In the matter of Veon Holdings BV

At a scheme convening hearing, creditors may form one class where their rights are sufficiently similar to enable consultation in pursuit of a common interest. The court must compare both existing rights and scheme rights against the most likely alternative if the scheme fails. Differences in commercial interests, payment channels or external ability to enjoy identical rights do not necessarily fracture a class.

The court must assess the scheme as a whole, but a distinct amendment which materially affects one group’s contractual rights and is unrelated to the scheme’s principal purpose may require separate classes. Such an amendment may instead be excised where the scheme company accepts that course.

Veon Holdings BV applied for an order convening a single meeting of holders of two series of unsecured notes under a scheme of arrangement. The scheme principally proposed an eight-month maturity extension, together with an amendment fee and a put option, against a background of sanctions affecting payments through the Russian National Settlement Depository and the proposed sale of the group’s Russian subsidiary.

Opposing creditors argued that the different maturity dates, amendments to voting rights, and distinction between NSD and non-NSD holders required separate classes. The court also considered notice, jurisdiction, whether the proposal was a compromise or arrangement, creditor voting rights and the adequacy of the explanatory statement.

1. Outcome. A single meeting of the scheme creditors was directed to be convened. The provisions amending quorum and consent requirements for reserved matters were excised. The provision excluding sanctioned noteholders when calculating quorum could remain.
2. The class question was whether creditors’ rights were so dissimilar as to make consultation together with a view to their common interest impossible. Existing rights and rights conferred by the scheme had to be assessed by reference to the most likely comparator if the scheme did not proceed. Rights, rather than differences in commercial interests, were the relevant focus.
3. The most likely comparator was repayment of the 2023 notes in full at maturity. The difference between the February and April maturity dates did not create a sufficiently material difference in recovery risk. The equal eight-month extension, continued interest and common put option did not prevent consultation together.
4. The proposed removal of individual veto rights under the February notes was different. It would materially alter each February noteholder’s contractual rights through a meeting in which April noteholders, who had no interest in those rights, could vote. That amendment was not an incidental part of the principal maturity-extension package and would have required separate classes if retained.
5. The inability of NSD holders to receive payments through the clearing systems was an external difference in the enjoyment of identical rights, not a difference in rights against the company or under the scheme. The evidence did not establish a scheme-conditional wider arrangement conferring separate rights on NSD holders.
6. The proposal constituted a compromise or arrangement because the maturity extension, amendment fee and put option involved sufficient give and take, even though the benefits depended on regulatory approvals. Notice was sufficient in the circumstances, and the explanatory statement adequately enabled an informed decision.
7. Beneficial holders through the clearing systems were contingent creditors entitled to vote. Parallel trustee claims did not create double counting. The company was not required to make voting conditional on disclosure of holdings in other debt instruments.

First-instance decision. No earlier appellate decision is stated in the judgment.