Public Joint-Stock Company Commercial Bank "Privatbank", Re

The court may sanction a scheme affecting foreign creditors where the contractual rights are governed by English law and the scheme will be recognised in the relevant foreign jurisdiction. A sufficient connection with England may arise from the governing law, jurisdiction clauses and the practical effect of the scheme. Creditors with sufficiently similar rights before and after the scheme may vote as one class. The court must nevertheless consider differences between creditors when exercising its sanctioning discretion. Voting agreements and fees do not automatically make a scheme unfair. Their significance depends on the circumstances, including their availability to all creditors, timing, materiality and the size of the majority independently supporting the scheme.

The Ukrainian bank sought sanction under section 899 of the Companies Act 2006 for a scheme concerning two series of subordinated loan notes with an aggregate nominal value of US $220 million. The notes were to be cancelled and replaced with notes issued by an English special purpose vehicle, extending maturity and increasing the coupon.

At an earlier convening hearing, Asplin J held that the noteholders were contingent creditors, that the bank could be wound up in England as an unregistered company, that there was sufficient English connection, and that the creditors could vote as one class. The scheme was approved by 98.26% in number and 98.95% in value. The issues were whether the jurisdictional and class requirements were met and whether the scheme was fair and appropriate to sanction.

1. Jurisdiction and connection. The court agreed with Asplin J that the noteholders were contingent creditors for the purposes of sections 895–899 of the Companies Act 2006, and that the bank was capable of being wound up in England as an unregistered company under section 221 of the Insolvency Act 1986. The English governing law of the notes, loans and trust deeds provided a sufficient connection with England. The likely recognition in Ukraine of variations made under the governing law reinforced that conclusion. The court also agreed that, if the EU Judgments Regulation 1215/2012 applied, jurisdiction was available under Article 8.
2. Class composition. Although the two series had different maturity dates, the realistic alternative was insolvency, in which the claims would be accelerated and rank pari passu on a subordinated basis. The rights before and after the scheme were therefore substantially similar, and the creditors could properly constitute a single class.
3. Discretion to sanction. Differences between creditors remained relevant to fairness. The recent issue of the 2021 Notes and the possibility that its single holder’s votes increased the statutory majority were considered, but the scheme had overwhelming support even if those votes were ignored. The changed positions of previous opponents were also examined, and no side deal or other inducement was shown.
4. Voting agreements. Agreements under which some noteholders received a fee of 2% of the outstanding principal in return for voting in favour did not make the scheme unfair in the circumstances. The agreements were available to all creditors until shortly before the meeting, and there had been no material change making the scheme less favourable. The court noted that materiality might depend on the acquisition price of the notes, but found it unnecessary to decide that issue.
5. The scheme was appropriate to sanction.

At an earlier convening hearing, Asplin J directed that a single meeting of the holders of the two series of notes be convened and held. She concluded that the noteholders were contingent creditors, that there was sufficient connection with England, and that they could form one class. The present court agreed with those conclusions and sanctioned the scheme.