Chaptre Finance PLC, Re

The Plan Company sought sanction of a restructuring plan under Part 26A of the Companies Act 2006 to permit introduction of up to £85m of new super‑senior financing and to implement commercial amendments to the intercreditor and other finance documents. The sanction hearing required the court to apply sections 901F and 901G CA 2006, in particular the section 901G(3) "no worse off" test for a cross‑class cram down.

The court held that: (i) the assenting classes had validly approved the Plan and the plan was one an intelligent and honest creditor might reasonably approve; (ii) the relevant alternative was most likely administration and a distressed sale; (iii) expert evidence (valuations and creditor outcome reports) supported the Plan Company’s contention that Senior Creditors would receive nothing in the relevant alternative and would receive a positive recovery if the Plan and new money were implemented; (iv) objections based on alternative expert commentary and on issues such as the level of the distressed sale discount and the appropriate discount for time value of money could not be resolved on the papers without cross‑examination; and (v) because the Senior Creditors were out of the money in the relevant alternative, their objections carried little weight and did not defeat the court’s discretion to sanction the Plan under section 901G.

Background and parties. The Plan Company (part of a Group owning a large biomass power plant) had been through a prior sanctioned restructuring in 2023. Significant operational and liquidity problems recurred in 2024. The Plan Company sought sanction of a second restructuring plan under Part 26A CA 2006 binding four creditor classes (Priority, Elevated, Hedging, Senior) to permit New Super Senior Funding and to implement the Enviva commercial deal with the Pellet Supplier.

Nature of the application. The application was for sanction of a restructuring plan under Part 26A (section 901F), including an application to impose the Plan on a dissenting class by relying on the cross‑class cram down in section 901G. The Plan would amend the ICA/CTA and other finance documents, create Tranches C and D of the Priority Facility to raise new money, modify security waterfalls and permit a limited security package to the Pellet Supplier as conditions of the Enviva Deal.

Procedural posture and evidence. The convening order permitted four creditor meetings; three classes approved the Plan but the Senior Creditors voted 76.06% against, constituting a dissenting class. The Opposing Creditors (including lenders under a Floating Rate Term Loan with an insurer K‑Sure) opposed sanction. The Plan Company relied on expert valuation and outcomes reports (Interpath) and an insolvency practitioner’s outcomes report (Pike). Initial Interpath reports lacked Part 35 compliance but compliant expert reports were served shortly before the hearing. The Opposing Creditors filed a non‑Part 35 commentary (FRP Letter) and did not put forward their own Part 35 expert evidence or seek cross‑examination.

Issues framed by the court. (i) Whether conditioning A (no worse off) under section 901G(3) was satisfied for the dissenting Senior Creditors by comparison with the relevant alternative; (ii) whether Condition B was satisfied; (iii) how the court should exercise its discretion when a dissenting class is out of the money; (iv) procedural fairness and sufficiency of expert evidence and whether the court could prefer the FRP commentary over the Plan Company’s expert reports without cross‑examination; and (v) specific fairness complaints about amendments to the ICA (removal of the Waterfall Debt Cap and distressed disposal / fairness opinion provisions).

Court’s reasoning and outcome. The court found the relevant alternative would most likely be administration and a distressed sale. It accepted that, on the evidence served and absent effective challenge by cross‑examination, the expert reports established that Senior Creditors would be wholly out of the money in the relevant alternative and would receive a positive recovery under the Plan. The court emphasised the importance of Part 35 compliance and cross‑examination where expert opinion is contested: in this case the Opposing Creditors had not produced Part 35 evidence nor sought cross‑examination, and their FRP Letter was of limited evidential weight. Because the Senior Creditors were out of the money, their fairness objections (including to the waterfall amendments and distressed disposal provisions) carried little weight; the proposed amendments were conditions of obtaining the new money which the in‑the‑money creditors had chosen to accept. The court therefore concluded that Conditions A and B were satisfied and, in the exercise of its discretion, sanctioned the Plan.

The Plan is sanctioned. The court concluded that the statutory conditions for a cross‑class cram down under section 901G (including the no worse off test) were satisfied because the relevant alternative was most likely administration with a distressed sale in which the Senior Creditors would be out of the money, and because the assenting classes had approved the Plan. The court accepted the Plan Company’s expert evidence in the absence of competing Part 35 evidence and cross‑examination and exercised its discretion to sanction the Plan, finding the Senior Creditors’ fairness objections of little weight.