Re Veon Holdings BV

The court considered an application under Part 26 of the Companies Act 2006 to convene a single meeting of certain unsecured noteholders to vote on a scheme of arrangement proposing an eight month extension of maturity for two series of 2023 notes and related amendments. The judge applied established principles on class composition, identifying the appropriate comparator (repayment in full on original maturities) and asking whether differences in rights were such that creditors could not consult together with a view to their common interest.

The court held that differences in maturity dates (February v April 2023) did not produce a sufficiently material divergence in recovery prospects to fracture the class, particularly given the Company’s then liquidity and the interconnected commercial package. Differences arising from the sanctioned status of the National Settlement Depository (NSD) produced differences in interests rather than legal rights and did not require separate classes. However, the proposed harmonisation of voting thresholds would have removed a unanimous veto right held by February noteholders and thereby affected rights in a way that could not be regarded as incidental to the main package; those provisions were excised. The court also found that notice given and the explanatory materials were adequate in the urgent circumstances.

Background and nature of the application:

• The applicant, VEON Holdings BV, sought an order to convene a single meeting of certain unsecured holders of two series of 2023 notes to consider a Scheme of arrangement under Part 26 of the Companies Act 2006. The Scheme would impose a short standstill and principally extend the maturity dates of the February and April 2023 notes by eight months in return for an amendment fee and a put option, and would make other amendments to voting and quorum provisions.

Parties and factual context:

• The application was opposed by holders of small percentages of the relevant notes. Much of the difficulty arose because up to 60% by value of the 2023 notes were held through the Russian National Settlement Depository (NSD), itself sanctioned, creating practical obstacles to voting and to the transmission of payments. The Company had also contracted to sell its Russian operating subsidiary PJSC VimpelCom, a transaction central to the commercial rationale for the extension and to the risk of double payment under Russian measures including Presidential Decree No. 430 and related Russian Ministry of Finance communications.

Issues framed by the court:

1. Whether notice and the explanatory statement were adequate in the urgent circumstances;
2. Whether the English court had jurisdiction to convene a meeting for a foreign company;
3. Whether the proposed creditors should be treated as a single class for convening purposes, taking account of differing maturities, proposed changes to voting thresholds (including removal of a February noteholders’ unanimous veto on reserved matters) and differences in ability to receive payments (NSD v non-NSD holders); and
4. Whether any proposed amendments should be excised before a meeting was convened.

Court’s reasoning and conclusions:

• Notice: In light of sanctions and the NSD position the court concluded that, given the urgency and simplicity of the Scheme, the methods used to give notice and the explanatory statement were sufficient.
• Jurisdiction: The Company was a "company" within the Companies Act and there was a sufficient connection with England because the relevant debt was governed by English law; the exercise of the discretionary jurisdiction would be directed at sanction stage.
• Class composition and comparator: The court adopted the usual comparator of repayment in full on original maturity dates. Applying established authorities, it held that differences in maturity dates and coupon did not produce such materially different legal rights as to prevent consultation together: the differing maturities did not materially affect the likelihood of recovery in full, given the Company’s liquidity and the interdependence of the package of amendments.
• Voting thresholds and veto: The proposed change which would remove a unanimous veto held by February noteholders was not incidental to the main purpose of extending maturities and could not properly be imposed by a meeting of all 2023 noteholders; that part of the Scheme was excised. The exclusion from quorum calculations of notes held by sanctioned persons could remain.
• NSD v non-NSD holders: The fact that NSD holders may be unable to receive payments was a difference in ability to enjoy rights (interests) rather than in legal rights; there was no sufficient connection to treat any likely Russian arrangements as conditional benefits for class composition purposes and separate classes were not required.

Practical outcome: A single meeting of the Scheme creditors was to be convened, but the provisions changing quorum and consent requirements (removing the February noteholders’ veto) were to be excised from the Scheme document prior to convening.

The application to convene a single meeting of the relevant 2023 noteholders is allowed, subject to excision from the Scheme of the proposed amendments that would remove the February 2023 noteholders’ unanimous veto on reserved matters. The court found (i) sufficient notice had been given in the urgent circumstances, (ii) it had jurisdiction and (iii) on class composition the differences in maturity dates and NSD holding status did not produce material differences in legal rights sufficient to require separate classes, while the proposed change to remove a veto right was not incidental and therefore had to be excised.