Gategroup Guarantee Ltd, Re

When sanctioning a restructuring plan under Companies Act 2006 Part 26A, the court applies the established scheme-sanctioning principles where no cross-class cram down arises. It must consider statutory compliance, class representation and coercion, fairness, and any blot or defect.

The court must also be satisfied that the plan will achieve its purpose, including recognition and effectiveness in materially relevant foreign jurisdictions. An artificial co-obligor structure does not necessarily prevent sanction. Where it is the only practicable means of avoiding a value-destructive insolvency, materially benefits creditors, and causes minimal impairment, the court may sanction the plan. A plan may alter rights involving third parties where it contains an effective mechanism, such as an appointment or enforceable covenant, to implement that alteration.

Gategroup Guarantee Limited applied for sanction of a restructuring plan under Part 26A of the Companies Act 2006. The plan extended the maturity of bonds and waived a change-of-control event of default as part of a wider group restructuring.

The court had previously convened separate meetings of senior lenders and bondholders. The meetings approved the plan by the required majorities. At the sanction hearing, the issues included the representativeness of the bondholder vote, the fairness of the plan, the effect of an artificial co-obligor structure used to engage the English jurisdiction, and the plan’s recognition under Swiss and Luxembourg law.

1. The plan was sanctioned. The statutory requirements were satisfied, the classes had been fairly represented, the majorities were not coercing minorities, the plan was one which a reasonable and honest creditor could approve, and no remaining blot or defect justified refusing sanction.
2. Where no cross-class cram down arises, the matters for consideration under Part 26A are the same as those applicable to a scheme under Part 26: statutory compliance, proper class representation and absence of coercion, fairness, and absence of a blot or defect. The court must additionally be satisfied that the plan will achieve its purpose, including practical effectiveness and recognition in important foreign jurisdictions.
3. The artificial co-obligor structure did not justify refusing sanction. The group faced serious financial difficulty; insolvency would materially prejudice creditors; the wider restructuring required the bond maturity extension; obtaining the necessary bondholder consent through the contractual amendment mechanism was not feasible; no alternative Swiss or Luxembourg procedure was available; the bondholders’ impairment was minimal; and the issuer’s COMI had in fact been moved to England. The arrangement therefore constituted good forum shopping and served the interests of the affected creditors.
4. A scheme or plan binds the company and its creditors, but it does not automatically alter third-party rights without an appropriate mechanism. Consistently with Re T&N Limited, a plan may achieve the necessary effect through an appointment of an attorney or a covenant enforceable by the company. The amendment appointing the company to take any steps necessary to implement the bond amendments was within the court’s power and supplied the required mechanism.
5. The evidence established that the plan was likely to be recognised in Switzerland and Luxembourg. The steps taken by the issuer, including relocating its principal place of business, appointing UK-resident directors, holding board meetings in England, notifying creditors, and registering an English branch, were sufficient to relocate its COMI to England given the limited nature of its business.