In the matter of Vue International Bidco plc

At a convening hearing under Part 26 of the Companies Act 2006, the court considers jurisdiction, notice and class composition, rather than the merits or fairness of the proposed scheme. A scheme creditor class is determined by the creditors’ legal rights viewed against the appropriate comparator, not by their separate commercial interests or intentions. Differences in debt terms, optional participation in new money, legitimate underwriting or lock-up fees, adviser-fee payments and proposed treatment under a later restructuring do not require separate classes where the rights compromised by the scheme remain sufficiently similar. Notice is fact-sensitive and depends on matters including complexity, prior consultation and urgency. The court may refuse to convene a meeting where an obvious jurisdictional roadblock would prevent sanction.

Vue International Bidco plc applied under section 896 of the Companies Act 2006 for an order convening a meeting of lenders under its senior finance documents to consider a scheme of arrangement. The scheme was intended to amend existing finance documents and facilitate a new super-senior money facility during a severe liquidity crisis.

The second lien noteholders and an unsecured claimant, Event, were unaffected by the scheme. The issues were whether the court had jurisdiction, whether the notice period was adequate, and whether the senior lenders should vote in one class despite differences in facilities, fees, underwriting arrangements and proposed treatment under a separate financial restructuring.

1. The application was granted and a single meeting of the scheme creditors was ordered. The court had jurisdiction because the company was incorporated in England, liable to be wound up there and within Part 26 of the Companies Act 2006. The scheme involved a compromise or arrangement containing the necessary element of give and take. No jurisdictional roadblock was apparent.

2. At a convening hearing the court does not determine the merits or fairness of the scheme. It considers class composition and may consider whether an obvious jurisdictional obstacle would unquestionably prevent sanction. A creditor who fails to raise a class issue at the convening stage will ordinarily be unable to raise it at sanction unless there is good reason.

3. The 14-day notice period was adequate. The assessment was fact-sensitive and took account of the company’s urgent liquidity position, the scheme’s relative simplicity, extensive prior communications, the sophistication of the creditors and the absence of objection or any request for more time.

4. Class composition depended on legal rights viewed against the appropriate comparator, namely an accelerated sale followed by a pre-pack administration. The senior lenders had substantially the same rights, common security and equal ranking absent the scheme, and were treated alike under it. Their differing interest rates and maturity dates did not fracture the class.

5. Commercial differences did not require separate classes. All creditors had the same right to participate in the new money facility. A properly negotiated backstop fee for a genuine underwriting service, modest lock-up fees available to creditors, and payment of adviser fees did not constitute a bounty or windfall or prevent consultation in a common interest. The different treatment of the BIGS Facility under the later financial restructuring was irrelevant because that restructuring was not implemented by the scheme and did not alter rights under the scheme.

6. Event, whose rights were unaffected, had no objection to raise at the convening stage. It could make representations at the sanction hearing concerning fairness if it wished.