In the matter of Chaptre Finance Plc
[2023] EWHC 1665 (Ch)
In the matter of Yunneng Wind Power Co, Ltd
26 July 2023
[2023] EWHC 2111 (Ch)
High Court
A Taiwanese company needs money to finish a big wind farm. It asked a UK court for permission to get its lenders to agree to a rescue plan. The court said yes because the plan is fair and the lenders have been properly told about it, despite it being a quick turnaround.
Key Facts
- •Yunneng Wind Power Co. Ltd. (the "Company") applied for an order to convene five meetings of its finance creditors (the "Plan Creditors") to consider a Restructuring Plan under Part 26A of the Companies Act 2006.
- •The Company, a Taiwanese company, is experiencing severe financial difficulties and faces an imminent liquidity shortfall.
- •The Plan proposes up to €1.7 billion of new funding to address liquidity issues and complete the Yunlin offshore wind farm project.
- •The Plan requires amendments to finance documents, necessitating creditor consent or the use of cross-class cram-down provisions.
- •Plan Creditors are expected to receive returns of 90-100% under the Plan, compared to 2.38-9.94% in a Taiwanese bankruptcy.
- •All financing documents are governed by English law, providing jurisdiction for the English court.
- •The Company's financial difficulties stem from external factors (pandemic, inflation, war in Ukraine) and internal factors.
- •The Plan involves adjustments to the financing structure, including a super-priority "Super Senior Facility" and changes to the priority of existing debt.
Legal Principles
A foreign company can be subject to a restructuring plan under Part 26A of the Companies Act 2006 if it has a sufficient connection with England and Wales.
Case law
A sufficient connection exists where the claims subject to the plan are governed by English law and the English courts are given jurisdiction by the finance documents.
Case law
Conditions A and B of section 901A CA 2006 must be satisfied: financial difficulties affecting the ability to carry on business, and a proposed compromise or arrangement to mitigate those difficulties.
Section 901A CA 2006
A class of creditors must be confined to those whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.
Re Hawk Insurance Company Ltd [2002] BCC 300, Sovereign Life Assurance v Dodd [1892] 2 QB 573, Re UDL Holdings Ltd [2002] 1 HKC 172, Re Gategroup [2021] EWHC 304 (Ch)
The legal rights of creditors, not their commercial interests or rights against third parties, determine class composition.
Re Noble Group Limited [2018] EWHC 2911 (Ch), Re Gategroup [2021] EWHC 304 (Ch)
Granting elevation rights (higher ranking for existing debt for those lending new money) does not necessarily fracture a class if available pro rata to all creditors.
Re ED&F Man Holdings Ltd [2022] EWHC 433 (Ch)
Cross-holdings do not impact class composition.
Re ColourOz Investment 2 LLC [2020] EWHC 1864 (Ch)
A lock-up agreement does not automatically fracture a class.
Re Telewest Communications plc (No. 1) [2004] EWHC 924 (Ch)
Outcomes
The court granted the order to convene five class meetings of Plan Creditors.
The court found that the proposed class composition was appropriate, considering the rights of creditors both currently and under the Plan, and in the alternative scenario of Taiwanese bankruptcy. The differences in rights between classes were not so dissimilar as to prevent consultation on common interests.
The court accepted that adequate notice had been given to Plan Creditors despite a shorter notice period than usual, due to the urgency of the situation and the sophisticated nature of the creditors.
The creditors had been kept informed through various means; they were sophisticated parties; and a delay would cause a liquidity crisis.