In the matter of Vue International Bidco plc

The company applied under section 896 of the Companies Act 2006 for an order convening a meeting of its scheme creditors to consider a scheme of arrangement under Part 26 CA 2006. The court considered the limited procedural issues appropriate for a convening hearing: jurisdiction, adequacy of notice and class composition, applying the Practice Statement (Companies: Schemes of Arrangement) and relevant authorities such as Re Swissport Fuelling Limited.

The court held that it had jurisdiction (company incorporated in England, scheme involved appropriate ‘give and take’) and that there were no jurisdictional roadblocks. On notice, the court found that 14 days' notice by email in the specific urgent circumstances was adequate given the severe liquidity shortfall, creditor sophistication and extensive prior consultation. On class composition, the court applied the legal-rights comparator and concluded that the senior lenders formed a single class: differences of interest rate, maturities, entitlement to subscribe for new-money and the existence of modest lock-up and backstop fees (3% backstop, 0.5% lock-up) did not fracture the class. A small ancillary facility (the BIGS Facility) treated differently in the subsequent financial restructuring did not require separate class treatment for the purposes of the Scheme meeting. The convening order was granted.

Background and parties. The applicant, Vue International Bidco plc (the Company), and its subsidiaries (the Group) operate a cinema chain. The Group had two key tranches of indebtedness: senior facilities (Senior Facilities, Revolving Credit Facility and a Senior Secured Term Loan) and junior Second Lien Notes. The Scheme Creditors comprised the lenders under the Senior Finance Documents; the Second Lien Noteholders and certain unsecured creditors were not affected by the Scheme. The Group faced severe liquidity pressure following the COVID-19 pandemic and an arbitration claim, creating an imminent cash shortfall in September–October 2022.

Nature of the application. The Company sought an order under section 896 CA 2006 convening a meeting of Scheme Creditors to consider a scheme of arrangement under Part 26 CA 2006. The Scheme would amend the Senior Finance Documents to enable entry into a super-senior New Money Facility (to raise £75 million) and related subordination arrangements; it was presented as a means to avoid an accelerated sale, administration or liquidation and to preserve going concern value while a separate Financial Restructuring (debt for equity swap) was contemplated outside the Scheme.

Issues for the court. The court framed the convening hearing issues narrowly: (i) jurisdiction to convene meetings and to sanction a Part 26 scheme, (ii) adequacy of notice to the Scheme Creditors, and (iii) appropriate class composition for voting.

Reasoning and findings. On jurisdiction the court found the Company was within Part 26 (incorporated in England and liable to be wound up in England) and that the Scheme involved the requisite compromise or arrangement with ‘give and take’. The court rejected the suggestion that third-party rights or the appointment of a Senior Agent or a Deed of Release created jurisdictional obstacles. On notice the court applied the Practice Statement and relevant authorities, concluding that 14 days' email notice, together with prior negotiation and wide dissemination (including read receipts and website posting), was adequate in the urgent circumstances: creditors were sophisticated, heavily consulted and over 90% by value had locked up support. On class composition the court applied the legal-rights comparator (the likely alternative being an accelerated sale and pre-pack administration), concluding the senior lenders had sufficiently similar legal rights to form a single class. Differences in interest rates/maturities, the possibility some lenders might not subscribe pro rata to the New Money Facility, the presence of a backstop arrangement (with a 3% backstop fee) and modest lock-up fees (0.5%), and the distinct treatment of the small BIGS Facility in the later Financial Restructuring did not fracture the class for the purposes of convening and voting. The court noted authorities holding that legitimate commercial fees for underwriting or locking up do not, of themselves, fracture a class. A letter from an unsecured third party (Event) did not affect jurisdiction or class composition as its rights were not affected by the Scheme.

Disposition. The court ordered that the Scheme Creditors be convened to vote as a single class.

The application for a convening order under section 896 CA 2006 is allowed. The court found it had jurisdiction to convene meetings under Part 26, that adequate notice had been given in the urgent circumstances, and that the Scheme Creditors properly constituted a single class for voting. The judge therefore made the convening order allowing the Company to summon the meeting of Scheme Creditors.