Cimolai SpA & Anor, Re

This is an application by two Italian group companies for sanction of parallel English restructuring plans under Part 26A of the Companies Act 2006 to implement and give effect to Concordato proposals made in proceedings in Italy. The court considered compliance with the statutory requirements, class composition, the results of the creditor meetings, and whether the court could exercise the cross-class cramdown power in section 901G where one or more classes did not achieve the statutory majority required by section 901F.

The judge concluded that the Plan Companies satisfied the threshold conditions in section 901A, the convening order and procedural requirements had been complied with, and the classes had been properly constituted. Several classes voted in favour by large majorities but four single-creditor classes recorded no votes; accordingly the court addressed the section 901G conditions (the "no worse off" test and the requirement that at least one consenting class would receive a payment or have a genuine economic interest). The court found the relevant alternative was likely to be either sanction of the Italian Concordato without an effective parallel English compromise or, alternatively, Italian liquidation, and that in either event the dissenting creditors would be no worse off under the plans. Condition B was also satisfied. The court exercised its discretion in favour of sanctioning the plans, finding no unfairness or other blot, and made an order sanctioning the restructuring plans.

Background and parties. The applicants were Cimolai SpA and Luigi Cimolai Holdings Company, principal operating and holding companies of the Cimolai Group, an Italian-headquartered designer and manufacturer of complex steel structures. Financial distress arose principally from exposure to foreign exchange derivative contracts, many governed by English law. The Plan Companies sought English restructuring plans under Part 26A to mirror Concordato proposals in Italian proceedings and to bind counterparties who would not participate in the Italian process.

Procedural posture and nature of the application. The application was a sanction hearing for restructuring plans convened under Part 26A of the Companies Act 2006. Creditor meetings were held in London on 16 August 2023 after a convening hearing on 14 July 2023. The Italian Concordato proceedings had been recognised in England under the Cross-Border Insolvency Regulations; earlier English relief had been granted on an interim and then final basis.

Issues for decision.

• Compliance with statutory requirements and threshold tests in section 901A.
• Proper constitution of classes and conduct of meetings.
• Whether the statutory majority under section 901F was obtained and, if not, whether section 901G permitted sanction by way of cross-class cramdown.
• Identification of the relevant alternative, application of the "no worse off" test, whether condition B was met, and whether the court should exercise its discretion to sanction.
• Ancillary issues including the effect of releases, the assessment date for claims, and differential treatment of creditors (including a withdrawal of claims by a principal derivative creditor, JB Drax).

Court's reasoning and conclusions. The court was satisfied that both companies met the definition in section 901A(4) and that conditions A and B (thresholds) were met: both faced financial difficulties affecting their ability to continue as going concerns and the plans were intended to mitigate those difficulties. The classes and convening procedures had been properly directed and followed. Voting outcomes showed substantial support in five Cimolai classes and one LCH class, but three Cimolai classes and one LCH class recorded no votes because they were single-creditor classes whose sole members did not attend or vote. The lack of votes meant the court had to consider section 901G. The judge identified the relevant alternative as either sanction of the Concordato without an effective English compromise or Italian liquidation. Applying the "no worse off" approach, the court found that dissenting creditors would not be worse off under the plans; some would obtain materially better returns than in liquidation. Condition B was also satisfied because at least one consenting class would receive a payment or hold a genuine economic interest in the relevant alternative. On discretion, the court found no unfairness or defect; releases and other ancillary provisions were ancillary and permissible to the extent necessary to make the arrangement effective. The court therefore sanctioned the restructuring plans and made the requisite order.

The court sanctioned the restructuring plans under Part 26A of the Companies Act 2006. The judge held that the statutory and procedural requirements were satisfied, that classes were properly constituted and the convening order complied with, and that the conditions in section 901G (the "no worse off" test and condition B) were met in view of the likely relevant alternative (Italian Concordato or liquidation). In the exercise of discretion there was no blot or unfairness requiring refusal, and the plans were accordingly sanctioned.

The judgment records prior procedural steps: a convening hearing on 14 July 2023 and an earlier judgment of the same judge at that hearing ([2023] EWHC 1819 (Ch)). It also records recognition orders under the Cross-Border Insolvency Regulations granted by Fancourt J (interim, 29 December 2022) and made final by Rajah J on 19 April 2023. There is no appellate history to this sanction application set out in the judgment.