VTB Capital Plc (in administration), Re
[2024] EWHC 1777 (Ch)
Praesidiad Limited, Re
17 October 2023
[2023] EWHC 2745 (Ch)
High Court
A company needs its creditors to agree to a debt fix. One creditor, a Russian bank under sanctions, can't fully participate due to regulations but the court says the fix can still happen and the other creditors will vote on it.
Key Facts
- •Praesidiad Ltd (the Company) applied for an order convening a creditor meeting to approve a scheme of arrangement under Part 26 of the Companies Act 2006.
- •The Company is an intermediate holding company in a group providing security solutions, operating in ~100 countries.
- •The Group faces financial distress due to post-COVID rising raw material and production costs, impacting revenue and liquidity.
- •The relevant creditors are lenders under a Senior Facilities Agreement (SFA) with significant debt (€290m + US$35m + €80m).
- •A restructuring plan, including an equity swap, was agreed in principle with an Ad Hoc group of lenders.
- •95.58% of SFA lenders support the scheme, except Bank GPB International SA (Luxembourg subsidiary of a Russian bank subject to sanctions).
- •An Interim Facilities Agreement (IFA) provides interim finance (€25m) to sustain the Group.
- •The scheme involves the Sponsor transferring Group ownership to scheme creditors for £1, with creditors receiving shares in a new Topco.
- •The SFA and IFA indebtedness will be reorganized into new facilities; regulatory approvals and a sanctions license are needed.
- •Bank GPB opposes the scheme, arguing it should be a separate creditor class due to sanctions restrictions and should have voting rights.
Legal Principles
A class of creditors must be composed of those whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.
Sovereign Life Assurance v Dodd [1892] 2 QB 573
The analysis of creditor rights involves examining rights against the scheme company to be released or varied, and new rights granted under the scheme.
Re Hawk [2001] 2 BCLC 480
The focus is on 'rights', not 'commercial interests'.
Re Hawk [2001] 2 BCLC 480
A creditor subject to sanctions may not vote at a scheme meeting.
Re Nostrum Oil and Gas plc [2022] EWHC 1646; Re CFLD (Cayman) Investment Ltd [2022] EWHC 3496; Re VEON BV [2022] EWHC 3473; Re SGB-Smit GmbH [2023] EWHC 1067
“Dealing with” funds includes using them “as a financial asset or instrument” and “use” must be construed in the light of that characteristic.
Re Palladyne International Asset Management BV (CICA Appeal No5 of 2019)
Outcomes
Order convening a single meeting of creditors was granted (with minor amendments).
Sufficient notice was given; jurisdictional requirements were met; arrangements were in place to ascertain creditor wishes; the scheme wasn't demonstrably ineffective.
Bank GPB's request to be a separate creditor class was denied.
While Bank GPB's treatment differs due to sanctions, these differences don't fracture the class and don't justify a veto power.
Bank GPB was not granted voting rights at the scheme meeting.
Consistent with precedent, a sanctioned lender cannot vote. The Court rejected Bank GPB’s argument based on the Palladyne case.