In the matter of Haya Holdco 2 Plc

The court considered an application to sanction a creditors' scheme of arrangement under section 899 of the Companies Act 2006. The Scheme would exchange existing senior secured notes for cash, new notes and an equity stake in the parent company, and would release both co-obligors including a Spanish subsidiary. The court applied the familiar tests summarised in Re KCA Deutag UK Finance plc: compliance with statutory requirements; fair representation of the class and bona fide voting by the majority; whether an intelligent and honest person might reasonably approve the proposal; and whether there was any other 'blot' or defect.

The judge found that the statutory requirements had been met, that the class was fairly represented and acted bona fide (with over 99% by value voting in favour), and that an intelligent and honest person might reasonably approve the Scheme in the light of the alternatives. Expert evidence from a Spanish law academic gave a real prospect that the Scheme's effect on the Spanish subsidiary would be recognised in Spain. Proposed amendments to the Scheme were held to be technical, approved after consultation with the ad hoc group's advisers, "reasonably necessary" to implement the recapitalisation, and not materially adverse to creditors. For these reasons the court sanctioned the modified Scheme.

Background and parties: The Scheme Company is Haya Holdco 2 plc. The Scheme concerned holders of two series of senior secured loan notes originally issued by a Spanish subsidiary, Haya Real Estate SAU (HRE). In April 2022 the Scheme Company acceded as co-obligor to those notes following a consent solicitation that changed applicable law and conferred jurisdiction in England and Wales. The Scheme would release both co-obligors in return for partial cash redemption, cancellation of outstanding notes, issue of new notes by the Scheme Company and an equity interest in Haya Holdco 1 Limited (Holdco).

Procedural posture and relief sought: The application sought the court's sanction of a scheme of arrangement under section 899 Companies Act 2006. A convening hearing was conducted by Marcus Smith J on 9 May 2022, who made directions and authorised a single meeting of Scheme creditors. The court meeting took place on 31 May 2022 and recorded near-unanimous creditor approval. The sanction hearing took place before Fancourt J on 9 June 2022.

Issues framed: The court applied the four-part test derived from Snowden J in Re KCA Deutag: (i) compliance with statutory requirements; (ii) whether the class was fairly represented and whether the majority voted bona fide for proper purposes; (iii) whether an intelligent and honest person might reasonably approve; and (iv) whether there was any other blot or defect. The judge also considered whether a number of proposed amendments to the Scheme could properly be sanctioned under the Scheme's clause permitting modifications (clause 8.14).

Evidence: Witness statements from company officers established compliance with the convening order and the voting majorities. Expert evidence on Spanish law was provided by Professor Pedro De Miguel Asensio (2 May 2022), who opined there was a real prospect that Spanish courts would recognise the Scheme's effect on liabilities of HRE, applying Rome I and thus recognising the Scheme as a variation of English-law governed contracts. The Scheme carried numerous recapitalisation conditions to be satisfied by a longstop date of 30 June 2022, but none were conditions precedent to the Scheme taking effect.

Court's reasoning and disposition: The court held that statutory requirements under section 899 were satisfied and that the class had been fairly represented and overwhelmingly supported the Scheme (over 99% by value). Given the alternatives, the Scheme was such that an intelligent and honest person might reasonably approve it. There was no blot on the Scheme; the expert evidence gave a real prospect of recognition in Spain, so sanction would not be futile. On amendments, the court construed the word "necessary" in clause 8.14 to mean "reasonably necessary" for efficient implementation. It found consultation with the ad hoc group's advisers had occurred, the modifications were technical and majority-approved, and they would not materially adversely affect Scheme creditors. The court therefore sanctioned the modified Scheme in the form presented.

The court sanctioned the modified scheme of arrangement under section 899 of the Companies Act 2006. The judge held that statutory requirements had been satisfied, the creditor class was fairly represented and had acted bona fide, the Scheme was one an intelligent and honest person might reasonably approve, there was no blot, and the proposed modifications were reasonably necessary, technical and not materially adverse. Expert evidence indicated a real prospect of recognition of the Scheme's effect in Spain.

A convening hearing was held before Marcus Smith J on 9 May 2022, who made directions and authorised a single meeting of Scheme creditors and gave a reserved judgment dealing with jurisdiction and class composition. The court meeting was held on 31 May 2022 with overwhelming creditor approval. The sanction hearing took place before Fancourt J on 9 June 2022 and resulted in sanction of the modified Scheme.