Arvos BidCo Sarl, Re

This is an application under Part 26 of the Companies Act 2006 for sanction of a scheme of arrangement to effect a wider group restructuring. The court applied the familiar Part 26 statutory and equitable tests: compliance with convening and notice requirements, correct class composition, attainment of the requisite majorities at the scheme meetings, fair representation of those classes, and whether the scheme is one that an intelligent and honest man acting in respect of his own interests might reasonably approve of.

The court found that meetings had been properly convened under the directions made by Meade J, that the two creditor classes (RCF/Ancillary Facilities and TLB Facilities) were correctly constituted, and that the necessary statutory majorities were achieved (100% in value for the RCF/Ancillary class; c.89.15% in value for the TLB class with the remainder abstaining for constitutional reasons). The court concluded the classes were fairly represented and the majorities acted bona fide. The court also identified no "blot or other defect" on grounds of jurisdiction or recognition, noting English-law governance of the facilities and foreign legal opinions obtained. On that basis the scheme was sanctioned.

This is a first instance sanction application by Arvos BidCo S.à.r.l. for a scheme of arrangement under Part 26 of the Companies Act 2006 as part of a wider restructuring of a Luxembourg-incorporated group engaged in heat-exchange solutions.

Background and parties:

• The Group benefits from loan facilities under a Credit Agreement governed by English law. The present scheme creditors are the lenders under that Credit Agreement.
• The relevant facilities comprise a revolving credit facility (RCF), a letter of credit facility and ancillary facilities, and term loan B facilities (TLB) maturing 29 August 2024. Total indebtedness under the facilities was approximately 2532 million.
• The proposed restructuring included an introduction of 40 million of new capital, amendments and restatements of RCF and LC/Ancillary commitments (without reduction), and a material compromise of the TLB lenders claims by waiving approximately 179 million, restating around 205 million on amended terms, immediate repayment of 30 million, hiving up 30 million debt to a new holding company and issuance of Class B Ordinary Shares to TLB lenders representing 45% of the new holding company ordinary shares.

Procedural posture and issues: The convening hearing (before Meade J) accepted two creditor classes: (1) RCF and Ancillary Facilities creditors; and (2) TLB creditors. The sanction hearing required the court to determine: (i) statutory compliance with Part 26; (ii) whether the classes were fairly represented and the majorities acted bona fide; (iii) whether the scheme a reasonable person might approve of for each class; and (iv) whether there was any blot or defect, including issues of jurisdiction and international recognition.

Courts reasoning and findings:

• Statutory requirements were satisfied: meetings were convened and held according to Meade Js directions and the requisite majorities were achieved (RCF/Ancillary: 100% in value for; TLB: c.89.15% in value for, remainder abstained for constitutional reasons).
• Each class was in effect fully represented and there was no evidence the majorities acted otherwise than bona fide and rationally.
• The commercial merits met the "intelligent and honest man" test: the RCF/Ancillary class were largely unaffected and the TLB class made an informed commercial assessment that the compromise was preferable to the anticipated outcome of a default and accelerated sale, which was predicted to realise materially less value.
• No blot or defect was identified. The English-law governance and exclusive jurisdiction clause supported English court jurisdiction and the Company had obtained foreign legal opinions on international recognition where relevant.

Result: The court sanctioned the scheme and made the order sought by the Company.

The scheme of arrangement under Part 26 of the Companies Act 2006 is sanctioned. The court concluded that statutory requirements had been complied with, the two creditor classes were properly constituted and fairly represented, the requisite majorities voted in favour, the scheme met the objective test that an intelligent and honest person might reasonably approve, and there was no blot or defect including in respect of jurisdiction and international recognition.