If at First You Don’t Succeed: English Court Approves Aggregate’s Restructuring Plan at Second Attempt, Following Initial Refusal
At a Glance
The English Court today approved the amended restructuring plan of a company in the Aggregate group, having refused to sanction its original plan.
The plan originally sought to release €245 million subordinated debt for zero consideration. Following the Court of Appeal’s landmark decision in Adler, the company modified its plan, offering subordinated creditors a pro rata share of a token payment of €200,000.
The Court held it did not have jurisdiction to sanction the plan at the first sanction hearing. Instead, it convened a further plan meeting and disenfranchised the subordinated creditors from voting at that meeting (on the basis they were ‘out of the money’). The Court then sanctioned the amended plan at a second sanction hearing.
The plan faced major opposition from certain subordinated creditors, on multiple grounds.
Aggregate group also faced hostile petitions in Luxembourg, including an attempt at a creditor-led Lux. restructuring plan.
The Court held as follows:
- ‘Compromise or arrangement’; modification of plan:
- The Court did not have jurisdiction to sanction a plan which compromised stakeholders’ rights for zero consideration; nor did it have jurisdiction to amend the plan to remedy this defect; nor did it have jurisdiction retrospectively to disenfranchise the out-of-the-money subordinated creditors.
- Instead, it convened a further plan meeting of senior creditors only, to vote on the amended plan. Paying subordinated creditors a share of €200,000, although ‘modest’, was sufficient to constitute the requisite compromise or arrangement.
- Relevant alternative: The correct relevant alternative to the plan was liquidation, in which subordinated creditors would receive nothing. The Court rejected arguments from an opposing creditor that the relevant alternative was a Lux. restructuring plan.
- ‘Fair share’: Since subordinated creditors would be entirely out of the money in the relevant alternative, it was “none of their concern” how senior creditors chose to share the benefits of the restructuring among themselves or with others.
- COMI shift / ‘forum shopping’: The plan company had shifted its centre of main interests (COMI) from Lux. to England, creating the requisite ‘sufficient connection’ to promulgate the plan. The Court attached relatively little significance to the perceived ‘artificiality’ of the COMI shift: debtors are free to choose where they carry on the administration of their business, including for reasons that might be characterised as ‘self-serving’.
