In The Matter Of Hilding Anders International AB

At the convening stage of a scheme application, the court asks whether there is any obvious and insurmountable jurisdictional impediment. An overseas company may fall within the scheme jurisdiction where it is liable to be wound up as an unregistered company, although the court’s eventual exercise of jurisdiction may require a sufficient connection with England.

For class composition, creditors may consult together where their rights are not so dissimilar as to make consultation in their common interest impossible. Arrangements concerning fees, new money, underwriting risk or private rebalancing between creditors do not fracture a class where creditors’ rights against the scheme company remain materially the same, or where all creditors have the same opportunity to obtain the relevant benefit.

Two companies in the Hilding Europe and Asia Group, one incorporated in Sweden and the other in Luxembourg, applied for orders convening meetings to consider connected schemes of arrangement. The schemes proposed amendments to senior facilities and notes, elevation of emergency new money to super-senior status, a debt-for-equity swap, and the capitalisation of certain interest.

The applicants sought separate meetings for senior facility creditors and noteholders. The court had to determine whether there was an obvious jurisdictional impediment and whether professional fees, early-bird and backstop fees, participation rights in the new money facility, and a turnover deed required further creditor classes.

The court made the Convening Order and directed the two proposed scheme meetings.

1. Jurisdiction. At the convening stage the relevant question was whether there was any obvious and insurmountable jurisdictional impediment. The proposals constituted a compromise or arrangement because they modified existing creditor rights and, where necessary, replaced them with new rights. The statutory reference to a company included an overseas company liable to be wound up as an unregistered company under Part V of the Insolvency Act 1986. The SFA and NPA being governed by English law and subject to the exclusive jurisdiction of the English courts supported a sufficient connection with England, but the ultimate exercise of jurisdiction was a matter for the sanction hearing.

2. Class composition. The governing test was whether creditors’ rights were so dissimilar that it was impossible for them to consult together in their common interest. The senior facility creditors had essentially identical rights under the existing facility and proposed scheme. The noteholders likewise had essentially identical rights under the notes and proposed debt-for-equity swap.

3. The payment of professional fees merely prevented relevant creditors from being out of pocket. The 0.25% early-bird fee was available equally to all creditors and was modest in relation to the competing restructuring and liquidation outcomes. The 4% backstop fee compensated creditors who undertook additional underwriting risk and was not likely to affect the basic choice facing creditors.

4. Although participation in the new money facility could confer super-senior status and a 4% upfront fee, every senior facility creditor had the right to participate pro rata on the same terms until the sanction hearing. Those features therefore did not create materially dissimilar rights at the time of voting.

5. The turnover deed was a private arrangement between creditors concerning an ex post facto adjustment of insolvency recoveries. It did not affect their rights against either scheme company and therefore did not fracture the class.

6. The explanatory statement was adequate for the commercial recipients, and the proposed meeting directions were approved subject to a minor timing amendment.