Re ED&F Man Holdings Ltd

The court sanctioned a restructuring plan under Part 26A of the Companies Act 2006. The statutory convening and notice requirements were satisfied and at the class meetings four of five creditor classes and one member class approved the plan by the statutory majorities required by section 901F. One creditor class (the "B debt" class) did not reach the 75% value threshold and therefore the court applied section 901G. The court identified the relevant alternative (a likely liquidation of the commodity trading entities and accelerated disposals of legacy assets), accepted the board's evidence and the FTI modelling, and concluded that members of the dissenting class would be no worse off under the plan than in the relevant alternative (the no-worse-off test). The court also found condition B satisfied. Having considered discretionary factors (including the extent of creditor support, the fairness of the elevation mechanism, rank/respect for existing rights and cross-border recognition), the judge exercised his discretion to sanction the plan.

This was a first instance sanction application under Part 26A of the Companies Act 2006 by E D & F Man Holdings Limited for a restructuring plan affecting multiple secured facilities and a 2017 ANZ settlement liability. At the convening hearing (Michael Green J, reported at [2022] EWHC 433 (Ch)) the court authorised five creditor and two member meetings which were held on 16 March 2022.

The principal issues were:

• whether the plan had been agreed by the required statutory majorities under section 901F;
• if a dissenting class remained, whether the court had jurisdiction under section 901G by being satisfied of the "no worse off" test (condition A) and condition B;
• whether the court should exercise its discretion to sanction the plan, having regard to matters such as creditor support, the elevation mechanism for new money, treatment of guarantor/ricochet arrangements and prospects of cross-border recognition.

Facts and procedural posture: the company is the ultimate holding company of a global commodities group. The plan sought to rearrange four categories of finance debt (a borrowing base facility, RCF, secured term loans A and B, and series of secured term notes) and to amend the ANZ settlement, introduce a new trade finance facility, convert and restate debt instruments with an elevation mechanism for lenders who provide new money, and amend governance documents. Most plan creditors voted in favour; the B debt class approved by only 69.66% in value and was therefore a dissenting class.

Court's reasoning: the judge accepted the board's evidence as to the relevant alternative (likely liquidation of the trading entities and accelerated sales) and placed weight on two FTI Consulting reports: an entity priority model assessing returns in the relevant alternative, and a Plan Outcome Report assessing returns under the plan. The entity priority model showed a return to the dissenting class of 0% (low case) to 5.5% (high case) in the relevant alternative. The Plan Outcome Report indicated that B debt holders who subscribed to new trade finance and obtained elevation could be repaid in full, while non-participating B debt holders would realise about 40% of restated debt. The judge concluded condition A was met (no worse off) and condition B was satisfied because at least one class with an economic interest had agreed the plan.

The judge then exercised his discretion to sanction the plan, emphasising (i) overwhelming overall creditor support (about 84% by value across all classes), (ii) compliance with statutory procedures, (iii) lack of evidence that assenting classes were unfairly represented, (iv) the plan's respect for existing ranking, (v) the reasonableness of the elevation mechanism in commercial terms, (vi) permissibility of the guarantor/ricochet device, and (vii) reasonable prospects of recognition in the United States and Brazil based on expert reports. The plan was therefore sanctioned and an order was made in the form put before the court.

The court sanctioned the restructuring plan under Part 26A of the Companies Act 2006. The judge found that the convening and voting requirements of section 901F had been satisfied for the requisite classes, that section 901G applied to the dissenting B debt class because the "no worse off" (condition A) and condition B tests were met (as shown by the board evidence and two FTI reports), and that in the exercise of the court's discretion the plan should be sanctioned. The court made an order in the form submitted by the applicant.

The judgment describes the prior convening hearing before Michael Green J on 24 February 2022, at which the court ordered meetings to be convened; that convening judgment is reported at [2022] EWHC 433 (Ch). The meetings were held on 16 March 2022 and the sanction application was heard on 23 March 2022. No appellate history beyond that is stated in the judgment.