Re Ambatovy Minerals SA

The court sanctioned restructuring plans for two Malagasy companies under Part 26A of the Companies Act 2006 and exercised its cross-class cram-down power under section 901G to bind a dissenting class. The judgment emphasises the statutory preconditions for Part 26A: satisfaction of sections 901A (Conditions A and B), proper class constitution and compliance with convening orders, an adequate explanatory statement, and the additional tests for cram-down in section 901G (the relevant alternative and the "no worse off" test). The relevant alternative was found to be insolvent liquidation in Madagascar. Independent financial analysis (Grant Thornton) demonstrated that each creditor class would be no worse off under the Plan than in the relevant alternative. The court also accepted expert evidence that a Malagasy court would more likely than not recognise the Plan. Having found no legal "blot", that classes were properly represented and informed, and that the Plan was fair in the round, the court exercised its discretion to sanction the Plan and permit the cross-class cram down.

This is a sanction judgment in which the High Court considered whether to approve two restructuring plans under Part 26A of the Companies Act 2006 for Ambatovy Minerals S.A. and Dynatec Madagascar S.A. The plans were promoted to secure new money and to deleverage c.US$2.3bn of indebtedness connected to the Ambatovy mining project in Madagascar.

Background and parties

• The Plan Companies operate a large nickel and cobalt mine in Madagascar. The shareholders (Sumitomo and KOMIR) had historically provided substantial funding.
• Four classes of creditors were identified: Super Senior Lenders (shareholders in another capacity), Senior Lenders, 2021 NM Lenders and Recovery Financing Lenders.
• The Plan proposed US$140m of new money and the write-down of most junior debt in return for limited cash payments and options to participate in new money; the Shareholders would retain equity and provide an anti-embarrassment Deferred Payment Mechanism.

Procedural posture and relief sought

• The Plan Companies applied for convening orders and then for sanction of the plans. There were two convening hearings and four court-directed class meetings. The Plan gained the requisite 75% in value in three classes but failed in the Recovery Financing Lenders class. The Plan Companies sought a cross-class cram-down under section 901G to bind that dissenting class.

Issues framed

1. Jurisdictional competence under Part 26A, including sufficient connection with England.
2. Whether statutory preconditions were met (sections 901A, 901C/D/F) and whether the Plan comprised a qualifying compromise or arrangement.
3. Whether the additional section 901G tests for cram-down were satisfied: identification of the relevant alternative, the "no worse off" test, and approval by at least one class with a genuine economic interest.
4. Whether the Plan would have practical effect in Madagascar.
5. Whether the Plan was fair in the exercise of the court's discretion and whether any "blot" or contrivance invalidated the Plan.

Reasoning and conclusions

• Jurisdiction: The court had jurisdiction because many relevant contracts were governed by English law and conferred English jurisdiction; the Plan Companies were capable of falling within the court's insolvency jurisdiction.
• Part 26A preconditions: The directors' evidence satisfied Conditions A and B (financial difficulties and a plan to address them). The explanatory statement and convening orders complied with requirements and classes were properly constituted.
• Relevant alternative: The court accepted liquidation in Madagascar as the most likely alternative, based on directors' evidence and Malagasy insolvency procedures, and accepted expert evidence on Malagasy law.
• No worse off: Grant Thornton’s modelling showed that every class would receive no less under the Plan than in the relevant alternative. The assenting classes included an in‑the‑money class (Super Senior Lenders), satisfying section 901G(5).
• Fairness and discretion: The court scrutinised the provenance of the Super Senior facility and concerns about contrivance, concluded there was no artifice, found no legal "blot", and held that the Plan’s allocation of the restructuring surplus was fair in all the circumstances. The court therefore exercised its discretion to sanction the Plan and grant the cram-down.

The court made an order sanctioning the plans and directing publication as required by section 901F(6) given the overseas status of the companies.

The court sanctioned the restructuring plans and exercised its cross-class cram-down power under section 901G CA 2006 to bind the dissenting Recovery Financing Lenders. The court’s rationale was that statutory jurisdictional and procedural preconditions under Part 26A were satisfied (including Conditions A and B in section 901A), the relevant alternative was insolvent liquidation in Madagascar, the "no worse off" test was met on the evidence (Grant Thornton), there was a reasonable prospect the Plan would be given effect in Madagascar, no legal "blot" was shown, and, on a full review of fairness and discretion, the Plan’s allocation of value was fair in all the circumstances.