Consort Healthcare (Tameside) Plc, Re
[2024] EWHC 1438 (Ch)
Sino-Ocean Group Holding Limited, Re
11 November 2024
[2024] EWHC 2851 (Ch)
High Court
A big Chinese property company needed court approval to restructure its debts. Some creditors complained about how the debts were grouped for voting, but the judge decided to let the restructuring process move forward. The judge also said the company should explain better how the restructuring affects the company's shareholders.
Key Facts
- •Sino-Ocean Group Holding Limited (Plan Company), a Hong Kong-incorporated company listed on the Hong Kong Stock Exchange, sought court approval to convene creditor meetings for a restructuring plan under Part 26A of the Companies Act 2006.
- •The Plan Company is the ultimate holding company of a large property development group with assets primarily in China, facing financial distress and enforcement actions.
- •The plan involves restructuring four classes of unsecured financial indebtedness, offering new secured debt instruments and convertible securities in exchange.
- •A parallel scheme of arrangement is proposed in Hong Kong, inter-conditional with the UK plan.
- •Creditors were divided into four classes (A-D) based on predicted recovery rates in a liquidation scenario, despite all loans being unsecured.
- •Long Corridor Asset Management Limited raised objections to the class composition, arguing insufficient time to review supporting documentation and questioning the rationale for separate classes.
- •The court considered jurisdictional issues, class composition principles, and potential roadblocks to convening the meetings.
Legal Principles
Jurisdictional requirements for Part 26A restructuring plans, including the definition of 'company' and conditions A and B under s.901A CA 2006.
Companies Act 2006, Insolvency Act 1986, Case law (Real Estate Development Co, In re Drax Holdings, In Re Rodenstock GmbH, Re Noble Group Ltd)
Principles for determining class composition in restructuring plans, focusing on whether creditors' rights are so dissimilar as to prevent consultation for common interest (Re Virgin Atlantic Airways Ltd, Re Virgin Active Holdings Limited, Re AGPS Bondco Plc). Consideration of 'rights in' and 'rights out'.
Case law (Re Virgin Atlantic Airways Ltd, Re Virgin Active Holdings Limited, Re AGPS Bondco Plc, Re Hawk Insurance Co Ltd)
Outcomes
The court approved the convening of creditor meetings.
The court found that the jurisdictional requirements were met and that the proposed class composition, while questioned by Long Corridor, was not fundamentally flawed. Differences in the 'rights out' (Plan Consideration offered to different classes) were deemed material enough to justify separate classes, even if the overall value was intended to be similar across classes.
The court rejected Long Corridor's request for an adjournment.
The court deemed that the urgency of the situation outweighed the need for additional time for Long Corridor's due diligence; issues regarding the fairness of the Plan could be addressed at the sanction hearing.
The court directed the Plan Company to enhance the explanatory statement to give greater prominence to the impact on shareholders.
The court considered the current explanatory statement insufficiently highlighted the effect on shareholders, which is relevant to the creditors' overall assessment of fairness.