PlusHolding GmbH, Re

At a scheme sanction hearing, the court may approve material modifications made after the creditors’ meeting where the modified scheme remains substantially the same in commercial and economic effect. The court must be satisfied that the modification does not undermine the creditors’ assent or impose a substantially different scheme, and that reasonable creditors would have approved it had it been put before them.

Sanction also requires compliance with the statutory procedure, fair representation, absence of any relevant blot or defect, and a conclusion that an intelligent and honest creditor acting in its own interest might reasonably approve the scheme. English governing-law and jurisdiction clauses, contractual lock-up arrangements and evidence of recognition in the relevant foreign jurisdiction may provide sufficient assurance of international effectiveness.

PlusHolding GmbH applied for sanction of a revised scheme under Part 26 of the Companies Act 2006. The scheme concerned approximately €265 million of term-facility debt used to finance a data-centre and cloud-computing group.

A convening order had been made by Adam Johnson J. A single class of lenders approved the original scheme unanimously among those voting, representing 96.12 per cent by value. A German tax ruling required for implementation of the original restructuring was not forthcoming, so the company proposed revisions. The revisions altered the level at which a €165 million PIK facility would sit but were said to preserve the same economic outcome. All creditors consented to, or did not oppose, the revised scheme.

The issues were whether the court had jurisdiction to sanction the revised scheme without a further meeting, and whether the statutory and discretionary requirements for sanction were satisfied.

1. The revised scheme was sanctioned. The creditors’ resolution authorised modifications approved or imposed by the court, and the modification clause permitted changes which did not materially adversely affect creditors’ interests.

2. Following Re Equitable Life Assurance Society [2002] BCC 319 and Re AON plc [2020] EWHC 1003 (Ch), the court had to be satisfied that the modified scheme was substantially the same as the scheme voted upon. It had to ensure that the modification did not foist a substantially different scheme on creditors or undermine their assent. The court was also required to consider whether reasonable creditors would have approved the revised scheme had it been before them at the meeting.

3. The changes were more than technical, but they did not materially alter the commercial or economic effect of the restructuring. The revised PIK facility continued to provide equity upside while reducing the relevant interest burden. The creditors’ written consents and absence of opposition supported the conclusion that they would have approved the revised scheme. Class composition and the relevance of the Explanatory Statement were unaffected.

4. The sanction requirements identified in Re KCA Deutag UK Finance PLC [2020] EWHC 2977 (Ch) were satisfied. The statutory requirements had been complied with; there was no class fracturing; the Explanatory Statement and supplemental materials were adequate; and there had been fair representation of creditors.

5. An intelligent and honest creditor acting in its own interest might reasonably approve the scheme, particularly given the unattractive distressed-sale alternative. The conditions precedent did not create a relevant blot or permit a third party to subvert the court’s jurisdiction.

6. The court had sufficient assurance of international effectiveness. The facilities were governed by English law and subject to English jurisdiction. The Lock-Up Agreement supported enforceability, and expert evidence indicated that the scheme was likely to be recognised in Germany.