Petra Diamonds US$ Treasury Plc, Re

At a scheme convening hearing, the court should address jurisdiction, creditor classification, class composition, voting arrangements and any obvious roadblock. It should not finally determine the fairness of the scheme, which is ordinarily reserved for the sanction hearing.

Creditors with identical rights under the same instrument should meet in a single class unless their rights are so dissimilar that they cannot properly consult together. Features such as new-money rights, lock-up fees, commercial underwriting fees, expense reimbursement and limited nomination rights do not necessarily fracture a class. Their significance may be reviewed at sanction.

Petra Diamonds US$ Treasury Plc sought an order under Companies Act 2006 Part 26 convening a meeting of holders of existing US$650 million notes. The proposed scheme would release the existing notes and provide replacement notes, equity and an opportunity to subscribe for new money.

The application raised issues concerning creditor status, whether the noteholders formed one class, the court’s jurisdiction over foreign creditors, the effectiveness of the scheme, voting arrangements and possible roadblocks. The court was concerned with the convening-stage issues and left broader questions of fairness to the sanction hearing.

1. Convening order. The court made the order convening a meeting of the existing noteholders. The arrangements gave creditors a sufficient and informed opportunity to attend the hearing.
2. Creditor status and arrangement. The noteholders were contingent creditors within the meaning of the Companies Act 2006, and the proposal was a compromise or arrangement because it involved a genuine element of give and take rather than a surrender or forfeiture of rights.
3. Class composition. Applying the principle in Sovereign Life [1892] 2 QB 573 at 583, the noteholders’ rights arose under one indenture, were identical, and would be affected in the same way. They could therefore meet as a single class. The court adopted the approach in Re Noble [2019] BCC 349 to hold that the open and assignable new-money opportunity did not fracture the class.
4. The lock-up agreement did not fracture the class because it was open to all holders and involved a genuine choice. The court followed Re Privatbank [2015] EWHC 3299. The lock-up fee, underwriting and restricted-period fees were commercial, not disguised consideration, and did not materially alter class composition. Reimbursement of advisers’ expenses likewise did not fracture the class.
5. Nomination rights for the four largest noteholders did not fracture the class. Following Re Pizzaexpress Financing 2 PLC [2020] EWHC 2873 at 44, the rights depended on holding size and did not confer control.
6. Jurisdiction and effectiveness. The court had jurisdiction over the English company. Assuming the Recast Jurisdiction and Judgments Regulation applied, Article 8 provided a gateway for jurisdiction over foreign noteholders, given the English defendant and the desirability of avoiding conflicting decisions. The issue could be reconsidered at sanction. No obvious defect, blot or roadblock was identified.
7. The electronic meeting arrangements and timetable were sufficient at the convening stage. Their adequacy and the representativeness of the vote remained matters for the sanction hearing.

Not an appeal. The judgment records no prior decision requiring appellate review.