Steinhoff International Holdings N.V., Re

At the convening stage of a scheme of arrangement, the court examines jurisdiction, the existence of a compromise or arrangement, class composition, creditor notification, effectiveness and any obvious roadblock. It does not finally determine the fairness of the scheme. Contingent creditors with direct enforcement rights may be scheme creditors. A compromise requires an element of give and take. Subordination may justify separate classes, although voting agreements and cross-holdings do not necessarily fracture a class. Uncertainty about related restructuring procedures is not an obstruction unless approval is a fanciful prospect. The court may convene meetings where the scheme gives creditors a sufficient informed opportunity to participate.

Steinhoff International Holdings N.V., a Dutch holding company, sought an order convening meetings of creditors under a proposed scheme of arrangement. The scheme concerned lenders under two English-law facilities guaranteed by a contingent payment undertaking. It proposed extending maturities, changing consent thresholds and granting security, as part of a wider group settlement involving related procedures in the Netherlands and South Africa.

The application was made at the convening stage. The court considered notification, creditor status, compromise or arrangement, class composition, jurisdiction over the company and creditors, effectiveness, possible roadblocks and the proposed meeting arrangements. The central issue was whether any jurisdictional, procedural or substantive obstacle made it inappropriate to convene the meetings.

1. Convening-stage function. The court’s task was to consider jurisdiction, whether the proposal constituted a compromise or arrangement, class composition, creditor notification, effectiveness and any obvious roadblock. Fairness was principally reserved for the sanction hearing.
2. Creditors and compromise. The contingent creditors fell within Part 26 because they benefited from the payment clause and had direct enforcement rights. The scheme involved sufficient give and take: creditors obtained extended maturities, revised consent mechanisms, security and the benefit of a wider settlement which could avoid liquidation. This satisfied the compromise or arrangement requirement at this stage.
3. Classes. Separate meetings for Facility A1 and Facility A2 were appropriate because Facility A2 was subordinated and exposed to a greater risk of no recovery. Voting agreements, payment of historic group obligations and cross-holdings did not themselves fracture either class, although their significance might require consideration at sanction.
4. Jurisdiction. The company was liable to be wound up as an unregistered company and the English-law governing provisions supplied a sufficient connection. Schemes fell outside the Insolvency Regulation. Assuming the Recast Judgments Regulation applied, Article 8 and Article 25 provided gateways to jurisdiction over creditors, including through asymmetric jurisdiction clauses.
5. Effectiveness and uncertainty. The proposed attorney mechanism, altered consent levels and scheme-related releases did not create an obvious roadblock. The related Dutch and South African procedures created uncertainty, but the group settlement remained a realistic prospect. Uncertainty did not prevent convening where acceptance was not fanciful.
6. Order. A convening order was made. The proposed notice and remote-meeting arrangements gave creditors a sufficient informed opportunity to participate.