The Use of Mediation
in Restructuring Negotiations
September 2026
Mediation has emerged as a way to facilitate good-faith engagement and discussions among the plan company and its creditor and other stakeholder groups in Part 26A restructuring plans (RPs). Indeed, it has recently received express endorsement by the English court as a constructive tool for devising restructuring plans that fairly allocate the benefits of the restructuring.
In this article, we explore the advantages and possible limitations of mediation in the context of RP negotiations, and some recent English court decisions that are expected to prompt market participants to incorporate alternative dispute resolution (ADR) processes in parallel or in conjunction with their in-court restructuring processes.
Mediation has emerged as a way to facilitate good-faith engagement and discussions among the plan company and its creditor and other stakeholder groups in Part 26A restructuring plans (RPs). Indeed, it has recently received express endorsement by the English court as a constructive tool for devising restructuring plans that fairly allocate the benefits of the restructuring.
In this article, we explore the advantages and possible limitations of mediation in the context of RP negotiations, and some recent English court decisions that are expected to prompt market participants to incorporate alternative dispute resolution (ADR) processes in parallel or in conjunction with their in-court restructuring processes.
Formulating Restructuring Plans
The use of mediation in restructuring negotiations was met with the court’s approval in May 2026 in Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch). Given the success of Waldorf’s second restructuring plan, some industry professionals expect that an increasing number of distressed companies will rely on mediation to demonstrate genuine engagement with their creditors and evidence fairness of their proposed restructuring plans.
Commercial Mediation Volumes Increased 24% in Two years
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Source: CEDR Mediation Audit 2025. Estimated civil and commercial mediation market in England and Wales.
Formulating Restructuring Plans
The use of mediation in restructuring negotiations was met with the court’s approval in May 2026 in Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch). Given the success of Waldorf’s second restructuring plan, some industry professionals expect that an increasing number of distressed companies will rely on mediation to demonstrate genuine engagement with their creditors and evidence fairness of their proposed restructuring plans.
Commercial Mediation Volumes Increased 24% in Two years
Click to find out more
Source: CEDR Mediation Audit 2025. Estimated civil and commercial mediation market in England and Wales.
Advantages, Disadvantages and Potential Limitations
In this section, we explore the advantages and disadvantages of using mediation in RP negotiations and its potential limitations, along with other practical considerations that are relevant in this developing area of restructuring law1:
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Mediation enables parties to resolve preemptively complex issues that a court may be ill-equipped to handle, particularly where industry-specific knowledge is required, because mediators with relevant specialist experience can be appointed. |
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Mediation is context-dependent. Certain cases may be unsuitable due to structural complexity or the composition of creditors. |
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Pre-mediation information exchange can level the playing field between more and less sophisticated parties. |
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Some mediation processes can be protracted, and an unsuccessful mediation may exacerbate tensions between parties. |
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Mediation can be facilitative or evaluative and can be tailored to clarify positions or guide negotiations. |
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Mediation can be exploited strategically to obtain confidential information and strengthen one party’s negotiation position. |
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By bringing the parties together, mediation may save time and money in preparing back-and-forth proposals and enable parties to reach a fair, mutually agreed settlement. Effective mediation may even reduce RP costs enough to make restructuring plans viable for small or midsize companies (SMEs). |
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The absence of key creditors can impede the effectiveness of the mediation process. |
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Parties may not always have sufficient information to mediate effectively. |
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Pros |
Cons |
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|---|---|---|---|
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Mediation enables parties to resolve preemptively complex issues that a court may be ill-equipped to handle, particularly where industry-specific knowledge is required, because mediators with relevant specialist experience can be appointed. |
Mediation is context-dependent. Certain cases may be unsuitable due to structural complexity or the composition of creditors. |
||
|
Pre-mediation information exchange can level the playing field between more and less sophisticated parties. |
Some mediation processes can be protracted, and an unsuccessful mediation may exacerbate tensions between parties. |
||
|
Mediation can be facilitative or evaluative and can be tailored to clarify positions or guide negotiations. |
Mediation can be exploited strategically to obtain confidential information and strengthen one party’s negotiation position. |
||
|
By bringing the parties together, mediation may save time and money in preparing back-and-forth proposals and enable parties to reach a fair, mutually agreed settlement. Effective mediation may even reduce RP costs enough to make restructuring plans viable for small or midsize companies (SMEs). |
The absence of key creditors can impede the effectiveness of the mediation process. |
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Parties may not always have sufficient information to mediate effectively. |
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Following recent English court decisions like Waldorf, parties are incentivized to participate in these mediation sessions. If they do not, they risk being penalized by the court for taking a “cavalier” approach to mediation.
However, skeptics worry that mediation could become a standard practice that stakeholders will be obliged to participate in even if they do not in good faith intend to reach a commercially sensible compromise. This could unnecessarily drive up restructuring costs. Unless mediation is conducted entirely on an open basis, it may also be challenging for the court to scrutinize whether the parties have participated in the negotiations in good faith.
Restructuring Plans Registered in England and Wales More Than Doubled in 2025
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Source: The Insolvency Service, Company Insolvency Statistics, December 2025. The Insolvency Service, Company Insolvency Statistics, December 2025.
The equivalent December 2024 release records nine restructuring plans in 2024
Following recent English court decisions like Waldorf, parties are incentivized to participate in these mediation sessions. If they do not, they risk being penalized by the court for taking a “cavalier” approach to mediation.
However, skeptics worry that mediation could become a standard practice that stakeholders will be obliged to participate in even if they do not in good faith intend to reach a commercially sensible compromise. This could unnecessarily drive up restructuring costs. Unless mediation is conducted entirely on an open basis, it may also be challenging for the court to scrutinize whether the parties have participated in the negotiations in good faith.
Restructuring Plans Registered in England and Wales More Than Doubled in 2025
Click to find out more
Source: The Insolvency Service, Company Insolvency Statistics, December 2025. The Insolvency Service, Company Insolvency Statistics, December 2025.
The equivalent December 2024 release records nine restructuring plans in 2024
Confidentiality
In Waldorf, the court was informed that a two-day mediation had taken place, which parties had participated or declined to participate, and what the outcome had been (Meaning that no actual agreement had been reached during the mediation itself, but negotiations continued and ultimately led to the final compromise).
One of the distinctive features of mediation is the confidentiality of information shared and the without prejudice nature of the connected communications. This encourages parties to disclose their true bargaining positions without worrying that it might impact them negatively should negotiations break down.
A question therefore arises as to the appropriate level of disclosure to the court (and publicly) of the proposals and communications made during RP-related mediations. Consider mediations in bankruptcy cases in the Southern District of New York Bankruptcy Court. At the end of the mediation, mediators would file a report with the court confirming the parties’ compliance (or noncompliance) with the requirements of the court’s mediation procedures and whether the mediation was successful, but the substance of the negotiations and the mediator’s recommendations would not be disclosed.
The mediation procedures of the court expressly forbid the mediator and any party to the mediation from divulging any statements made during the mediation or using any records or documents provided in the mediation outside of the mediation unless otherwise admissible before the court. This approach permits basic transparency without breaching confidentiality protections from admissibility. Sophisticated and professionally advised parties will also agree the precise scope of their confidentiality arrangement through bespoke NDAs in advance.
Timing in the Restructuring Process
If parties are to effectively incorporate mediation in the restructuring process, it should ideally be done in the early stages (For example, before the practice statement letter is filed) to identify the central issues between the parties at the earliest opportunity and allow ample time for negotiations. Of course, a balance has to be struck between the need to avoid delaying the court process on one hand and the potential ineffectiveness of forcing premature negotiations to take place before creditors gain sufficient visibility of the company’s assets and operations to understand their bargaining positions.
Timing of Mediation in the Restructuring Process
If parties are to effectively incorporate mediation in the restructuring process, it should ideally be done in the early stages (For example, before the practice statement letter is filed) to identify the central issues between the parties at the earliest opportunity and allow ample time for negotiations. Of course, a balance has to be struck between the need to avoid delaying the court process on one hand and the potential ineffectiveness of forcing premature negotiations to take place before creditors gain sufficient visibility of the company’s assets and operations to understand their bargaining positions.
The Court’s Approach to the Dissenting Class and Restructuring Negotiations
As discussed above, the use of mediation in restructuring negotiations has been endorsed by the English court in Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch). This case concerned a second restructuring plan proposed by the company (“RP2”) after the court declined to sanction an earlier restructuring plan (“RP1”) proposed back in 2025. This decision was heavily influenced by the fact that Waldorf failed to engage with its “underwater” creditors2.
In RP1, Waldorf sought the court’s sanction of a plan that was rejected by the Group’s unsecured creditors, consisting of Capricorn Energy Plc and Capricorn Energy UK Limited (together, “Capricorn”) and HM Revenue and Customs (“HMRC”) in respect of certain tax liabilities arising under the Energy (Oil and Gas) Profits Levy Act 2022.
In declining to exercise the court’s discretion to cram down the unsecured creditors, Mr. Justice Hildyard found that Waldorf made no attempt to involve the unsecured creditors in the development of the proposed plan or the wider restructuring before RP1 was launched. This was likely because they were assumed to be out-of-the-money in the relevant alternative and, based on prevailing RP jurisprudence at the time, needed only to be offered a de minimis amount of the restructuring surplus. This was even though Capricorn actively sought to negotiate a settlement with Waldorf.
In parallel with the Waldorf RP, the court’s attitude toward treatment of the dissenting class shifted drastically following a trilogy of Court of Appeal decisions in AGPS BondCo, Thames Water and Petrofac3. The court’s focus moved to the relative treatment of creditor classes and whether the allocation of the benefits of the restructuring between the creditor classes is fair4.
In particular, the Court of Appeal clarified in Re Petrofac that the cross-class cramdown power “was not designed as a tool to enable assenting classes to appropriate themselves an inequitable share of the benefits of the restructuring5.” The court also found that the proper use of such power is “to enable a plan to be sanctioned against the opposition of those unreasonably holding out for a better deal, where there has been a genuine attempt to formulate and negotiate a reasonable compromise between all stakeholders6.”
The result is that, while not a precondition to sanction, adequate and meaningful engagement with the dissenting class has become an important basis for assessing whether the envisaged benefits of the plan are fairly allocated among the classes and gauging the upper limits to the expectations of the dissenting class. Consequently, the plan company would find it highly difficult to discharge its burden of establishing that the proposed plan is fair in the absence of such engagement.
After RP1 failed, the parties went back to the drawing board and formulated RP2, which was ultimately sanctioned by Mr. Justice Green in May 2026. From the two judgments, the difference in outcome between Waldorf’s restructuring plans is largely attributable to the stakeholders’ respective efforts in engaging with one another to negotiate the restructuring terms.
The result is that, while not a precondition to sanction, adequate and meaningful engagement with the dissenting class has become an important basis for assessing whether the envisaged benefits of the plan are fairly allocated among the classes and gauging the upper limits to the expectations of the dissenting class. Consequently, the plan company would find it highly difficult to discharge its burden of establishing that the proposed plan is fair in the absence of such engagement.
After RP1 failed, the parties went back to the drawing board and formulated RP2, which was ultimately sanctioned by Mr. Justice Green in May 2026. From the two judgments, the difference in outcome between Waldorf’s restructuring plans is largely attributable to the stakeholders’ respective efforts in engaging with one another to negotiate the restructuring terms.
In developing RP2, Waldorf engaged extensively with all plan creditors. This included a two-day mediation in October 2025 to which all relevant creditors were invited to discuss an initial proposal put forward by a steering committee of secured bondholders (“SteerCo”) in the assenting class.
The court recognized that the use of mediation was unique for such a plan and that “the use of mediation in these circumstances to find agreement among the stakeholders is to be encouraged.” The mediation session was at least partially successful in that it kept SteerCo and Capricorn in constructive dialogue and eventually swayed the latter (who voted against RP1) into reaching a compromise and finally voting in favor of RP2.
In developing RP2, Waldorf engaged extensively with all plan creditors. This included a two-day mediation in October 2025 to which all relevant creditors were invited to discuss an initial proposal put forward by a steering committee of secured bondholders (“SteerCo”) in the assenting class.
The court recognized that the use of mediation was unique for such a plan and that “the use of mediation in these circumstances to find agreement among the stakeholders is to be encouraged.” The mediation session was at least partially successful in that it kept SteerCo and Capricorn in constructive dialogue and eventually swayed the latter (who voted against RP1) into reaching a compromise and finally voting in favor of RP2.
This left HMRC as the sole dissenting creditor of RP2, who refused to participate in the mediation session and opposed the sanction of the plan, citing its constitutional mandate to collect and manage taxes. While acknowledging HMRC’s particular position as an involuntary creditor with no ability to negotiate the terms of its relationship with a taxpaying company and agreeing that the court should accord great weight to its status and views on fairness of the plan, the court ultimately sided with the plan company and respected the heavily negotiated compromise struck between the plan company and its other creditors.
Both the High Court and the Court of Appeal refused to give HMRC leave to appeal the decision.
This left HMRC as the sole dissenting creditor of RP2, who refused to participate in the mediation session and opposed the sanction of the plan, citing its constitutional mandate to collect and manage taxes. While acknowledging HMRC’s particular position as an involuntary creditor with no ability to negotiate the terms of its relationship with a taxpaying company and agreeing that the court should accord great weight to its status and views on fairness of the plan, the court ultimately sided with the plan company and respected the heavily negotiated compromise struck between the plan company and its other creditors.
Both the High Court and the Court of Appeal refused to give HMRC leave to appeal the decision.
Conclusions
Whether mediation and other ADR methods will become prevalent in the RP context remains to be seen, but what is certain from the recent court decisions discussed in this article is that the court appreciates and actively encourages parties to engage in constructive dialogue with one another to reach a consensual solution. Furthermore, it exercises its cross-class cramdown powers in accordance with this spirit. All stakeholders in future restructurings involving a UK RP should pay heed to this guiding principle and approach the bargaining table with this in mind.
Conclusions
Whether mediation and other ADR methods will become prevalent in the RP context remains to be seen, but what is certain from the recent court decisions discussed in this article is that the court appreciates and actively encourages parties to engage in constructive dialogue with one another to reach a consensual solution. Furthermore, it exercises its cross-class cramdown powers in accordance with this spirit. All stakeholders in future restructurings involving a UK RP should pay heed to this guiding principle and approach the bargaining table with this in mind.
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