Haya Holdco 2 plc

The Court granted the Company permission to convene a single meeting of the holders of two series of senior secured notes (the Scheme Creditors) to consider a scheme of arrangement under Part 26 of the Companies Act 2006. The judge held that the English court has jurisdiction: the Company is an English incorporated company liable to be wound up under the Insolvency Act 1986, the Company became a co-issuer of the Existing SSNs and the governing law of the notes was validly changed to English law by a Supplemental Indenture. The proposed scheme was a compromise or arrangement within Part 26, involving a partial redemption, the issue of new notes and allotment of equity. On the question of class composition, the Court found that the Scheme Creditors should vote in a single class because their legal rights in the comparator (probable insolvency proceedings) and under the Scheme are sufficiently similar, and the matters advanced as potentially divisive (different interest rates, consent and work fees, adviser fees, nomination and information arrangements, and customary securities confirmations) did not fracture the class.

Background and parties: Haya Holdco 2 plc (the Company), an English incorporated member of a group whose principal operating company is Haya Real Estate S.A.U. (HRE), applied for an order to convene a single creditor meeting to consider a scheme of arrangement under Part 26 CA 2006. The Scheme concerns two series of senior secured notes issued under a 2017 indenture and maturing 15 November 2022. The Company had acceded as co-issuer and the governing law of the notes had been changed to English law by a Supplemental Indenture following a consent solicitation.

Nature of the application: The Company sought permission to convene a single meeting of the ultimate beneficial holders of the Existing SSNs (the Scheme Creditors) to vote on a Scheme that would (i) partially redeem the Existing SSNs using available cash, (ii) release the balance of the Existing SSNs, (iii) issue New SSNs for the released amount and (iv) transfer shares in a new holding company representing 27.5% of equity to Scheme Creditors. Implementation would also require the execution of various Recapitalisation Documents and deeds of release.

Evidence and issues: The Court considered witness statements, the Explanatory Statement, Kroll valuation evidence on comparator insolvency returns, an expert report on Spanish insolvency interest treatment and an expert report on New York law validating the amendment process. The convening hearing focussed narrowly on jurisdiction to convene and the appropriate class composition for voting.

Reasoning on jurisdiction: The judge found the Company falls within Part 26 (being an English incorporated company liable to be wound up under the Insolvency Act 1986). The Company’s accession as co-issuer and the change to English governing law effected by the Supplemental Indenture removed any jurisdictional obstacle. The Court accepted that steps designed to confer English jurisdiction for a scheme may be lawful where properly implemented.

Reasoning on class composition: The Court applied the comparator approach: the likely alternative was formal insolvency proceedings in England and Spain in which Scheme Creditors would hold secured claims against the same assets and rank pari passu for any shortfall. The judge concluded there was more to unite than to divide the Scheme Creditors and that differences raised (interest rate differences between series, customary securities confirmations, consent payment, advisers’ fees, a modest work fee, nomination rights and information access arrangements) were not material such as to make it impossible for creditors to consult together. The safeguards on information and the cleansing and publication of materials reduced any concern arising from differential access to information.

Result: The Court made an order in substantially the proposed form convening a single Scheme Meeting and gave directions for its conduct.

The application to convene a single meeting of the Scheme Creditors was allowed. The court concluded it had jurisdiction under Part 26 CA 2006 because the Company is an English company, had validly acceded as co-issuer of the Existing SSNs and the governing law of the notes had been changed to English law. The Scheme constituted a compromise or arrangement and the creditors properly form a single class because, on the relevant comparator (probable insolvency), their legal rights are sufficiently similar and the identified differences were not so material as to prevent consultation.