DTEK Finance BV, Re

This is an application under section 899 of the Companies Act 2006 for the court to sanction a scheme of arrangement (the Scheme) proposed by DTEK Finance B.V. The court held that it had jurisdiction to sanction the Scheme because the 2015 Notes had been validly brought under English governing law and there existed additional connecting factors (English law guarantees, a move of COMI to England and cash held in London). The statutory requirements in s 899(1) were satisfied: the convened single meeting of Scheme Creditors was properly called, a majority in number and holders of at least 75% by value voted in favour, and the majority fairly represented the class. The court also exercised its discretion to sanction the Scheme having considered objections from Alden and a later, unsubstantiated, correspondence from Callaway, both of which did not proceed to contest at sanction. The Scheme was therefore sanctioned.

Background and nature of the application:

• DTEK, a Netherlands incorporated finance vehicle within an energy group, applied under section 899 of the Companies Act 2006 for sanction of a scheme of arrangement to restructure certain notes due to mature on 28 April 2015 (the 2015 Notes).
• The Scheme provided that DTEK would acquire and cancel the existing 2015 Notes and issue new notes for 80% of par maturing in 2018 with the same interest rate, with 20% of par being paid in cash.

Procedural posture and parties:

• Permission to convene a single meeting of Scheme Creditors was granted by Nugee J. A meeting held on 23 April 2015 recorded overwhelming support for the Scheme (no votes against; value voting in favour approximately $184,468,000 of $200,000,000).
• Opposition was signalled by Alden (a hedge fund) and later by correspondence from an entity calling itself Callaway Capital Management LLC, but neither ultimately advanced a contested hearing before the sanctioning judge.

Issues framed by the court:

1. Whether the court had jurisdiction to sanction a scheme affecting a foreign company (s 26 and Part 26 context) — in particular whether there was a sufficient connection with England;
2. Whether it was appropriate to convene a single meeting of Scheme Creditors and whether the meeting complied with statutory requirements (s 899(1));
3. Whether the convened meeting properly represented the class of creditors;
4. Whether, in the court's discretion, the Scheme should be sanctioned given objections and the overall fairness of the procedure.

Court's reasoning:

• Jurisdiction: the governing law of the 2015 Notes had been changed from New York law to English law by collective creditor action in the context of the contemporaneous exchange and consent solicitations; that change, together with English-law guarantees, a shift of COMI to England and substantial assets in England, provided a sufficient connection to confer jurisdiction to sanction the Scheme. The court applied and followed authority on cross-border schemes and the relevance of governing-law links (including Re Drax, Re Primacom, In Re Magyar Telecom and Re APCOA).
• Effect of the Scheme: DTEK had obtained legal opinions addressing practical effectiveness of the Scheme in the Netherlands and other relevant jurisdictions and the means to obtain relief in the United States (including Chapter 15 registration), so the court was satisfied the Scheme would have practical effect.
• Statutory requirements and class: notice and convening of the meeting were proper; the statutory majorities under section 899(1) were achieved; the majority were acting bona fide and fairly represented the class despite incentives offered to early supporters.
• Discretion: objections from Alden and the Callaway correspondence did not lead to a substantive contest; the court found nothing in the opposition that justified refusing sanction and therefore exercised its discretion to approve the Scheme. The court reserved costs.

Wider context: The judgment records and applies established principles about jurisdictional links for sanctioning cross-border schemes and the court's cautious approach where governing-law changes are used to create access to English processes, but concluded the circumstances here were not objectionable.

The court sanctioned the proposed Scheme under section 899 of the Companies Act 2006. The judge held that the court had jurisdiction because the 2015 Notes were validly governed by English law and there were additional connecting factors (English-law guarantees, a move of COMI to England, and assets in England). The statutory requirements of s 899(1) were satisfied and, in the exercise of the court’s discretion, the Scheme was fair and should be approved. Objections raised did not justify refusing sanction.