Re Syncreon Group BV

This is an application under section 899 of the Companies Act 2006 for sanction of schemes of arrangement under Part 26 of the Companies Act 2006 proposed by Syncreon Group BV and Syncreon Automotive (UK) Ltd. The court applied the established tests for sanction: compliance with Part 26, proper constitution of classes, whether each class was fairly represented, whether the scheme is one which an intelligent and honest member of the class might reasonably approve, and whether there is any "blot" on the scheme. The requisite statutory majorities were obtained and the convening order requirements were substantially complied with (a limited waiver of the upload requirement was made). The court found no evidence of an adverse or coercive special interest among voting creditors (including in relation to backstop payments, lockup payments and cross-holdings) and concluded the fairness requirement was satisfied. The court held that releases of third parties were necessary to give effect to the restructuring and that English jurisdiction was available and appropriate, including on the basis of Article 25 of the Recast Judgments Regulation and the parties' contractual submissions. The court was satisfied the schemes would be effective in key foreign jurisdictions (notably the United States, Canada and the Netherlands) subject to conditions precedent and therefore granted the order sanctioning the schemes.

This was an application to sanction two linked schemes of arrangement proposed by Syncreon Group BV (a Dutch company) and Syncreon Automotive (UK) Ltd (an English company) as part of a cross-border debt restructuring. The schemes form part of a restructuring of secured Parent Credit Facility (PCF) debt and unsecured Notes, with Syncreon Group as borrower and note issuer and Syncreon UK as guarantor. The applicants sought court sanction under section 899 of the Companies Act 2006 after the court had made a convening order at an earlier hearing (hearing on 25 July with a reserved judgment of 31 July) and creditor meetings had been held.

The principal factual and procedural matters were:

• Meetings of the two creditor classes (PCF lenders and Noteholders) overwhelmingly approved the schemes by the statutory majorities in number and value.
• The proposed restructuring involved releases of existing debt and guarantees and the issue of Newco equity and restated debt, together with entry into key documents such as a Restructuring Implementation Deed and a Deed of Release. The Deed of Release included releases of third parties involved in the restructuring.
• Incentives such as backstop payments, lockup payments and additional amounts under the liquidity facility were described and their impact on voting considered.
• There were issues of jurisdiction and cross-border effectiveness, including the possible application of Council Regulation (EU) 2015/2012 (the Recast Judgments Regulation) and the Insolvency Regulation, and whether English jurisdiction and recognition in the United States, Canada and the Netherlands could be relied upon.

The court framed the issues as:

• Whether the statutory requirements of Part 26 and section 897 were complied with;
• Whether the classes were properly constituted and fairly represented (including whether any creditor had a special adverse interest);
• Whether the schemes satisfied the "intelligent and honest man" fairness test and whether there was any blot on the schemes; and
• Whether the English court had jurisdiction and whether the schemes would be effective in relevant foreign jurisdictions.

On reasoning, the court concluded:

• Statutory majorities were obtained and the Explanatory Statement adequately disclosed material matters. A minor non-compliance (restricted access to the Explanatory Statement on the public website for confidentiality reasons) was waived.
• No party had challenged class composition and the matter was not reopened. Turnout and voting patterns did not suggest oppression of a minority.
• The special-interest test (as discussed in Re Apcoa and Re Lehman) did not reveal any adverse interest that would render classes unrepresentative. Incentives such as backstop and lockup payments were not regarded as coercive or determinative in a way adverse to non-recipients because the overall returns under the schemes were materially superior to the likely alternatives.
• The releases of third parties, although broad, were explained in the Explanatory Statement and regarded as necessary and a regular feature of schemes to prevent ricochet claims that would otherwise undermine the restructuring.
• Jurisdiction was available: Syncreon UK was within the court's jurisdiction; Syncreon Group relied on changes making its documents governed by English law and submitting to English jurisdiction; Article 25 of the Recast Judgments Regulation applied to the contractual submissions and the position was, on analysis, analogous to prior authorities (including Commerzbank v Pauline Shipping). Many creditors had also submitted to English jurisdiction by signature to the Restructuring Support Agreement.
• The court accepted evidence from foreign law experts that recognition in the United States, Canada and the Netherlands was likely and that recognition in the United States and Canada was a condition of the restructuring. Other conditions precedent were either met or expected to be met.

Accordingly, the court granted the sanction order for the schemes, concluding they were fair, properly constituted and likely to be effective in key jurisdictions.

This was a first-instance sanctioning order. The court granted the order sanctioning the proposed schemes of arrangement in respect of Syncreon Group BV and Syncreon Automotive (UK) Ltd. The rationale was that the statutory requirements of Part 26 and section 897 had been met, each class was properly constituted and fairly represented, the schemes satisfied the "intelligent and honest man" fairness test and presented no blot, the releases were necessary to give effect to the restructuring, and the English court had jurisdiction and the schemes were likely to be effective in key foreign jurisdictions (subject to conditions precedent).

Previous steps in the same proceedings were described: there was a convening hearing on 25 July 2019 and a reserved judgment of 31 July 2019 in which the court made the convening order to summon creditor meetings. Those meetings were then held and the sanction application followed. No appellate history is recorded in this judgment.