New Look Secured Issuer Plc, Re Companies Act 2006

The court considered applications under section 896 of the Companies Act 2006 for orders convening meetings of creditors to consider proposed schemes of arrangement for two Scheme Companies (the Secured Issuer and New Look Ltd). Key legal principles applied included the court's jurisdictional inquiry (company connection, jurisdiction over creditors under the recast Judgments Regulation and whether the schemes would have a substantial effect) and the established test for class composition in schemes (whether creditors' legal rights are so dissimilar that they cannot sensibly consult together). The judge found jurisdiction over the Scheme Companies and the Scheme Creditors, concluded there was no obvious jurisdictional impediment as to substantial effect (noting more evidence may be required at sanction stage), and held that the proposed single classes for the Senior Secured Scheme and the Parallel RCF Scheme were appropriate. Accordingly the applications to convene meetings were granted.

This case concerned two related applications by New Look Secured Issuer plc and New Look Ltd for orders under section 896 Companies Act 2006 convening creditor meetings to consider schemes of arrangement as part of a wider restructuring of the New Look group. The Schemes formed part of a multi-element restructuring involving the conversion of existing secured notes, amendments to a revolving credit facility, intercreditor changes and a new equity-holding structure.

Nature of the application:

• Applications under section 896 Companies Act 2006 to convene meetings of creditors to consider (1) a Senior Secured Scheme for holders of Existing SSNs and (2) a Parallel RCF Scheme for RCF lenders.

Issues framed by the court:

• whether the English court had jurisdiction over the scheme companies;
• whether the court had jurisdiction over the scheme creditors (considering the recast Judgments Regulation and Article 8 as an anchor jurisdiction point); and
• whether the Schemes, if approved, would be likely to have a substantial effect in foreign jurisdictions.

Court's reasoning and subsidiary findings:

• Jurisdiction over the Scheme Companies was established because both companies were incorporated in England and Wales and other connecting factors existed (for example the RCF was governed by English law).
• On jurisdiction over creditors, the court proceeded on the assumption the recast Judgments Regulation may apply; it concluded there was jurisdiction because a sufficient number and value of scheme creditors were domiciled in England and Wales and Article 8 principles (anchor defendant approach) would permit the claims to be heard together.
• On substantial effect, the court could not reach a concluded view at the convening stage because evidence on recognition and effect abroad (notably in the United States under Chapter 15) had yet to be adduced; however the judge was satisfied there was no obvious jurisdictional impediment to convening meetings.
• On class composition, the court applied the established test (focusing on legal rights, not extraneous private interests). It held that holders of Fixed Rate and Floating Rate Existing SSNs formed a single class for the Senior Secured Scheme: currency and interest differences did not produce material dissimilarity of legal rights in an insolvency comparator. Participation in the Bridge Facility or accession to the lock-up agreement did not require separate classes where the lock-up opportunity was open to all and the additional fees were unlikely to materially affect voting decisions. Likewise, the RCF lenders formed a single class for the Parallel RCF Scheme because their rights under the facility were materially the same.

Disposition: The court granted both applications and directed that meetings of the respective classes of creditors be convened in accordance with the draft orders and documentation before the court.

Both applications to convene meetings of creditors under section 896 of the Companies Act 2006 are granted. The court found it had jurisdiction over the scheme companies and the relevant creditors, that there was no obvious jurisdictional impediment as to the substantial effect of the schemes (evidence on foreign effect to be addressed at sanction), and that the proposed single-class compositions for the Senior Secured Scheme and the Parallel RCF Scheme were appropriate.