Speciality Steel UK Limited, Re

The court granted a limited adjournment of the sanction hearing for a proposed reconstruction plan under the Companies Act 2006 to allow time for imminent negotiations with major creditors (notably the Greensill creditors) to be concluded, subject to tightly controlled steps and timelines. The judge balanced the likely benefit of clarity about the substance of any global settlement against the prejudice to a creditor, Harsco Metals Group Ltd., and imposed conditions intended to mitigate that prejudice: a report by the Plan Company within seven days setting out the state of negotiations, a hearing on 27 February to determine whether new meetings or a revised explanatory statement are required and whether the Plan remains viable, and a further sanction hearing provisionally listed for 24 March. The Plan Company was ordered to pay the wasted costs of the hearing and to make interim payment to Harsco for hire, with a validation order to be made in light of an extant winding up petition; the judge emphasised that any explanatory statement must be full and that transparency is essential for creditors and the court.

Background and parties: The Plan Company is Speciality Steel UK Ltd, a member of the GFG Group whose ultimate owner is Mr Gupta. The Plan forms part of broader group restructuring proposals. The Greensill creditors (represented by counsel) are major stakeholders whose group claims against the GFG Group were referred to in broad terms (c. US$4 billion) and the debt addressed in the Plan is approximately £289 million. Harsco Metals Group Ltd opposed the adjournment, citing prejudice arising from unpaid hire and an extant winding up petition.

Nature of the application: The Plan Company applied for an adjournment of the court-convened sanction hearing (directions for a two day hearing with half a day's reading) to enable a likely global settlement to be reached and to confine and define the matters to be determined at any sanction hearing.

Issues framed:

• whether fairness required an adjournment in order to allow urgent negotiations (notably with the Greensill creditors) to conclude and to avoid the court determining a Plan that might shortly be altered;
• the extent of prejudice to existing creditors (notably Harsco) if the adjournment were granted; and
• what conditions or directions, if any, should be imposed to control the adjournment and to mitigate prejudice.

Court’s reasoning and decision: The judge observed that applications to adjourn a trial-equivalent hearing require strong justification because of the cost and disruption, but fairness — balancing the benefit of clarity about the proposed arrangements against defined prejudice to creditors — was the guiding principle. The prospect of a global settlement with the Greensill creditors that would materially affect the Plan justified a short, controlled adjournment. To address prejudice, the court directed a short timetable: the Plan Company to provide a report within seven days on the state of negotiations; a hearing on 27 February to determine whether new meetings or a revised explanatory statement (or other steps) were required and whether the Plan remained within the court's jurisdiction to sanction; and a provisional sanction hearing on 24 March. The Plan Company undertook to pay costs wasted on the present hearing and to make interim payment to Harsco for hire, with a validation order to be made in light of the existing winding up petition due to be before the court on 19 February. The judge reiterated that any explanatory statement must be full and may need to cover ancillary arrangements affecting the Plan Company (citing precedent going back to Telewest).

The court therefore acceded to the adjournment application on a tightly controlled basis and emphasised transparency and completeness of materials for creditors and the court.

The application for an adjournment was allowed on tightly drawn terms. The court allowed a controlled adjournment to enable negotiations to be completed and to clarify the content of the Plan, subject to: (i) the Plan Company filing a report within seven days on the state of negotiations, (ii) a hearing on 27 February to determine whether new creditor meetings or a revised explanatory statement are required and whether the Plan is viable for sanction, and (iii) a provisional sanction hearing listed for 24 March. The Plan Company was ordered to pay the costs wasted on the hearing and to make interim payment to Harsco for hire, with a validation order to be made in light of the extant winding up petition. The judge emphasised the requirement for a full explanatory statement and adequate transparency to creditors and the court.