By Leonard Klingbaum, Matthew Czyzyk, Sam Badawi, Nitin Konchady, Faiza N. Rahman, Matthew M. Roose, Natalie Blanc, Natalie Raine, and Alisha Turak (Ropes & Grey)
Ropes & Gray analyzes Fossil Group, Inc.’s recent restructuring transaction, focusing on how Fossil used a combination of U.S. securities law techniques and an English restructuring process to address upcoming debt maturities and overcome insufficient creditor participation in a traditional exchange offer.
Fossil faced a looming maturity of approximately $150 million in unsecured notes due in November 2026. Ownership of the notes was concentrated, with roughly 60 percent held by two institutional investors and the remainder widely held by retail investors. To extend maturities and improve liquidity, Fossil entered into a transaction support agreement with the majority holders, who agreed to participate in and backstop a $32.5 million SEC-registered rights offering of first-out first-lien notes. At the same time, Fossil launched a registered exchange offer allowing all noteholders to exchange their existing unsecured notes for new secured notes due in 2029.
Under the exchange, participating holders could receive higher-priority first-out notes bearing a higher interest rate, while non-participants could exchange into lower-priority second-out notes with a lower coupon. Consenting holders also received consent fees in the form of additional notes, and all exchanging holders received warrants, with additional equity incentives provided to rights-offering participants. The transaction was structured to require at least 90 percent participation to achieve the desired amendments and refinancing.
Although the exchange offer achieved strong participation, it fell short of the required threshold, reaching approximately 84 percent. Rather than abandoning the transaction or pursuing a U.S. Chapter 11 filing, Fossil turned to an English restructuring mechanism under Part 26A of the UK Companies Act. To establish jurisdiction and ensure enforceability, Fossil created a UK subsidiary that guaranteed the notes and amended the governing law of the indenture from New York law to English law with creditor consent.
The English restructuring plan allowed Fossil to bind all noteholders with approval from 75 percent in value of the voting creditors in the relevant class, without any requirement for a majority in number. At the plan meeting, holders representing nearly all of the voting debt approved the plan, with overwhelming support. The English court sanctioned the plan on November 10, and a U.S. bankruptcy court subsequently recognized and enforced it through a Chapter 15 proceeding two days later.
The transaction is significant as the first known instance of a U.S.-listed company restructuring U.S.-law debt through an English plan of arrangement. The article highlights the growing relevance of English restructuring tools as an alternative to U.S. exchange offers and Chapter 11, particularly where participation thresholds cannot otherwise be met. While English plans can be faster and more flexible, the article notes that English courts closely scrutinize fairness and economic treatment, limiting the ability to extract outsized premiums for select creditor groups. Despite higher costs, the Fossil transaction demonstrates that cross-border restructuring strategies can provide a powerful solution in complex distressed debt situations.
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