Syncreon Group BV, Re

The court may sanction a scheme of arrangement where the statutory requirements have been met, the creditor classes have been fairly constituted and represented, and the scheme is one which an intelligent and honest member of the relevant class might reasonably approve. The court must also consider jurisdiction, the scheme’s effectiveness in relevant foreign jurisdictions, and whether there is any blot on the scheme. Special interests such as restructuring support, backstop or lockup payments do not invalidate a vote unless they create an adverse interest which drives creditors to support the scheme against the interests of the class as a whole.

Syncreon Group BV and Syncreon Automotive (UK) Ltd applied under section 899 of the Companies Act 2006 for sanction of schemes restructuring secured facility debt and notes. The schemes had been overwhelmingly approved by the relevant creditor classes at meetings convened by an earlier order. The court considered statutory compliance, class representation, fairness, releases, jurisdiction, the possible application of the Recast Judgments Regulation, and the likely effectiveness of the schemes in the United States, Canada, the Netherlands and the United Kingdom.

1. Sanction granted. The court sanctioned both schemes.
2. The requirements of Part 26 of the Companies Act 2006 had been complied with. The statutory majorities were substantially exceeded, and the minor departure from the convening order concerning access to the explanatory statement was appropriately waived. The explanatory statement satisfied section 897.
3. The court would not reopen the constitution of the classes, which had been addressed at the convening hearing and had not materially changed. The classes had been fairly represented. The relevant question was whether the voting creditors had an adverse special interest which conflicted with the interests of the class as a whole. Payments for backstop lending, amendments to a liquidity facility and participation in the restructuring support agreement were commercial consideration for those arrangements, rather than incentives creating such an adverse interest.
4. The fairness requirement was satisfied. In light of the Group’s overleveraging, defaults and the materially worse alternatives of enforcement or insolvency, the schemes were arrangements which an intelligent and honest member of each class, acting in that member’s own interest, might reasonably approve.
5. The releases of co-debtors, co-guarantors and persons involved in the restructuring were sufficiently explained and were regarded as necessary to prevent ricochet claims. Their breadth did not create a blot on the schemes.
6. The English court had jurisdiction. The changes to governing law and jurisdiction clauses provided a sufficient connection. Article 25 of the Recast Judgments Regulation could be relied upon in relation to both the PCF debt and the Notes, including because the contractual arrangements effectively bound the Noteholders through the Notes trustee.
7. The schemes were likely to have substantial practical effect. Recognition in the United States and Canada was a condition of implementation, and expert evidence supported recognition and effectiveness in the relevant jurisdictions.

This was a first-instance sanction hearing. The court had previously made a convening order on 25 July 2019, followed by a reserved judgment dated 31 July 2019. The creditor meetings were then held and the present application for sanction was granted.