Re New Look Financing plc

The court granted the Company's application under section 896 of the Companies Act 2006 to convene a single meeting of Scheme Creditors to consider a scheme of arrangement. The judge applied the established two-stage class composition test (Re Hawk) and concluded that the Scheme Creditors constituted a single class because their antecedent rights under the Indenture were the same and the proposed compromise treated them equally, including the pro rata allocation of the shareholder loan and non-voting B-shares. The court considered wider aspects of the linked Financial Restructuring (including the opportunity to participate in the PIK Loan and the issue of A-ordinary shares) and concluded that any differences in position arose from choices open equally to all Scheme Creditors rather than from inherently dissimilar rights.

The court found no jurisdictional roadblock at the convening stage (having regard to assumptions about the recast Judgments Regulation and article 8) and accepted that notification to creditors and the proposed timetable were adequate in the light of pressing liquidity issues and the related CVA timetable. Directions were given permitting a remote (webinar) meeting with a virtual breakout facility, an order restricting public inspection of identified confidential documents on the court file, and a declaration appointing a named foreign representative for potential Chapter 15 proceedings.

Background and parties

• The applicant was New Look Financing plc (the issuer under a New York law indenture of sterling and euro senior secured notes). The Scheme Creditors comprised the beneficial holders of those notes. The Company is an English company and part of a retail group whose principal operating company is New Look Retailers Limited (NLRL).
• The Company sought a scheme to equitize the SSNs as part of a wider Financial Restructuring linked to an operational restructuring implemented through a CVA proposed by NLRL.

Nature of the application

The application, brought by Part 8 claim form, sought an order under section 896(1) Companies Act 2006 convening a single meeting of Scheme Creditors to consider and, if thought fit, approve the proposed Scheme of Arrangement.

Issues for decision

1. Whether the Scheme Creditors formed one class or required multiple classes for the purpose of voting on the Scheme;
2. Whether there were any jurisdictional or other roadblocks to convening the meeting (including questions linked to the recast Judgments Regulation and article 8);
3. Whether notice and timetable were adequate in the light of the Practice Statement and the Company’s liquidity forecast and the CVA timetable;
4. Practical directions as to conduct of the meeting (remote attendance), confidentiality of court documents and appointment of a foreign representative for possible Chapter 15 proceedings.

Court's reasoning

• The court applied the two-stage test for class composition: compare antecedent rights to be released or varied and the new rights under the Scheme. All Scheme Creditors held the same rights under the Indenture (currency differences not material in the insolvency comparator) and were offered identical scheme consideration on a pro rata basis. Differences arising from participation in the PIK Loan and receipt of A-shares flowed from an equal opportunity available to all Scheme Creditors rather than from inherently different creditor rights; therefore a single class was appropriate.
• The court concluded there was no obvious jurisdictional obstacle at the convening stage, noting the Company's assertion that at least one Scheme Creditor was domiciled in the United Kingdom and that it was expedient for the proceedings to be in England given the Company's COMI and the location of its business and assets. The court accepted that the Company would adduce evidence at sanction to support practical effectiveness of the Scheme (including expert evidence as to New York law and likely recognition in US Chapter 15 proceedings).
• Notification was adequate in the circumstances and the proposed remote meeting procedure complied with recent guidance. The court considered it appropriate to make a limited confidentiality order for specified sensitive documents and to declare the appointment of the proposed foreign representative.

The court emphasised that its role at the convening stage is not to determine the merits of the Scheme but to identify any jurisdictional roadblocks and decide on appropriate meeting arrangements and class composition.

The application to convene a single meeting of Scheme Creditors under section 896 Companies Act 2006 was granted. The court held that Scheme Creditors constituted a single class because their antecedent rights under the Indenture and the treatment under the Scheme were not so dissimilar as to prevent them consulting together with a view to their common interest. The court found no jurisdictional roadblock at the convening stage, approved the notification period and timetable, authorised the meeting to be conducted remotely with appropriate safeguards, made a limited confidentiality order for specified documents and declared the appointed foreign representative authorised to act for Chapter 15 purposes.