New Look Secured Issuer Plc, Re Companies Act 2006

At the convening stage of a scheme of arrangement, the court must determine hard-edged jurisdictional questions but need only be satisfied that there is no obvious impediment where the issue depends on further evidence. Scheme creditors should be placed in separate meetings only where their legal rights against the company, including replacement rights under the scheme or rights in the relevant insolvency comparator, are so dissimilar that they cannot consult together in a common interest. Differences in personal interests, currency, interest rates, participation in a lock-up agreement or related restructuring transactions do not necessarily require separate classes. The court may convene a single meeting where those differences are insufficiently material.

New Look Secured Issuer plc and New Look Ltd applied under section 896 of the Companies Act 2006 for orders convening creditor meetings to consider a senior secured scheme and a parallel revolving credit facility scheme forming part of a wider restructuring.

The court considered jurisdiction over the scheme companies and creditors, whether the schemes were likely to have a substantial effect, and whether the proposed single meetings were appropriately constituted. The central issue was whether the creditors’ rights were sufficiently similar to permit consultation in a common interest.

1. Jurisdiction. The applicants were English companies and therefore companies within Part 26 of the Companies Act 2006. Their incorporation supplied a sufficient connection with England. The New York governing law of the existing senior secured notes did not prevent those rights being compromised by an English scheme where the scheme company otherwise had a sufficient connection.
2. On the assumption that the recast Judgments Regulation applied, Article 8 could provide jurisdiction over scheme creditors where one creditor domiciled in the United Kingdom was an anchor defendant. The court did not need to resolve the broader legal question because the evidence showed substantial United Kingdom creditor participation. There was jurisdiction over the scheme creditors.
3. The court could not reach a concluded view on substantial effect because evidence had yet to be adduced. It was nevertheless satisfied that there was no obvious jurisdictional impediment and proceeded to the convening stage.
4. Class composition. The applicable test was whether the creditors’ rights against the company were so dissimilar as to make it impossible for them to consult together with a view to their common interest. The comparison focused on legal rights, not interests unrelated to those rights. Where a scheme was proposed as an alternative to insolvency, the relevant comparator was the rights creditors would have in the insolvency.
5. The sterling and euro senior secured notes did not create separate classes. Their currency and interest differences were not sufficiently material, particularly because the insolvency comparator would convert the claims into sterling and would not provide for future interest. The common security ranking also supported a single class.
6. Participation in the lock-up agreement, entitlement to its modest fee, participation in the bridge facility or eligibility for new money bonds did not fracture the class. Those arrangements were available on substantially equal terms, did not materially affect voting decisions, or were separate from the schemes. Brait’s wider shareholder interests were interests rather than different legal rights.
7. The revolving credit facility creditors likewise had materially identical pari passu rights under a single facility. Their differing participation in the lock-up agreement did not require separate meetings. Both applications were granted and meetings were convened in accordance with the draft orders.