Primacom Holding GmbH & Anor v A Group of the Senior Lenders & Credit Agricole

At the convening stage of a creditors’ scheme, the court assesses class composition by reference to creditors’ rights, not their commercial interests or motives. Creditors belong in the same class where their existing rights and the rights offered in replacement are sufficiently similar to permit consultation in pursuit of a common interest. Questions of fairness, coercion, consent fees and special interests ordinarily belong to the later sanction hearing.

An overseas company may fall within the scheme jurisdiction where it is liable to be wound up under the Companies Act 2006. English-law finance documents and an English-law inter-creditor agreement may provide a sufficient connection with England, even where the company’s centre of main interests is abroad.

PrimaCom Holding GmbH sought an order convening four meetings of creditors to consider a restructuring scheme under Part 26 of the Companies Act 2006. The company was incorporated in Germany and formed part of a financially distressed group. Its financing arrangements and inter-creditor agreement were governed by English law.

The court considered whether the proposed creditor classes were properly constituted, whether the English court had jurisdiction and a sufficient connection with the scheme, whether the scheme would probably be recognised in Germany, whether secured creditors were within the statutory definition of creditors, and whether the meeting documentation was adequate. The court also refused an application by Credit Agricole for an adjournment.

1. Adjournment. The application to adjourn was refused. Although the court recognised concerns about creditor negotiations and the possibility that the proposed scheme might fail, preserving the possibility of a scheme was the least disadvantageous course. The court did not have evidence sufficient to conclude that the scheme had no prospect of success.
2. Class composition. At the convening stage under [2001] 2 BCLC 675, the court was concerned with class constitution, not fairness. The governing question, reflecting [1892] 2 QB 573, was whether creditors’ rights against the company, including their rights under the proposed scheme, were so dissimilar that they could not practically consult together in pursuit of a common interest. The court must focus exclusively on rights rather than interests.
3. Cross-holdings, investor status, possible equitable subordination, modest differences in interest rates and maturity dates, the opportunity to participate in bridge financing, lock-up agreements and consent fees did not require separate classes. Those matters could be relevant to fairness, coercion or voting weight at the sanction hearing. The proposed classes were therefore a sensible and permissible starting point.
4. Jurisdiction. A German company could fall within section 895 of the Companies Act 2006, even though section 900 powers might not be available or necessary. The fact that all relevant financing arrangements and the inter-creditor agreement were governed by English law supplied a sufficient connection with England. The company’s German COMI did not prevent the English court exercising jurisdiction.
5. On the evidence, there was sufficient basis to proceed on the footing that a scheme sanctioned in England would be recognised in Germany, although the position under article 32 of the European Regulation was not free from uncertainty. German substantive law was likely to recognise English law as governing the restructuring or extinction of English-law debts, and recognition was not considered contrary to German public policy.
6. Secured creditors were creditors for the purposes of section 895, and the explanatory statement, notices, voting and proxy form and meeting regulations were sufficiently adequate for the convening stage. The relevant documentation was approved and the meetings were directed to be convened.

First-instance decision. No earlier decision in the same proceedings is stated in the judgment.