Sprint Bidco BV, Re

At a scheme-sanction hearing, the court should address four questions: whether the statutory requirements and convening order were complied with; whether the class was fairly represented and voted bona fide; whether an intelligent and honest member of the class might reasonably approve the scheme; and whether there is any blot or insufficient prospect of recognition abroad.

A substantial statutory majority creates a strong presumption in favour of sanction. The court is slow to differ from the meeting where the class was properly constituted, adequately informed and fairly represented. A scheme involving new money and an elevation of participating creditors’ claims is not inherently unfair where participation was available on reasonable terms and supported by good commercial reasons. The court should not sanction a scheme in vain, but a reasonable prospect of substantial international effect is sufficient.

Sprint Bidco BV applied for court sanction of a scheme of arrangement under section 899 of the Companies Act 2006. The scheme creditors voted in a single class, with the statutory majorities obtained at a meeting attended by creditors representing 97.72% in value.

Five creditors voted against the scheme. Two raised concerns concerning alleged unfairness arising from shareholder equity retention and creditor write-downs, information asymmetry, and the management of the company’s financial difficulties. The company was incorporated in the Netherlands and held substantial assets in Germany, giving rise to an issue concerning international recognition and effectiveness.

The central questions were whether the statutory and procedural requirements had been met, whether the class had been fairly represented, whether the scheme was one which creditors might reasonably approve, and whether the court would be acting in vain by sanctioning it.

1. Statutory requirements. The requirements under section 899 of the Companies Act 2006 and the convening order were satisfied. The requisite majorities in number and value were obtained, and the creditors had adequate notice and information. The minor amendments to the scheme documents did not affect the operation of the scheme or the voting decision.
2. Class constitution and representation. Having determined at the convening hearing that the scheme creditors should vote in a single class, the court would not ordinarily revisit that conclusion of its own motion at sanction, absent a creditor raising a properly arguable objection. There was no evidence that the class was unfairly constituted or that the majority acted other than bona fide in its perceived interests.
3. Reasonable approval and fairness. The court had to ask whether an intelligent and honest creditor, acting in its own interests, might reasonably approve the scheme. It was not required to decide whether the scheme was the fairest or best possible arrangement. The large majority created a strong presumption of fairness. The evidence showed that the scheme produced a better outcome than the relevant liquidation comparator, including for creditors not providing new money. The new-money arrangements were available to all creditors, justified by good commercial reasons and on reasonable terms, and did not create inherent unfairness.
4. International effectiveness. The English-law governing provisions supplied a sufficient connection with England. Independent expert evidence established a reasonable prospect of recognition in the Netherlands and Germany, and the scheme therefore served a substantial purpose in the relevant jurisdictions. The substantial creditor support and contractual commitments under the restructuring support agreement provided further assurance that the court would not be acting in vain.
5. All requirements having been met, sanction of the Scheme was granted and an order was made accordingly.