Consort Healthcare (Tameside) Plc, Re

At the convening stage of a restructuring plan application, the court should not refuse to convene creditor meetings unless a jurisdictional or other objection is an obvious roadblock. The court may defer substantial questions about the plan’s ultimate jurisdictional validity to the sanction hearing where they do not prevent consideration of the plan at the convening stage.

The statutory conditions for proposing a restructuring plan must be sufficiently established before meetings are convened. Separate classes are appropriate where creditors’ rights differ materially before and under the proposed plan. It is not necessarily objectionable to present alternative compromises or arrangements, leaving the plan company to decide after voting which, if any, to submit for sanction.

Consort Healthcare (Tameside) Plc applied under Companies Act 2006 Part 26A for an order convening meetings of three creditor classes to consider a restructuring plan. The plan concerned the company’s financial claims and proposed changes to its contractual obligations under a private finance initiative project agreement.

The plan was supported by an intra-group creditor and a guarantor, but opposed by Tameside and Glossop Integrated Care NHS Foundation Trust, which was owed money by the company and received services from it. The immediate issues were whether there was a jurisdictional roadblock, whether Conditions A and B were satisfied, whether the proposed class structure was appropriate, and whether the plan documents and notice were sufficient.

1. Application granted. The court made an order convening meetings of three separate creditor classes and dealt with related case-management matters.
2. Potential issues concerning whether the plan could amend the project agreement, require the Trust to dismiss consultants, or impose a 30-day period for accepting the amended agreement were matters that might arise at the sanction hearing. They were not obvious jurisdictional roadblocks requiring refusal of a convening order.
3. Condition A under Companies Act 2006 s 901A was satisfied because the evidence showed financial difficulties affecting, or capable of affecting, the company’s ability to continue as a going concern. Condition B was sufficiently established because compromises or arrangements were proposed between the company and its three identified creditor classes.
4. It was not obviously objectionable for the plan to offer two potential compromises, described as the Sustainability Option and the Settlement Option, with the company deciding in light of the voting outcome which, if any, to put forward for sanction.
5. The proposed classification was appropriate. The creditors’ rights were materially different both before the plan and under the plan. The court did not need to decide at the convening hearing whether approval by Ambac, as the proposed creditor, would bind the underlying bondholders.
6. The notice period, explanatory statement and meeting proposals were sufficient. No obvious defect justified declining to convene the meetings.