Consort Healthcare (Tameside) Plc, Re

The court considered an application under section 901C of the Companies Act 2006 for an order convening meetings of creditors to consider a restructuring plan under Part 26A. The judge held that there was no obvious jurisdictional roadblock to convening meetings, that Condition A (financial difficulty affecting ability to carry on business as a going concern) in section 901A was satisfied, and that Condition B (a compromise or arrangement is proposed) was sufficiently met to authorise convening the meetings. The judge accepted that the three relevant creditors should vote as separate classes, concluded that notice and explanatory documents were adequate, and identified potential jurisdictional questions (for later determination at sanction) including whether the Plan can alter the Project Agreement or affect third party rights and whether the 30 day effective-date mechanism was permissible.

The Plan Company, a special purpose vehicle delivering services to Tameside and Glossop Integrated Care NHS Foundation Trust under a private finance initiative Project Agreement, applied for an order under s901C CA2006 to convene meetings of three creditors to consider a restructuring plan. The three creditors are: (1) a group member holding subordinated debt (IntermediateCo) who supports the Plan; (2) a guarantor of senior bonds (Ambac) who supports the Plan; and (3) the Trust, which receives services and opposes the Plan. The Plan was put as two alternative compromises, the "Sustainability Option" and the "Settlement Option", intended to compromise financial claims and recalibrate obligations under the Project Agreement following an adjudication award against the Plan Company that the Plan Company says makes its business unviable and would otherwise lead to administration.

The principal issues at the convening hearing were whether there were jurisdictional "roadblocks" such that the court should decline to convene meetings, whether Conditions A and B in section 901A of the Companies Act 2006 were satisfied, whether the creditors should be treated as three separate classes, whether Ambac could properly vote as the creditor rather than underlying bondholders, and whether notice and the explanatory documents were adequate. The judge identified potential jurisdictional questions for the sanction hearing (including whether the Plan can amend the Project Agreement as proposed, require dismissal of a named consultant and the effect of the Plan's 30 day effective-date mechanism on step-in or termination rights) but held that none were so obvious as to prevent convening meetings.

The court found Condition A satisfied on the evidence of financial difficulty affecting the Plan Company’s ability to carry on as a going concern and Condition B satisfied because a compromise or arrangement in respect of the three creditors was proposed. Class division into three separate classes was appropriate given materially different rights. The court accepted that Ambac was the relevant voting creditor for its proposed compromise without deciding whether a sanctioned Plan would bind underlying bondholders. The judge was satisfied that the Practice Statement Letter, notice, explanatory statement and meeting documentation were adequate. The court therefore made the requested order convening creditor meetings and dealt with ancillary case management directions to facilitate any subsequent sanction hearing.

The application for an order convening meetings of creditors under section 901C of the Companies Act 2006 is allowed. The court was satisfied that there was no obvious jurisdictional impediment to convening meetings, that Condition A and Condition B in section 901A were met, that the three creditors should vote in separate classes, and that notice and explanatory documents were adequate. Potential jurisdictional issues were identified for determination at any sanction hearing but did not preclude convening meetings.