Gategroup Guarantee Ltd, Re

A restructuring plan under Part 26A of the Companies Act 2006 falls within the bankruptcy exclusion in the Lugano Convention. Its financial-difficulty conditions, collective character and judicial supervision distinguish it from an ordinary scheme of arrangement. Its absence from Annex A to the Recast Insolvency Regulation does not determine that classification.

An artificial co-obligor structure can support a qualifying arrangement, although its fairness and foreign effectiveness remain matters for sanction. An arrangement need not alter creditors’ rights against the plan company. Third-party amendments are not subject to a strict jurisdictional requirement of being ancillary and necessary. In an assetless co-obligor structure, class composition may require looking through to the underlying obligors. Improved recovery prospects cannot justify combining creditors whose materially different rights prevent consultation together.

Gategroup Guarantee Limited, the plan company, was an English subsidiary newly incorporated by gategroup Holding AG, the Swiss parent of an airline catering group. The pandemic had caused severe financial difficulties. Without a restructuring and additional shareholder funding, the group faced liquidation.

The plan company assumed liabilities to the group’s senior lenders and bondholders through a deed poll. It had no assets with which to discharge those liabilities independently. Associated contribution arrangements required the underlying group obligors to fund or make the payments. The proposed restructuring plan would principally extend the senior loans and bonds by five years.

The bonds were governed by Swiss law and contained an exclusive Zurich jurisdiction clause. Their contractual quorum requirement presented a practical obstacle to amendment. The application therefore raised whether Part 26A proceedings fell within the Lugano bankruptcy exclusion, whether the artificial structure satisfied the statutory conditions, and whether senior lenders and bondholders could vote together.

A bondholder withdrew its opposition before the hearing, but its detailed objections remained available to the court. The court ordered two creditor meetings on 11 February 2021. This judgment explained that order.

1. The application was granted: two meetings were to be convened, one for the senior lenders and one for the bondholders. The court had jurisdiction and the proposal constituted a compromise or arrangement under Part 26A of the Companies Act 2006. Sanction remained for a subsequent hearing.

2. Part 26A proceedings fell within article 1(2)(b) of the Lugano Convention. Their collective character required a jurisdictional approach suited to competing creditors, rather than separate contractual claims. They also satisfied the substantive requirements of article 1(1) of the Recast Insolvency Regulation: collective proceedings based on insolvency law, directed towards rescue or debt adjustment, with judicial supervision. The statutory financial-difficulty conditions distinguished Part 26A from Part 26.

   The absence of Part 26A from Annex A had no probative value in these circumstances. The narrow dovetailing argument could not determine proceedings in a country outside the Insolvency Regulation. The Zurich jurisdiction clause consequently presented no bar (paras 73–137).

3. The plan company’s voluntary assumption of liabilities made it insolvent and therefore financially distressed. Its role in enabling the group restructuring constituted its business purpose. The plan would address its difficulties by enabling those liabilities to be satisfied through the restructured group. Both statutory threshold conditions were met; whether those conditions coincided with the common law creditor-interests duty was left open (paras 116–118, 177–180).

4. An arrangement required an element of give and take and had to concern creditors in their capacity as creditors. It could involve give and take with third parties and need not alter rights against the company itself. Ancillary and necessary third-party amendments were permissible, but those descriptions did not impose a strict jurisdictional hurdle. The degree of connection remained relevant to sanction discretion: Re T&N Ltd (No 4) and Re Lehman Brothers International (Europe) explained and applied (paras 141–167).

5. The artificial co-obligor structure created genuine legal liabilities and presented no jurisdictional impediment. Its discretionary acceptability remained open. Unfair interference with legitimate creditor interests or ineffective foreign compromises could prevent sanction, whereas an otherwise unavailable restructuring avoiding destructive liquidation and benefiting creditors could justify the structure (paras 166–176).

6. Class composition depended on existing rights in the appropriate comparator and rights under the plan, applying the consultation test in Sovereign Life Assurance v Dodd, [1892] 2 QB 573. The court had to look through this assetless structure to the underlying obligors. The creditor groups remained exposed to different entities and materially different credit risks.

   Better recovery prospects did not permit the court to anticipate creditors’ commercial decisions. Differences in interest, maturity and change-of-control treatment reinforced the fundamental distinction, although those additional differences might not alone have required separate classes (paras 181–208).

7. Notice, the explanatory statement and remote meeting arrangements were appropriate. Foreign recognition required fuller examination at sanction, but disclosed no present blot preventing meetings. Neither cross-class cram-down nor the assumed equivalence between its relevant alternative and the class comparator required determination (paras 185, 209–215).

• High Court: On 11 February 2021, the court ordered separate meetings of senior lenders and bondholders. The present judgment explained that order.
• High Court: The convening application listed for 15 January 2021 was adjourned for a two-day hearing, with directions for documents to be provided to the opposing bondholder. The opposition was withdrawn before the adjourned hearing.