Lecta Paper UK Limited, Re

The Company applied for an order convening a single meeting of creditors to consider a proposed Scheme of Arrangement under Part 26 of the Companies Act 2006. The court considered two questions: whether it had jurisdiction to convene the meeting and whether the Scheme Creditors should be treated as a single class. The Senior Secured Notes, which are pari passu and secured by a common security package, are to be released and replaced by newly issued New SSNs maturing in September 2028; a New Money Facility of €90 million is available and partly underwritten.

The judge was satisfied that the court had jurisdiction and that the Scheme constituted a compromise or arrangement under Part 26. On class composition, the court held that the existing and proposed rights of the Scheme Creditors were materially the same, that modest consent fees, the opportunity to subscribe to new money (including pre-emption rights exercised by shareholders) and backstop fees did not fracture the class, and that a single class meeting was appropriate. The court directed that a single class meeting be convened and made the draft directions provided.

This is an application by Lecta Paper UK Limited for an order convening a single meeting of creditors to consider a Scheme of Arrangement under Part 26 of the Companies Act 2006. The Company is an English incorporated, wholly owned subsidiary within a European paper manufacturing group that has suffered material deterioration in financial position since a prior 2020 restructuring. The proposed Scheme concerns two series of Senior Secured Notes with an aggregate principal of 255,225,550, due 1 March 2025, which are to be released and replaced by New Senior Secured Notes ("New SSNs") maturing September 2028. A New Money Facility of 90 million, effectively underwritten by certain shareholders, is integral to the refinancing.

The issues before the court were (i) whether the court had jurisdiction to convene the meeting and sanction the Scheme and (ii) whether the Scheme Creditors should vote in a single class or be divided into separate classes. The Company relied on evidence from directors and the Information Agent and on a common form lock-up agreement and support from a working group of noteholders. The Company also explained the existence of an intercreditor agreement with a 115 million super senior facility agreement (SSFA) that ranks senior on enforcement.

The court applied established authority on class composition, observing that the Scheme Creditors hold materially the same existing rights (common security package and pari passu ranking) and will receive the same package of consideration under the Scheme on a pro rata basis. Differences limited to interest rates between the two note series were not sufficient to require separate classes. The court considered and rejected arguments that modest consent fees under the lock-up agreement, the ability to subscribe to the New Money Facility (including shareholders' pre-emption rights), or backstop fees fractured the class. The judge accepted that jurisdictional questions and potential foreign enforcement issues had been addressed sufficiently for the convening hearing and could be further considered at sanction. Having found more to unite than divide the creditors, the court directed that a single class meeting be convened and made the draft directions submitted by the Company.

The court granted the application to convene a single class meeting of Scheme Creditors and made the directions in the draft order. The judge held that the court had jurisdiction under Part 26 of the Companies Act 2006, that the proposed arrangement was a compromise or arrangement within Part 26, and that the Scheme Creditors form a single class because their existing and proposed rights are materially the same; modest consent fees, New Money subscription rights (including shareholders' pre-emption) and backstop fees did not fracture the class.