OQ Chemicals Holding Drei GmbH & Anor, Re

At a scheme convening hearing, the court must assess jurisdictional obstacles, the adequacy of notice and explanatory materials, and whether creditors can consult together in a single class. Class composition requires a comparative assessment of creditors’ strict legal rights in the scheme and the proper comparator. Differences in rights do not necessarily fracture a class where there is more to unite than divide.

Participation in new money, properly characterised and fairly offered fees, and accession to a restructuring support agreement will not ordinarily create separate classes. A time-limited provision affecting how amendment rights are exercised may be ancillary and non-substantial. A substantive alteration to veto rights may nevertheless be considered with the scheme package as a whole where it is integral to the transaction and cannot realistically be used by unaffected creditors to impose a disadvantage on affected creditors.

OQ Chemicals Holding Drei GmbH and OQ Chemicals Corporation applied for orders convening single meetings of their scheme creditors to consider materially identical and inter-conditional schemes under Part 26 of the Companies Act 2006.

The schemes principally sought to extend the maturity of term loans and a revolving facility, together with related amendments concerning fees, voting rights and a proposed snooze provision. The applicants were foreign companies and the credit agreement had recently been amended to English law. The central issues were whether sufficient notice had been given, whether jurisdictional or international-effectiveness obstacles existed, and whether the lenders could properly constitute a single class.

1. Convening order. The applications were granted. Single meetings of the scheme creditors were directed.
2. Notice and jurisdiction. Fifteen days’ notice was sufficient in light of the complexity of the schemes, the creditor constituency and prior creditor engagement. The applicants were companies liable to be wound up as unregistered companies and therefore eligible for a scheme. Sufficient connection and international effectiveness were principally matters for the sanction hearing, subject at the convening stage to the absence of a clear and insuperable roadblock.
3. Governing law and effectiveness. A contractual change to English governing law may facilitate sufficient connection where it is not alien to the parties’ arrangements and is made for a proper restructuring purpose rather than to prejudice a minority. The absence of final expert reports did not create a roadblock here, given the absence of opposition and the recognition of similar schemes in Germany and the United States. Expert evidence will ordinarily be preferable, and may be necessary where effectiveness is controversial.
4. Class composition. The court must compare creditors’ strict legal rights under the schemes with the proper comparator and ask whether, objectively, there is more to unite than divide them. Material differences do not necessarily require separate classes.
5. Fees and restructuring support. Opportunities to participate in new money, and fees genuinely payable for that service, do not ordinarily fracture a class where participation is fairly available, the fee is not a disguised alteration of existing debt rights and is insufficient materially to affect voting. Accession to a restructuring support agreement is likewise not class creating where it objectively does not affect voting; the relevant fee was immaterial.
6. Snooze and sacred-rights provisions. The snooze provision affected an ancillary and procedural aspect of amendment rights and was not sufficiently substantial to fracture the class. The reduction of the term lenders’ veto over sacred-rights amendments was a substantive difference, but it formed an integral, time-limited part of the overall restructuring package. The small proportion of unaffected revolving debt and the absence of any realistic prospect that those lenders could impose the adverse change on term lenders supported a single class.
7. The explanatory statement, meeting timetable, proxy arrangements and remote-meeting directions were adequate. The court accordingly made the convening order sought.