Enzen Global Limited & Anor, Re

When sanctioning a restructuring plan under Part 26A of the Companies Act 2006, the court may rely on directors’ and expert evidence of the most likely relevant alternative where that evidence is rational and unchallenged. The statutory no-worse-off condition is assessed on the balance of probabilities. The court’s discretion to compromise dissenting classes requires consideration of whether the restructuring surplus is fairly distributed, but does not require proportional distributions where creditors have claims of equal nil value in the relevant alternative. A real, non-illusory consideration may justify releasing such claims. The court may conduct a high-level review for manifest unfairness where opposition is unsupported by evidence.

Enzen Global Limited and its subsidiary, Enzen Limited, applied for sanction of inter-conditional restructuring plans under Part 26A of the Companies Act 2006. Both companies faced imminent cash-flow insolvency and substantial secured and preferential liabilities. The plans preserved the businesses, amended or released secured debt, provided new money, compromised HMRC’s claims and paid unsecured creditors the higher of £1,000 or 150% of their estimated administration return.

Several creditor classes dissented or were deemed to dissent. The central issues were whether the statutory conditions for cross-class cramdown were met and whether the court should exercise its discretion to sanction the plans despite that dissent.

1. Relevant alternative and evidence. The realistic alternative was an accelerated sale followed by pre-pack administration. The court accepted the directors’ evidence because it was rational and supported by unchallenged expert evidence. Liquidation would destroy value, while a trading administration was commercially unavailable.
2. Condition A. Under section 901 G(3) of the Companies Act 2006, the court had to be satisfied that no dissenting creditor would be worse off under the plan than in the relevant alternative. The correct standard was the balance of probabilities, not conclusive proof excluding every theoretical possibility of a better insolvency recovery. Each dissenting creditor would receive £1,000 rather than a nil return.
3. Condition B. Section 901 G(5) was satisfied because the plans were approved by 75% by value of a class with a genuine economic interest in the relevant alternative. The Super Senior Creditors had such an interest. It was unnecessary to decide whether HMRC’s prospective recovery constituted a genuine economic interest.
4. Discretion and fairness. The discretion under section 901 G(2) required a high-level assessment of whether the restructuring benefits were manifestly unfairly allocated and whether unanswered objections prevented the applicants discharging the burden of persuasion. The court applied the concept of fair distribution of the restructuring surplus. The contribution made by the secured creditors, including deleveraging, new money and assumption of purchaser risk, justified their role in allocating the surplus.
5. A flat payment to unsecured creditors was not unfair merely because it produced unequal recoveries against claim size. In the relevant alternative every unsecured claim had the same nil value. The £1,000 consideration was real, and the administrative cost of granular distribution was material. HMRC’s greater payment was justified by its preferential status, commercial leverage and continuing relationship.
6. The plans contained no relevant blot. There was at least a reasonable prospect that the sanction order would be effective in Spain if due process were followed. The Parent and Company restructuring plans were sanctioned.