Re Noble Group Ltd

The court acceded to an application under section 896 of the Companies Act 2006 to convene meetings of the Company’s Scheme Creditors to consider a proposed scheme of arrangement that forms part of a wider restructuring. The principal legal issue was the proper composition of classes for voting at the convening stage and whether any "roadblocks" existed to the court exercising jurisdiction in England. Applying the established test (Sovereign Life; Hawk; UDL), the judge held that Deutsche Bank should be placed in a separate class given its uniquely favourable treatment under the Scheme, while all other Scheme Creditors (finance creditors and other creditors) should be convened in a single class, subject to fairness issues to be addressed at the sanction hearing.

The court also considered international jurisdiction, COMI evidence and the potential effect of EU regulations and declined to decide complex jurisdictional questions at convening, although it indicated no obvious roadblock to sanction. The court expressed concern about the tight timetable and completeness of disclosure, analysed payments to an ad hoc creditor group (work, waiver, interim and backstop fees) and concluded that, on the evidence, those payments did not require separate classes but warranted fuller disclosure and scrutiny at sanction. The application to convene meetings and a declaration as to appointment of foreign representatives were granted.

This was a first instance convening hearing under section 896 CA 2006. The Company, a Bermuda-incorporated commodities group listed in Singapore, applied for orders to summon meetings of its Scheme Creditors to consider a scheme of arrangement forming part of a complex rescue restructuring. The restructuring envisaged transferring the Company’s business and assets to New Noble and allocating 70% of New Noble equity to an SPV for unsecured Scheme Creditors; the Scheme provides for new debt instruments, an election mechanism to "risk participate" in new money facilities in return for structurally senior Priority Debt, a Bar Date for claims and an adjudication process modelled on liquidation proof procedures.

Nature of the application: an order under section 896 CA 2006 convening creditor meetings to consider and, if thought fit, approve the Scheme; ancillary declarations (appointment of foreign representatives).

Parties and posture: the Company sought the convening order; an Ad Hoc Group of finance creditors supported the Restructuring but some Other Scheme Creditors (for example, Yancoal) objected or raised concerns in correspondence; Deutsche Bank had bespoke treatment under the Scheme.

Issues framed:

• Class composition for the convening meetings (whether all Scheme Creditors other than Deutsche Bank should be in a single class);
• Timing and adequacy of notice and the proposed timetable for dispatch of the Explanatory Statement, elections to risk participate and the Scheme meetings;
• Whether any international jurisdictional "roadblocks" (COMI, Insolvency Regulation, Judgments Regulation, practical effectiveness) prevented the Court from exercising its jurisdiction;
• Whether payments to certain creditors (work fees, waiver fees, interim facility fees, backstop fees) required separate classes or other relief.

Court’s reasoning: the convening stage is primarily concerned with class formulation and obvious jurisdictional impediments; it is not the occasion for determining scheme fairness, which is for sanction. Applying the rights-based test (Sovereign Life; Hawk; UDL) the judge concluded that Deutsche Bank must vote separately because part of its claim received unique senior consideration. The Company’s Finance Creditors and Other Scheme Creditors do not, on a rights-comparison, possess sufficiently dissimilar rights: the Scheme’s claims process is modelled on liquidation proof processes and therefore differences of commercial position or willingness to risk-participate are matters of individual interest to be addressed at sanction rather than at convening. The court was concerned that the original timetable gave insufficient time for Other Scheme Creditors to assess and implement risk participation, but accepted a short extension which left the convening order permissible. On fees to the Ad Hoc Group the court required fuller disclosure, analysed materiality (comparing fees to projected returns under the Scheme and liquidation recoveries) and concluded that, on the evidence, the payments did not compel separate classes though they remain relevant to fairness at sanction. On international jurisdiction the court declined to decide complex factual/discretionary issues at convening but saw no obvious "roadblock" to sanction and indicated that article 8 of the Judgments Regulation would likely be engaged if needed. The declaration of appointment of foreign representatives was granted to assist recognition in the United States.

The court granted the application to convene meetings under section 896 Companies Act 2006. Deutsche Bank was ordered to be placed in a separate class because part of its claim was to receive uniquely senior notes; all other Scheme Creditors were placed in a single class. The court refused to decide complex international jurisdiction questions at the convening stage but indicated no obvious roadblock. The court required fuller disclosure on fees and criticised the compressed timetable, but concluded the revised (slightly extended) timetable was not obviously impossible. The claim to convene meetings is allowed and a declaration was made as to the appointment of foreign representatives to assist Chapter 15 recognition in the United States.