Pizzaexpress Financing 2 Plc, Re

At a restructuring-plan convening hearing, the court determines jurisdiction, class composition, notice and meeting arrangements. It does not decide the plan’s merits or fairness. Meetings should nevertheless be refused where an evident blot or roadblock would make them pointless.

The principles governing classes under Part 26 generally apply to Part 26A. A class contains persons whose rights are not so dissimilar that consultation about their common interest is impossible. Cross-holdings and benefits available on equal terms do not ordinarily fracture a class. Commercial underwriting fees, expense reimbursement and shareholder nomination rights likewise need not create separate classes.

A plan may release guarantors and other obligors where this is necessary to give effect to the compromise. Deliberately creating a contribution obligation to bring related debt within the plan is not inherently abusive.

The Plan Company promoted a restructuring plan under Part 26A of the Companies Act 2006. Financial difficulties affecting a restaurant group had created an imminent risk of administration. The plan proposed to compromise senior secured notes and subordinated unsecured notes through debt reduction, new secured debt, equity allocations and a new-money facility.

At the convening hearing, the company sought meetings of the Plan Member, the holders of the existing senior secured notes and the holders of the senior unsecured notes. The court considered jurisdiction, class composition, notice, the explanatory statement, meeting arrangements and possible obstacles to sanction. It also considered third-party releases, a contribution deed, anticipated recognition under Chapter 15 of the US Bankruptcy Code and the relationship between the plan and wider operational restructuring.

1. Application granted. The court ordered the three proposed meetings to be convened. At a convening hearing the court does not determine the merits or fairness of a restructuring plan. It may, however, consider provisionally whether an evident blot or roadblock would make convening meetings pointless. The approach in Telewest Communications [2004] BCC 342 was applied.
2. The statutory jurisdiction existed. The Plan Company was a company liable to be wound up under the Insolvency Act 1986. It had encountered financial difficulties affecting its ability to continue as a going concern. The proposal contained the necessary give and take and was intended to eliminate, reduce or mitigate the effects of those difficulties. For creditors domiciled in the European Union, the court adopted the conventional assumption that Regulation 1215/2012 applied and held that Article 8 was engaged because each relevant class contained, or would contain by sanction, an English-domiciled creditor.
3. The principles of class composition under Part 26 also applied broadly to Part 26A. The governing inquiry was whether the participants’ rights were so dissimilar that consultation about their common interest was impossible. Separate meetings were required for the Plan Member, the senior secured noteholders and the subordinated unsecured noteholders because their existing and proposed rights differed fundamentally.
4. The unsecured-noteholder class was not fractured by affiliates’ cross-holdings. Such interests did not alter their rights as creditors, although they might later affect whether the vote was representative. The secured-noteholder class was not fractured by participation in the new-money facility, because all holders could participate on the same terms. Nor was it fractured by market-rate backstop fees, reimbursement of advisers’ expenses or nomination rights attributable to the size of resulting shareholdings. Those matters did not make consultation about a common interest impossible.
5. The notice was sufficient in the circumstances, and the explanatory statement adequately communicated all material matters. The proposed meeting arrangements, including remote meetings, were appropriate.
6. The proposed releases of the company, its parent and guarantors were not a blot because releases necessary to make the creditor compromise effective may be included in a plan. The deliberate creation of a contribution obligation in respect of the unsecured notes was not inherently abusive. Anticipated Chapter 15 recognition, the associated operational restructuring and the continuing sales process created no present roadblock.

not stated in the judgment.