Ambatovy Minerals Societe Anonyme & Anor, Re

Part 26A of the Companies Act 2006 permits a restructuring plan to bind a dissenting class only where the statutory conditions are satisfied and the court considers the plan fair overall. The court must identify the relevant alternative by selecting what is most likely to occur without sanction. It must compare each dissenting creditor’s position with that alternative and examine how any restructuring surplus is distributed between creditor groups. A dissenting class that is out of the money may be given little weight, but its treatment remains relevant to the overall fairness assessment. The court must also scrutinise whether an in-the-money cram-down class was artificially created. Where the plan provides genuine give and take, improves recoveries, and is the only realistic alternative to insolvency, cross-class cram down may be justified.

The court had previously sanctioned restructuring plans for two Malagasy companies operating a nickel and cobalt mine. This judgment gave the reasons for sanctioning the plans under Part 26A of the Companies Act 2006.

The plans introduced substantial new money, discharged most senior and subordinated financial debt, and left the shareholder lenders with the equity. Three creditor classes approved the plans by the statutory majority. The Recovery Financing Lenders did not, because KEXIM voted against the plan. The companies therefore sought a cross-class cram-down order under section 901G.

The issues included jurisdiction, class constitution, the relevant alternative, the no-worse-off condition, genuine economic interest, alleged artificial creation of the cram-down class, recognition in Madagascar, and the overall fairness of the plans.

1. Jurisdiction and statutory preconditions. The foreign companies were unregistered companies liable to be wound up under the Insolvency Act 1986 and therefore fell within Part 26A. English-law liabilities and jurisdiction clauses supplied a sufficient connection with England. The plans were compromises or arrangements because they involved sufficient give and take, rather than uncompensated expropriation. Conditions A and B in section 901A were satisfied.
2. Relevant alternative. Under section 901G(4), the relevant alternative is whatever the court considers most likely to occur if the plan is not sanctioned. It need not be more likely than all other possibilities in an absolute sense. On the evidence, the only realistic source of new money was the shareholders. Without it, the directors would have to declare a cessation of payments in Madagascar, leading to insolvent liquidation. That was the relevant alternative.
3. Cross-class conditions. The Grant Thornton evidence established that every creditor class would be better off under the plans than in liquidation. The Super Senior Lenders were the only creditors with a genuine economic interest in the relevant alternative and had approved the plans by the requisite majority. The further conditions in section 901G were therefore met.
4. Fairness and artificiality. Satisfaction of the statutory conditions created no presumption in favour of sanction. The court had to stand back and assess fairness in the round, including the allocation of the restructuring surplus and any objection to the creation of the cram-down class. The Super Senior Debt was advanced to meet an urgent liquidity need, not to manufacture a voting class. The fact that the shareholder lenders were both the cram-down class and the recipients of the equity did not itself make the plans impermissible.
5. Dissenting creditor and distribution. KEXIM’s unexplained objection deserved negligible personal weight because it was out of the money in the relevant alternative. Nevertheless, the court remained required to assess the treatment of the dissenting class as part of overall fairness. The modest payment to the Recovery Financing Lenders constituted sufficient give and take and was not substantively expropriatory.
6. Recognition and order. There was a reasonable prospect that the Malagasy courts would recognise and give effect to the plans. The plans were fair overall. The court exercised the cross-class cram-down power and sanctioned both plans. Copies of the orders were to be published in the Gazette under section 901F(6).