembourg court had not yet ruled on that objection. Moreover, he noted, even if the Luxembourg court were to decline to examine the Ardagh restructuring, that alone would not show that the Luxembourg proceeding was contrary to U.S. public policy, especially given the robust creditor protections under Luxembourg law. Id.

Outlook

The bankruptcy court's ruling in Ardagh Finance is noteworthy for a number of reasons. First, it represents the first time that a U.S. bankruptcy court has considered and granted recognition of a JRP under Luxembourg's 2023 bankruptcy law. Although Luxembourg has not implemented the Model Law, its enactment of a new bankruptcy law in 2023 designed to promote reorganization, rather than liquidation, of financially distressed businesses by means of JRPs represents progress in both domestic and cross-border cases. Ardagh Finance indicates that the structure and fundamental fairness of Luxembourg JRPs will likely satisfy the requirements for chapter 15 recognition in the United States.

More broadly, Ardagh Finance illustrates a strategy that is increasingly common among large corporate groups: utilizing existing entities that are obligors or guarantors of (or that can be easily added as obligors or guarantors of) group debt as vehicles to access non-U.S. restructuring regimes. Many jurisdictions—including the United Kingdom and the Netherlands—do not require the entire corporate group to be a debtor in a proceeding, allowing a single entity within the group to serve as the restructuring vehicle for a comprehensive group-wide restructuring. In Ardagh Finance, the debtor—a Luxembourg holding company with no material business operations—was precisely such a vehicle, and its use of Luxembourg's new JRP framework to restructure debt held at the entity level underscores the flexibility and appeal of these regimes for multijurisdictional groups.

The ruling also reinforces the limited role of the public policy exception in chapter 15. Public policy objections remain difficult to establish and will be sustained only in narrow circumstances, particularly where the foreign proceeding provides meaningful procedural protections and the asserted objections are premature or can be addressed in the foreign court.

A separate takeaway is that recognition of a foreign proceeding does not automatically result in recognition or enforcement of every order entered in that proceeding and that parties should pursue their rights abroad in the first instance. The bankruptcy court emphasized that no plan had yet been approved by the Luxembourg court and that the foreign representative would need to return to the U.S. court if it later sought enforcement of any confirmed plan in the United States. This distinction is important for creditors and other parties in interest. Chapter 15 recognition is an ancillary process and is not a substitute for participation in the main proceeding. Indeed, parties should actively pursue objections to (and appeals of decisions regarding) plan treatment, claim classification, voting rights, or other substantive issues in the foreign proceeding. A chapter 15 court will not sit as an appellate court and second-guess the main restructuring court's final, non-appealable decisions. 

Borrowers and their sponsors have long used liability management exercises or transactions ("LMEs") to create runway, preserve liquidity, and rationalize capital structures outside judicial restructuring proceedings. These transactions include "uptiers," "double-dips," "drop-downs," non-pro rata exchanges, debt-for-debt tenders, and rights offerings tailored to reward cooperation and speed. LMEs are designed to address the high cost of unanimity in widely held capital structures, as well as the flexibility modern credit agreements provide to amend with majority consent as long as "sacred rights" are not changed without each affected lender's consent. These and similar strategies are becoming increasingly common in restructuring situations in both the United States and Europe. The risk is that the LME may not solve the borrower's underlying financial distress, leaving the borrower to seek a later in-court restructuring or face lender-on-lender litigation, sometimes in connection with an in-court proceeding.

Recently, such conflicts have erupted prominently in the United States in both out-of-court restructurings and high-profile bankruptcy cases, including the chapter 11 cases of Serta Simmons, Incora/Wesco, ConvergeOne, and STG Logistics. Despite confirmation of chapter 11 plans incorporating the terms of LMEs, sophisticated lenders benefiting from such transactions have largely been unable to avoid appellate review of plan confirmation orders under the doctrine of "equitable mootness." That judge-fashioned doctrine may preclude appellate review of a confirmation order if a plan has been "substantially consummated" and reversal or modification of the order would be impossible or would undermine the reorganization. Appellate courts may be less willing to apply equitable mootness when they perceive that participating lenders, after foreseeable adverse appellate consequences, are invoking the doctrine to preserve what the courts view as "ill-gotten gains."

Ardagh Finance is a European chapter in the same narrative, albeit in a different context. The PIK noteholders' core complaint in Ardagh Finance is that they are being squeezed out, and rendered unsecured, by new senior secured lenders in an overarching restructuring transaction. If the Luxembourg court rejects the noteholders' challenge to the legitimacy of that transaction in the Luxembourg proceeding, it remains to be seen whether the U.S. bankruptcy court will enforce it in the United States as a matter of comity.

Read the full Business Restructuring Review.