Project Lietzenburger Straße Holdco SARL, Re

Part 26A requires a proposed compromise or arrangement for every class of creditor or member to which the proposal is directed. A proposal that simply confiscates a class’s rights without compensating advantage is outside the court’s jurisdiction. The court cannot use its inherent power to amend a proposal so as to create jurisdiction where the original proposal was not a compromise or arrangement.

A convening order remains binding until set aside or varied, even if doubts later arise about jurisdiction. Where a class has no genuine economic interest in the relevant alternative, it may be excluded from a further plan meeting. The court accordingly refused to sanction the plan and ordered a further meeting of the in-the-money creditors.

Project Lietzenburger Straße Holdco S.à.r.L. applied for sanction of a restructuring plan under Part 26A of the Companies Act 2006. The plan restructured senior secured debt but cancelled Tier 2 and junior debt without consideration. The plan meetings had approved the senior and Tier 2 proposals, but not the junior proposal. The Tier 2 creditors were treated as dissenting because they were not fairly represented.

Miles J had earlier made a convening order and gave reasons at [2023] EWHC 2849 (Ch). After the Court of Appeal’s judgment in Re AGPS Bondco Plc [2024] EWCA Civ 24, the Plan Company proposed amendments providing modest compensation to the subordinated creditors. The central issues were whether the original plan was a compromise or arrangement, whether the court could amend it before sanction, and whether the amended plan could be sanctioned.

1. The court refused to sanction the plan as voted upon. Following Re AGPS Bondco Plc [2024] EWCA Civ 24, it held that a confiscation or expropriation of creditors’ rights without compensating advantage is not a compromise or arrangement under Part 26 or Part 26A. The passages in Re AGPS Bondco Plc were obiter, but the court considered them correct and followed them.

2. Condition B in section 901A required the proposal to constitute a compromise or arrangement for every class to which it was directed. The fact that the plan contained a compromise with the Senior Creditors did not cure the absence of a compromise with the Tier 2 and junior creditors. Since Condition B was not met, Part 26A did not apply and the court had no jurisdiction to sanction the plan.

3. The convening order was not invalidated by the later authority. An order remains binding until set aside or varied, even where there is doubt about the jurisdiction to make it. However, the sanction stage required the court to consider afresh whether Condition B was satisfied. The court could not use its inherent power to amend the plan so as to transform a non-sanctionable proposal into one within Part 26A. It therefore refused the proposed amendments and declined retrospectively to disenfranchise the subordinated creditors for the purpose of sanctioning the original plan.

4. In conditional findings, the court concluded that the amended plan would have contained a compromise because it offered modest payments to the subordinated creditors. It also found that the Plan Company’s COMI had shifted to England, that there was a reasonable prospect of recognition in Luxembourg and Germany, and that the relevant alternative was liquidation producing no return for the subordinated creditors. If it had jurisdiction, the court would have sanctioned the amended plan by cross-class cramdown.

5. The court ordered a further meeting of Senior Creditors on three business days’ notice. Under section 901C(4), the Tier 2 and junior creditors could be excluded because they had no genuine economic interest in the relevant alternative. Any future sanction application would be for the judge then hearing it.

This was a first-instance decision. The judgment records that Miles J made the earlier Convening Order and gave reasons at [2023] EWHC 2849 (Ch).