Safari Holding Verwaltungs GmbH

The court granted an order under section 896 of the Companies Act 2006 convening a meeting of creditors to approve a proposed scheme of arrangement. The judge applied the established tests for (i) adequacy of notice, (ii) class composition (whether the rights of creditors were so dissimilar as to prevent them consulting together), and (iii) the jurisdictional and international aspects of a scheme involving a foreign company, including the need for a "sufficient connection" to England and Wales and consideration of likely international effectiveness.

The court found notice had been given in adequate time. On class composition the court held there was a single class of Scheme Creditors: differences arising from the backstop fee, consent fee, adviser fee payments and limited director appointment rights were not sufficiently material to fracture the class. On jurisdiction and international effect, the judge accepted there was a sufficient connection to England and Wales given the choice of English law in the transaction documents (noting and addressing an unusual "floating" clause in Section 14.08 of the Third Supplemental Indenture) and concluded there was a real prospect the Scheme would have substantial effect in Germany, supported by expert evidence. For those reasons the convening order was made and directions given for a remote meeting of Scheme Creditors.

This was a first instance application by Safari Holding Verwaltungs GmbH for an order under section 896 Companies Act 2006 to convene a meeting of creditors to vote on a proposed scheme of arrangement forming part of a broader restructuring. The Company is a German incorporated gaming arcade operator whose financial performance had been severely affected by COVID-19 and German regulatory changes. The principal indebtedness to be compromised comprised €350 million of senior secured notes due November 2022 issued under an indenture, together with English law guarantees and shared collateral.

(i) Relief sought: an order to convene a creditors' meeting for approval of a scheme of arrangement which would cancel the existing notes and replace them with a package of new securities (Reinstated SSNs, New MidCo PIK Notes and optionally New SSNs), raise new money, and implement a new shareholding structure transferring parent shares to a New HoldCo and allocating equity to Existing Noteholders, with the effect of deleveraging and stabilising the group.

(ii) Issues framed: adequacy of notice of the convening hearing; correct class composition for the purposes of convening a single meeting; the effect of transactional payments and arrangements (backstop fee, consent fee, adviser fee payments, director appointment rights) on class composition; jurisdictional competence under the Companies Act 2006 for a foreign company and the requirement of a "sufficient connection" to England and Wales; and preliminary consideration of the likely international effectiveness of the Scheme, notably in Germany.

(iii) Reasoning and subsidiary findings:

• Notice: the Practice Statement Letter and supplemental notice were placed on the scheme website over three weeks before the hearing and provided adequate notice.
• Class composition: applying the established test (whether rights are so dissimilar as to prevent creditors consulting together), the court concluded there was a single class of Scheme Creditors because existing rights were identical and the Scheme would affect creditors in the same way. Specific potential differences were considered and rejected as material: (a) the Backstop Fee (4% of New SSNs, approximately €1.2m or c.0.3% of total scheme consideration) was regarded as payment for new services and not sufficiently material to fracture the class; (b) the Consent Fee (0.25%) was available to all creditors on identical terms and, even if not, was unlikely to influence votes compared with the substantive recovery difference; (c) adviser fees paid to ad hoc committee advisers did not confer a material net benefit; (d) director appointment rights attached to Class A shares were too limited and intangible to be material.
• Jurisdiction and governing law: the Company relied on an amendment making English law the governing law and conferring non-exclusive English jurisdiction. The court addressed an unusual provision (Section 14.08 of the Third Supplemental Indenture) that allowed certain specific provisions to be interpreted under New York law if English law would be less favourable; the court concluded that there was a present choice of English law subject to a future contingency or, in any event, an implied choice of English law for the Specific Provisions. That was sufficient to establish a "sufficient connection" to England and Wales for convening purposes.
• International effectiveness: the court noted expert German law opinion that the English law scheme would be recognised in Germany; the court was satisfied that existence of that expert evidence gave a real prospect of substantial effect abroad and was not aware of any obvious roadblock to sanction.

The court therefore made the convening order sought and directed that the remote meeting of Scheme Creditors be held by Zoom on 28 April 2022.

The application for an order convening a meeting of Scheme Creditors under section 896 Companies Act 2006 was allowed. The court concluded notice was adequate; there was a single class of Scheme Creditors because variations such as the backstop fee, consent fees, adviser fee arrangements and limited director appointment rights were not sufficiently material to fracture the class; and there was a sufficient connection with England and Wales given the choice of English law (notwithstanding an unusual proviso in Section 14.08) and a real prospect of international effectiveness (notably in Germany). Accordingly the convening Order was made and directions given for a remote creditor meeting on 28 April 2022.