IN THE MATTER OF ED & F MAN HOLDINGS LIMITED

Under Companies Act 2006 Part 26A, the court may sanction a restructuring plan notwithstanding the dissent of a class only if the statutory cross-class cram-down conditions are met. The relevant alternative is the outcome most likely if the plan is not sanctioned; it need not be certain or more probable than all other outcomes combined. The court may ordinarily accept a rational and considered board assessment of that alternative unless there is sufficient reason to doubt it.

Once jurisdiction is engaged, sanction remains discretionary. Material considerations include fair representation, bona fide voting, overwhelming support, compliance with statutory requirements, the fairness of the allocation of restructuring benefits, and whether a creditor is offered an equal opportunity to obtain priority by providing new money. A creditor who is out of, or nearly out of, the money may reasonably receive a limited share of the restructuring surplus.

E D & F Man Holdings Limited, the ultimate holding company of an international commodities group, applied to sanction a restructuring plan under Part 26A of the Companies Act 2006. The plan restructured English-law finance debt, extended and amended facilities, provided for new trade finance and altered shareholder rights.

Five creditor classes and two member classes voted on the plan. All but the class comprising term loan B lenders and secured term-note holders approved it by the requisite 75% majority in value. That class approved the plan by 69.66% in value. The court therefore had to decide whether the cross-class cram-down conditions in section 901G were met and, if so, whether sanction should be granted in the exercise of discretion.

1. The restructuring plan was sanctioned. The statutory meeting and disclosure requirements were met. The dissenting B debt class had not approved the plan by the 75% value threshold, so sanction depended on section 901G of the Companies Act 2006.

2. The relevant alternative was the group’s liquidation of its commodity-trading entities while accelerating sales of remaining legacy assets. Section 901G(4) requires the court to select what is most likely to occur if the plan is not sanctioned. It does not require certainty or proof that the chosen scenario is more likely than all alternatives combined. A rational and considered board assessment will ordinarily be accepted unless there is sufficient reason to doubt it. There was none.

3. The expert evidence established that the dissenting class would recover nothing in the low case and 5.5% in the high case under that alternative. Under the plan, participating creditors could receive full payment of their restated debt and non-participants about 40%. No member of the dissenting class would therefore be worse off. Other assenting creditor classes would receive a payment or have a genuine economic interest in the relevant alternative, satisfying section 901G(5).

4. Sanction remained discretionary. The court gave weight to the substantial creditor support, high attendance, fair representation, bona fide voting, statutory compliance and the plan’s commercial reasonableness. It also held that a restructuring surplus need not be shared equally with a dissenting class which was out of, or nearly out of, the money.

5. The elevation mechanism was not unfair. Every member of the dissenting class had the same pro rata opportunity to provide new money and thereby improve the ranking of existing debt. Non-participants remained materially better off than in the relevant alternative. The deed of contribution creating a ricochet claim was also unobjectionable because it was used to achieve the best outcome for creditors as a whole. There was a reasonable prospect of recognition where required, including in the United States and Brazil.

The judgment records an earlier convening order by Michael Green J, reported at [2022] EWHC 433 (Ch), permitting the relevant creditor and member meetings. It was not an appeal.