Selecta Finance UK Ltd, Re

For a scheme of arrangement, creditor classes are formed by reference to legal rights, both before and after the proposed scheme. Creditors may remain in one class despite material differences if those differences do not make it impossible for them to consult together in their common interest. Small differences in interest rates or currency will not necessarily fracture a class. A lock-up fee available to all creditors, or a modest fee that is immaterial to the voting decision, will not necessarily do so. Nor will arrangements under which advisers’ fees are paid where the creditors themselves receive no bounty or net benefit. A scheme may release claims against co-obligors where necessary to prevent contribution claims defeating its purpose.

Selecta Finance UK Ltd, a newly incorporated English company, applied under Part 26 of the Companies Act 2006 for an order convening a single meeting of holders of senior secured notes. The notes had originally been issued by a Dutch parent company under New York law, but the company had become a co-issuer and the governing-law and jurisdiction provisions had been amended to English law.

The restructuring proposed a debt-for-debt and debt-for-equity exchange. Issues included notice, jurisdiction, whether the noteholders formed one class, the effect of a lock-up fee and advisers’ fees, meeting arrangements, and ancillary relief.

1. Order convening meeting. The court ordered a single meeting of the scheme creditors and gave the requested ancillary directions. The proposed virtual meeting was acceptable, subject to any issue arising at the sanction stage.
2. Notice and jurisdiction. Notice given 17 days before the hearing, together with earlier publication of the restructuring terms, was adequate. The company was liable to be wound up in England and therefore fell within Part 26 of the Companies Act 2006. Establishing an English jurisdictional link specifically to use the scheme jurisdiction was not inherently objectionable and amounted to legitimate forum shopping on the evidence.
3. Assuming the Recast Judgments Regulation applied, the amended jurisdiction clause conferred jurisdiction over proceedings brought against the noteholders by the company. Jurisdiction was also tentatively available under article 8 because English-domiciled creditors anchored closely connected claims which it was expedient to determine together.
4. Class composition. The relevant comparison was between creditors’ legal rights if the scheme failed and their legal rights under the scheme. The noteholders had the same security and ranking before the scheme and proportionate entitlements under it. Differences in interest rates and currency did not make consultation impossible.
5. The lock-up fee did not fracture the class. It was available to all creditors, or alternatively was too immaterial in the context of the restructuring to affect voting decisions. Advisers’ fee arrangements also did not fracture the class: they reimbursed costs and conferred no bounty or net benefit on the ad hoc group. Requirements for customary securities-law confirmations did not fracture the class because an affected creditor could nominate another person to receive its allocation.
6. The scheme could release claims against both co-obligors. Otherwise one principal debtor might remain liable for the whole debt and assert a contribution claim capable of defeating the scheme’s purpose. A declaration concerning the company’s foreign representative and an order under CPR 5.4D(2) were also made.

First-instance decision. No earlier decision in the same proceedings is stated.