Class and jurisdictional issues in schemes of arrangement (Re New Look Secured Issuer plc and another)

Class and jurisdictional issues in schemes of arrangement (Re New Look Secured Issuer plc and another)

Charlotte Cooke, barrister at South Square, examines the High Court’s decision in Re New Look Secured Issuer plc and another to grant applications by two companies for orders pursuant to section 896 of the Companies Act 2006 (CA 2006) to convene meetings of their creditors to consider proposed schemes of arrangement.

Re New Look Secured Issuer plc and another [2019] EWHC 960 (Ch), [2019] All ER (D) 91 (Apr)  

What are the practical implications of the judgment?

Building on previous cases, the decision in Re New Look Secured Issuer plc and another will inform practitioners as to how to approach jurisdictional issues relating to schemes of arrangement and as to proper class composition.

What was the background?

The companies’ group had experienced liquidity issues, as a result of a range of internal and external factors. Among other things, the fashion retail sector in the UK has faced a decline in footfall on the high street, requiring more costly promotional efforts to stimulate trade.

Against this background, the group’s level of debt was considered unsustainable. The restructuring, of which the schemes form part, is intended to provide the group with a deleveraged balance sheet, with lower overall gross debt.

Unless the restructuring was implemented, a bridge facility would terminate on 30 June 2019, with the group unlikely to be able to repay it, which would likely result in filing for insolvency proceedings.

The scheme companies obtained opinions which showed that the outcome from scheme creditors would be better in the event the schemes (and the restructuring more generally) were implemented, as compared with insolvency proceedings. It was therefore considered that the restructuring and the schemes were in the best interests of the group’s stakeholders, including in particular, the scheme creditors. The companies therefore applied to convene meetings of creditors to vote on the proposed schemes and later, if they had been approved by the requisite majority of creditors, to sanction the schemes.

What did the High Court decide?

Smith J addressed jurisdictional issues before going on to consider the proposed meetings.

Jurisdict

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.