Haya Holdco 2 Plc, Re

This is an application under Part 26 of the Companies Act 2006 to sanction a scheme of arrangement proposed by Haya Holdco 2 Plc. The court found that statutory requirements had been complied with, the single class of scheme creditors (holders of notes issued under the 2022 scheme) was properly constituted and fairly represented, and the necessary majorities had voted in favour. The court accepted that the creditors were better judges of their commercial advantage and that the scheme would deliver a significantly better return than the likely alternative (liquidation). The court also concluded that changes to the governing law of the 2022 notes were effective under New York law, that releases contained in the scheme had a proper juridical basis, and that the scheme would probably be effective under Spanish law; there was therefore no "blot" or defect warranting refusal.

Background and parties:

• The scheme company, incorporated in England, is an intermediate company in a group whose operating activities are largely based in Spain and which suffered major revenue decline after the COVID-19 pandemic.
• The scheme creditors are holders of notes issued pursuant to a scheme sanctioned in June 2022; those notes are the group's only secured creditors.

Nature of the application:

• The company applied for sanction of a scheme of arrangement under Part 26 Companies Act 2006 to implement a sale of the group's principal operating subsidiary (Haya Real Estate SAU) and provide a mechanism to distribute the sale proceeds to the noteholders whose notes would fall due in November 2025.

Procedural posture:

• A convening order was made by Richard Smith J on 28 July 2023 and the scheme meeting was held on 22 August 2023.
• At the meeting some 115 creditors attended in person or by proxy representing 98.16% of outstanding notes; the scheme was approved by 99.89% by value and 99.12% by number.

Issues framed by the court:

• Compliance with statutory requirements under Part 26.
• Whether the class was properly constituted and fairly represented and whether the majority voted bona fide for proper purposes.
• Whether an intelligent and honest man acting in respect of his interests might reasonably approve the scheme (commercial advantage test).
• Whether there was any other "blot" or defect, including questions of cross-border effectiveness.

Court's reasoning:

• The company is incorporated in England so jurisdictional connection under Part 26 was satisfied.
• The statutory majorities were achieved and the convening order procedures were followed; minor amendments were adequately notified.
• Class composition had been considered at the convening stage and, absent opposition, was not revisited. Turnout and voting patterns showed fair representation and bona fide conduct.
• The court accepted that creditors were best placed to judge commercial advantage; overwhelmingly favourable support and evidence indicated creditors would receive materially more under the scheme than in the alternative of liquidation.
• The court found the early bird and consent fees, and risk fees to ad hoc group members, were not unfair or materially distorting of the vote as they were disclosed and paid for specific purposes.
• The court accepted expert evidence that the change of governing law of the 2022 notes from New York to English law was effective under New York law, supporting cross-jurisdictional effectiveness of the scheme and of the releases; evidence also supported probable effectiveness under Spanish law.
• On that basis there was no blot or defect, and the court granted the sanction order sought.

The court sanctioned the proposed scheme of arrangement. The judge concluded that statutory requirements under Part 26 were met, the single class of scheme creditors was fairly represented and had acted bona fide, the scheme was one which creditors could reasonably approve (giving them a materially better return than the liquidation alternative), the releases had a proper juridical basis, and the scheme was likely to be effective in relevant foreign jurisdictions; accordingly there was no defect preventing sanction.