Following on from our Commercial Litigation and Investigations predictions, our partners share their insights into some of the key financial and restructuring litigation themes for the year ahead.
Please contact us or reach out to your usual Pallas relationship partner if you have any questions or would like further information on these topics.
2026 is the Year of ‘Private Credit Litigation’
The market has long been discussing the ‘private credit’ boom, and we predict that we are on the cusp of a wave of related litigation. With its sheer scale, fast growth, increased diversification and questions around transparency, litigation is around the corner, driven from within, by external economic volatility or – more likely – a combination of both.
2025 saw Tricolor and First Brands grab all of the headlines; we have already considered how these situations got DOJ and SEC attention which is not going away.
Turning to the civil courts – particularly in London and New York – we predict that, whilst Tricolor and First Brands are not one-offs, they are a sign of things to come.
What type of issues will be in dispute? We predict valuation, transparency, diligence and marketing, use of PIK, and risk management. These issues may find their form in a misrepresentation claim, breach of mandate/duty of care, or contractual claims around valuations, against borrowers, fund managers and third parties (auditors, valuation agents, etc).
Finally, will these disputes fight all of the way through the courts? 2026 may be too early to see much of that, but we predict that the ultimate answer is “yes”: the amounts at stake will be too large, the need to place blame too big, and some of the issues too uncertain to avoid the big cases we’re expecting to see.
Restructuring Plans: Does Withdrawal of the UKSC Appeal in Waldorf Productions mean “Risky Business” or “Back to the Future” for Cram Down and Restructuring Plans?
By Neil Pigott
The withdrawal of the appeal in Waldorf Productions UK PLC1, for certain, misses an opportunity for the UK Supreme Court’s guidance on the fairness test for cram down in restructuring plans (RPs). Then again, this creates a “Back to the Future” moment – which may not be a bad thing.
The Court of Appeal decisions in Adler2, Thames Water3 and Petrofac4 (RP trio) established that the Court’s sanction of an RP over a dissenting voting class must satisfy a modified fairness test:
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- What this means: the Court tests the fairness of allocation of value preserved or created by an RP. This involves a holistic assessment of each RP on its facts and whether that RP would be regarded as fair and reasonable by an honest approving class member.
- What this does not mean: An RP still does not need to be the best plan available; it need only satisfy the tests for Court sanction.
We predict:
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- The new Practice Statement (applicable from 1 January 2026) in action will telegraph the Court’s approach to the fairness test (following the RP trio), reducing uncertainty.
- An RP’s relevance will develop as an alternative, looming over and incentivising out of court deals (including, for example, in liability management exercises).
The Rise of Creditor-on-Creditor Litigation
As liability management exercise (LME) activity continues to accelerate throughout 2026, we expect to see a corresponding rise in creditor disputes.
LMEs often pit creditors against one another by rearranging lender priority and redistributing value. Accordingly, these transactions are particularly susceptible to legal challenge, especially from minority lenders excluded from the transaction.
In the US, 2026 is already seeing a growing number of creditor disputes involving creditor cooperation agreements, alleged violations of lenders’ “sacred rights,” and challenges to non-pro rata exchanges. Given these trends, we expect creditors will continue to vigorously challenge LMEs, giving rise to more creditor-on-creditor litigation.
LME transactions have likewise begun to permeate the UK market. If recent trends in the US are any indicator, we predict a wave of creditor disputes are sure to follow.
To view our team’s commercial litigation predictions, please click here, and to view our investigations predictions, please click here.
1 UKSC/2025/0169
2 Strategic Value Capital Solutions Master Fund LP & Ors v AGPS BondCo PLC [2024] EWCA Civ 24
3 Kington S.à r.l., Thames Water & anr v Thames Water Utilities Holdings & ors [2025] EWCA Civ 475
4 In the matter of Petrofac Limited and Petrofac International (UAE) LLC [2025] EWCA Civ 821