DTEK Finance BV, Re

A foreign company may obtain sanction of a scheme of arrangement where it has a sufficient connection with England. English governing law of the compromised debt is capable of providing that connection, even where adopted shortly before the sanction hearing, provided the change is valid and has a commercial rationale. Other relevant connections may include English-law guarantees, an English centre of main operations and substantial English assets.

The court must also be satisfied that the scheme will have practical effect in the jurisdictions concerned. A single class is appropriate where creditors have substantially the same rights before and after the scheme. If the statutory voting thresholds are met and the majority fairly represents the class, the court may sanction the scheme in its discretion where the arrangement is fair and no other material objection remains.

DTEK Finance B.V., a Netherlands-incorporated finance company in an energy group, applied under section 899 of the Companies Act 2006 for sanction of a scheme between it and holders of its 2015 notes. The notes were due to mature on 28 April 2015, and the proposed restructuring exchanged them for new notes and cash.

The court considered whether DTEK had a sufficient connection with England, whether the creditors formed a single class, whether the statutory requirements had been satisfied, whether the meeting fairly represented the class, and whether the scheme should be sanctioned in the court’s discretion. The scheme had been approved unanimously by those voting, representing more than 75 per cent by value.

1. Jurisdiction. The court had jurisdiction to sanction the scheme. The English governing law of the notes constituted a sufficient connection, although that governing law had been changed shortly before the application and for the purpose of enabling the scheme. The change was valid under New York law, was permitted by the contractual terms, and English law was neither alien nor indiscriminate in the circumstances. The English-law guarantees, DTEK’s transfer of its centre of main operations to England, and its cash held in an English bank account each provided additional connections.
2. The court had to be satisfied that the scheme would have practical effect. Evidence concerning recognition and enforcement in the Netherlands, the guarantors’ jurisdictions and the United States established a sufficient practical basis for sanction.
3. Class constitution. A single meeting was appropriate because the scheme creditors had the same rights against DTEK which were to be discharged and would receive the same rights under the scheme. An early-support payment did not alter that conclusion.
4. Statutory requirements and fairness. Notice had been properly given and the meeting duly convened. The requirements in section 899(1) of the Companies Act 2006 were satisfied: a majority in number of those voting approved the scheme and represented at least 75 per cent by value. The majority fairly represented the class, with no evidence of bad faith, coercion or adverse interests.
5. The court’s discretion should be exercised in favour of sanction. The objections raised by Alden and Callaway did not disclose any reason to refuse approval. The scheme was sanctioned, with costs reserved.