In the matter of Chaptre Finance Plc
[2023] EWHC 1665 (Ch)
Atento UK Limited & Anor, Re
20 October 2023
[2023] EWHC 2754 (Ch)
High Court
Two companies are in financial trouble and need to restructure their debts. A judge said it's okay for them to hold a meeting with their lenders to agree a plan to help them pay off their debts and get new investment. The plan involves changing some existing debts, getting rid of others and giving some lenders new shares in the company as part of the deal.
Key Facts
- •Atento UK Limited and Atento Luxco 1 (Plan Companies) applied for an order under section 901C of the Companies Act 2006 to convene creditor meetings for restructuring plans.
- •The Atento Group faces severe financial difficulties and a liquidity shortfall by December 1, 2023.
- •The restructuring involves a US$76 million injection (Exit Financing), with US$58 million from Plan Creditors and US$18 million from an affiliate.
- •Four classes of creditors (Plan Creditors) are involved: Class A (existing 2025 notes), Class B (new money 2025 notes), Class C (new junior lien notes), and Class D (2026 notes and Swap Providers).
- •The plans involve amending/restatement of notes, extinguishing some liabilities, and allocating ordinary shares in Atento Luxco 1.
- •A significant portion of Plan Creditors (e.g., ~76% of Class A, 100% of Class B and C, ~54% of Class D) have irrevocably acceded to the Restructuring Support Agreement (RSA).
- •The relevant alternative to the restructuring plan is a Group-wide liquidation.
- •The court considered adequacy of notice, jurisdictional requirements, class composition, and other potential roadblocks.
- •The court found that the proposed restructuring plans satisfy the requirements for convening creditor meetings.
Legal Principles
Companies Act 2006, section 901C allows for convening creditor meetings for restructuring plans.
Companies Act 2006
A company under section 901A of the Companies Act 2006 is defined as any company liable to be wound up under the Insolvency Act 1986.
Companies Act 2006, section 901A(4)(b)
Adequacy of notice is fact-sensitive; considerations include the sophistication of creditors and urgency.
Case law (implied)
In identifying the relevant alternative, directors are normally in the best position to identify what will happen if a scheme or plan fails.
ED&F Man Holdings Limited [2022] EWHC 687 (Ch) at paragraph 39
Class composition requires that creditors within a class have similar rights and that the class cannot be further meaningfully subdivided; consideration is given to whether any differences in treatment would materially influence creditors' voting decisions.
Re PizzaExpress Financing 2 Limited [2020] EWHC 2873 (Ch); Re Noble Group Limited [2019] BCC 349; Re PGS ASA [2020] EWHC 3622 (Ch)
Consent fees do not necessarily fracture a class if they are not likely to materially influence voting decisions, especially when available until the meeting and when the alternative is substantially worse.
Re Noble Group Limited [2019] BCC 349; Re PGS ASA [2020] EWHC 3622 (Ch)
Adviser fees payable irrespective of plan sanction do not fracture a class.
Case law (implied)
Outcomes
The court granted the convening order.
The court found that the Plan Companies met the requirements for convening creditor meetings under section 901C of the Companies Act 2006. Adequate notice was given, jurisdictional requirements were likely to be met at the sanction hearing, and the proposed class composition was appropriate. The court addressed concerns regarding the consent fees and found they did not fracture the class.