Relevant alternative

The relevant alternative is a finding of fact, not a formality. The court decides what would most likely occur without the plan, and in a distressed case that is usually an administration, an accelerated sale of the business, or a break up. Each dissenting class is then measured against that scenario.

Because the no worse off test compares the plan to that scenario and to nothing else, the comparator does most of the work. A class that recovers nothing in the relevant alternative is close to impossible to make worse off, so almost any consideration under the plan clears the test.

That is why the valuation evidence is fought so hard. A dissenting class trying to defeat cram down rarely attacks the plan itself. It argues that the court has chosen the wrong alternative, or that the alternative is worth more than the company says, because moving the comparator is the only route to showing the class is worse off.

It also explains why a liquidation analysis gets prepared when nobody intends to liquidate. The comparator is not what the parties want to happen, it is what the court believes would happen, so establishing it is an evidential exercise rather than a negotiating position.