In the matter of AGPS Bondco PLC

Under Companies Act 2006 Part 26A, a court may sanction a restructuring plan despite a dissenting class where the statutory conditions are met and discretion is properly exercised. The no-worse-off inquiry involves identifying the most likely relevant alternative, assessing its consequences for the dissenting class, and comparing those consequences with the plan. The comparison is broad and includes timing, security and enforceability, not merely nominal claims. Uncertainty in valuation is not fatal; the court must make the best assessment available on the balance of probabilities. Differential treatment, altered priorities and unequal maturities may be sanctioned where supported by a proper commercial or legal justification and where the dissenting class is not unfairly prejudiced. The court need not select the best or only fair plan.

AGPS BondCo PLC applied under Part 26A of the Companies Act 2006 for sanction of a restructuring plan concerning six series of German-law senior unsecured notes. All classes approved the plan by at least 75% in value except the 2029 noteholders, who approved it by 62.28%. The plan company sought a cross-class cram down of that class.

At the convening stage, Sir Anthony Mann approved the constitution of the classes and made the convening order, with reasons in [2023] EWHC 415 (Ch). The principal issues at the sanction hearing were whether the issuer substitution was valid under German law, whether the 2029 creditors satisfied the no-worse-off test, whether the plan was fair in the exercise of the court’s discretion, and whether alleged acceleration notices or other features created a legal blot.

The plan was sanctioned. The court applied the cross-class cram-down power to the dissenting 2029 noteholders.

1. Jurisdiction. The issuer-substitution clause was valid and enforceable under German law. Substitution clauses were generally permissible. The special transparency requirement in SchVG §3 displaced, or alternatively satisfied the relevant concern under, BGB §307(1) sentence 2. The contractual conditions had been met and the parent company had given the required guarantee. The English court therefore had jurisdiction.
2. No-worse-off test. Under Companies Act 2006 s 901G, the court had to identify the most likely relevant alternative, assess its consequences for the dissenting class, and compare them with the plan. The relevant alternative was formal insolvency. On the balance of probabilities, the group would realise approximately €3.288 billion in insolvency, producing a recovery of about 63.25% for the 2029 creditors. The BCG evidence was preferred to the opposing valuation evidence, making full repayment under the plan the more likely outcome. Even on the opposing valuation assumptions, the likely operation of the loan-to-value covenant, acceleration rights, enforcement structure and a creditor credit bid meant that the creditors would probably recover on a pari passu basis and be better off than in insolvency. Contractual PIK interest was not included in the insolvency comparison because the relevant comparison was actual returns, not worthless contractual entitlements.
3. Discretion and fairness. Overall creditor support was relevant but not decisive. The court was not required to choose the best or only fair plan. Differential treatment and priority changes were permissible where justified. The extension and priority given to the 2024 notes, the New Money terms, the 3% backstop fee, the shareholders’ retained equity and the appointment of the Notes Representative did not make the plan unfair. The Notes Representative provisions were consistent with majority mechanisms under SchVG and contained safeguards.
4. Other objections. The unresolved German-law question concerning earlier acceleration notices did not make the plan unlawful or inoperable. There was a reasonable prospect of recognition in Germany and Luxembourg. The explanatory statement contained sufficient information, and any alleged deficiencies would not have affected the votes.

At the prior convening stage, High Court judge Sir Anthony Mann made the convening order and gave reasons in [2023] EWHC 415 (Ch). The sanction application was then determined at first instance by Leech J.