Re AGPS Bondco PLC

The court considered an application under Part 26A of the Companies Act 2006 to sanction a cross-class restructuring plan for AGPS BondCo PLC and related group entities. The central legal issues were (i) jurisdiction and the validity under German law of an issuer substitution clause in the notes' terms and conditions; (ii) whether the statutory no worse off test in section 901G (Condition A) was satisfied for the dissenting 2029 noteholders; and (iii) whether the court should exercise its discretion to sanction the Plan despite differential treatment between classes (horizontal comparator and pari passu concerns).

The judge held that the issuer substitution clause (Clause 12) was valid under German law (SchVG and applicable BGB principles) and that the issuer substitution which had been implemented was effective, so the English court had jurisdiction to proceed. On the statutory cross-class cram‑down test the court accepted the Plan Company’s expert modelling (BCG) and supporting evidence showing that the Group’s assets, sold under the Plan, were likely to produce recoveries at least as good as the Relevant Alternative (liquidation), and that Condition A was satisfied for the 2029 class. The court also found Condition B satisfied. On discretion the judge accepted that, although the Plan preserved differing maturities (with one maturity extended) and provided transactional protections and uplift to certain classes (new-money fees, backstop etc.), the overall package and safeguards (including the Release Price Mechanism, the Intercreditor Agreement and the Notes Representative mechanics) and the strong creditor support meant that sanction was appropriate. The Plan was therefore sanctioned.

This is a first-instance sanction hearing under Part 26A. AGPS BondCo PLC (the Plan Company) sought orders to convene meetings and to sanction a restructuring plan affecting holders of six series of senior unsecured notes governed by German law. The Plan would implement amendments (including a 2024 maturity extension, temporary interest suspension with uplift, new covenants such as an LTV covenant, creation of a notes representative under the SchVG, and a New Money financing package) and an associated intercreditor and security structure intended to secure new financing and effect an orderly wind-down and disposals.

Procedural posture: Convening directions were given by Sir Anthony Mann; meetings were held and all classes but the 2029 noteholder class approved the Plan (the 2029 class voted 62.28% in favour, below the 75% statutory threshold). The Plan Company therefore relied on s.901G to sanction the Plan despite the dissenting 2029 class. Two creditor groups appeared: SteerCo (supporting sanction) and an ad hoc group (AHG) of 2029 noteholders (opposing sanction). The court heard contested factual and expert evidence over several days, including expert evidence on German law (validity of issuer substitution) and valuation and market modelling evidence (BCG, Knight Frank, CBRE, NAI Apollo, FTI, and others).

Key issues framed by the court:

• Jurisdiction and validity of the Issuer Substitution under the notes (Clause 12) as a matter of German law (interaction of SchVG §3 and the general terms law, BGB §307).
• Condition A of s.901G: whether the dissenting 2029 class would be no worse off under the Plan than in the Relevant Alternative (most likely outcome if the Plan fails).
• Condition B of s.901G: whether an approving class that would receive a payment or have a genuine economic interest in the Relevant Alternative had approved the Plan.
• Whether the court should exercise its discretion to sanction the Plan, taking into account the horizontal comparator, the pari passu principle, the allocation of new-money benefits and fees (including a backstop), the proposed Notes Representative and the proposed intercreditor/security mechanics.

Court’s reasoning (concise):

• Issuer substitution: the judge accepted the Plan Company’s German law expert (Professor Thole) and concluded Clause 12(1) is a standard and valid substitution clause under German law, compatible with SchVG transparency requirements and not rendered ineffective by BGB §307 in the circumstances; the substitution effected on 11 January 2023 was therefore valid.
• Relevant Alternative and valuations: the court preferred the Plan Company’s valuation and market forecast evidence (BCG, CBRE, NAI Apollo) over the AHG’s valuations (Knight Frank) and found the most likely outcome in insolvency involved significant 'insolvency discounts' (the BCG assumptions were accepted as reasonable). BCG’s modelling, taken together with management’s disposal plan and other evidence, supported the conclusion that the Plan would produce recoveries at least as good as the Relevant Alternative.
• No Worse Off test (Condition A): on the balance of probabilities the court accepted that 2029 noteholders would be no worse off; in the primary case the 2029 creditors were likely to be repaid in full under the Plan; alternatively, even on Knight Frank figures but with pari passu enforcement and application of the security/intercreditor mechanics, the 2029 class would not be worse off (the court emphasised the practical likelihood of acceleration, enforcement and a credit-bid outcome which would preserve pro rata recoveries).
• Discretion: although the Plan involved differential treatment (maturity extension only for 2024 notes; backstop/new-money fees; shareholders retaining equity), the judge concluded the package was commercially justified, enjoyed strong creditor support, contained procedural and contractual safeguards (Release Price Mechanism, intercreditor waterfall, notes representative, voting mechanics under SchVG) and did not offend the pari passu principle in the relevant sense so as to require refusal. The court sanctioned the Plan.

Wider context: the judgment explains how Part 26A (s.901G) is applied in complex cross-border restructurings, addresses interaction with German law (SchVG and BGB) and illustrates the court’s approach to valuation uncertainties, cross-class cram-down and contractual mechanics (notes representative, intercreditor arrangements, new-money incentives).

The court sanctioned the Restructuring Plan. Leech J held that (i) the issuer substitution clause in the SUNs (Clause 12) was valid under German law and the issuer substitution carried out on 11 January 2023 was effective, so the English court had jurisdiction; (ii) on the balance of probabilities Condition A of section 901G was satisfied in relation to the dissenting 2029 noteholders (the no worse off test), and Condition B was also met; and (iii) the court should exercise its discretion to sanction the Plan despite cross-class differences, because the package (including new-money arrangements, release-price protections, intercreditor mechanics and notes representative provisions) and the strong creditor support justified sanction. The Plan was therefore approved.