In the matter of Chaptre Finance Plc

At a restructuring-plan convening hearing, the court considers notice, jurisdictional conditions, obvious obstacles to sanction and class composition, but not the plan’s merits or fairness. Notice is fact-sensitive and may be sufficient where urgency, creditor sophistication and prior consultation justify an abbreviated period. Creditors may remain in one class despite different contractual terms where their rights against the company are sufficiently similar in the relevant alternative. New-money incentives do not fracture a class if they are available to all relevant creditors on the stated terms. Class composition is determined by creditors’ rights against the company, rather than rights against third parties such as guarantors or insurers.

Chaptre Finance plc applied under section 901C(1) of the Companies Act 2006 for orders convening three creditor meetings to consider a restructuring plan under Part 26A. The plan was intended to facilitate an £80 million super senior facility and avoid imminent insolvency following construction delays and defects affecting a biomass power plant.

The proposed meetings concerned funder creditors, hedging bank creditors and a pellet supplier voting alone. The court considered notice, the statutory jurisdictional conditions, the use of a deed poll and deed of contribution, and whether the proposed classes were properly constituted.

1. Application granted. The court ordered the convening of three plan meetings in the terms of the draft order.
2. The function of a convening hearing under Part 26A was to consider whether creditors had sufficient notice, whether the jurisdictional conditions and any obvious jurisdictional requirements were satisfied, and whether the proposed classes were properly constituted. The court was not to decide the merits or fairness of the plan, which belonged to any later sanction hearing.
3. The 14 days’ notice was sufficient. The appropriate period was fact-sensitive and depended on the plan’s complexity, the company’s urgency, creditor sophistication, prior consultation and other relevant factors. The Group’s imminent liquidity crisis and the creditors’ prior involvement justified the timetable.
4. The conditions in sections 901A and 901G of the Companies Act 2006 were satisfied. The company faced financial difficulties affecting its ability to continue as a going concern, and the plan was a compromise or arrangement intended to mitigate those difficulties. The most likely relevant alternative was formal insolvency proceedings.
5. The proposed classes were appropriate. The funder creditors and hedging bank creditors had rights sufficiently similar for them to consult together in the relevant alternative. Differences in interest rates, maturity dates and swap types did not fracture the classes where they would be irrelevant in the anticipated insolvency.
6. The availability of a super senior facility and associated ranking benefits did not fracture the funder class because participation was available to all funders. The closed-out hedging bank could remain in the funder class despite being unable to participate, having regard to the similarity of its rights, the small size of its claim and its support for the plan.
7. Class composition depended on creditors’ rights against the company, not rights between creditors or against third parties. Accordingly, ECA guarantees and possible subrogation did not require a separate class. A single-creditor class was permissible.