Noble Group Ltd, Re

At the convening stage of a scheme of arrangement, the court determines creditor classes and any clear jurisdictional obstacle. It does not decide the scheme’s merits or fairness, which ordinarily remain for sanction.

Classes depend on the rights creditors have before the scheme and the rights offered by it. Differences in individual commercial interests, risk appetite or the practical effect of a common claims process do not ordinarily require separate classes. Separate meetings are required only where differences in rights make consultation in a common interest impossible.

Fees paid to some creditors may affect class composition if they form part of, and are material to, the scheme consideration. Their materiality must be assessed realistically against the likely scheme and liquidation returns, rather than merely against debt face value.

Noble Group Ltd, a Bermudan commodities-trading holding company with an asserted London COMI, applied under Companies Act 2006 section 896 to convene meetings for an English scheme of arrangement. The company had defaulted on substantial unsecured finance debt and proposed a wider restructuring intended to transfer its business and assets to a new group.

The scheme proposed different treatment for Deutsche Bank, an optional opportunity for creditors to provide new-money support in return for priority debt, a claims bar date and adjudication process, and fees for members of an ad hoc creditor group. The principal issues were class composition, voting arrangements for beneficial noteholders, international-jurisdiction issues, the appointment of foreign representatives, and a very compressed timetable.

1. Application granted. Snowden J ordered separate meetings for Deutsche Bank and for all other Scheme Creditors. Deutsche Bank received uniquely senior consideration for part of its claim. That constituted a separate linked arrangement and prevented consultation with the remaining creditors in a common interest.

2. The court’s principal task at a convening hearing is to determine proper classes. It may also address a clear jurisdictional or quasi-jurisdictional impediment, but should not determine merits, fairness, or fact-sensitive discretionary jurisdiction questions which can properly await sanction. There was no apparent roadblock to sanctioning this scheme.

3. Class composition requires comparison between creditors’ pre-scheme rights and their rights under the scheme. In an insolvency restructuring proposed as the alternative to liquidation, the relevant existing rights are the rights creditors would have in a winding up. Finance creditors and other creditors would rank equally and be subject to the same proof-of-debt process. The greater uncertainty affecting some disputed claims was a difference in likely outcome, not a difference in rights.

4. All Scheme Creditors had the same contractual right to elect to risk participate and obtain priority debt. Different willingness or ability to provide new money reflected individual circumstances and commercial interests, not distinct rights. The original timetable would have made the offer unreal because it allowed insufficient time to assess it. The revised dates were not shown, at the convening stage, to remain impossibly short. Fairness objections remained open at sanction.

5. Fees paid independently of a scheme do not ordinarily affect classes if they were paid for legitimate reasons and are genuinely independent of the scheme and restructuring. Contingent backstop fees required an assessment of materiality. The relevant comparison was with expected scheme and liquidation returns, and, where payment compensated financial risk, its market character. On the evidence, the fees did not make common consultation impossible, although fairness and disclosure could be revisited at sanction.

6. Beneficial noteholders with potential direct rights against the issuer were contingent creditors and should vote, subject to directions preventing double counting. The court also declared the foreign representatives validly appointed for the English scheme, without deciding their status under US law or Bermuda law.

The judge warned that the court is not a rubber stamp. Parties must allow adequate time for judicial preparation and must not arrange later steps on the assumption of an immediate decision.

not stated in the judgment.