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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> DTEK Energy BV, Re  EWHC 1456 (Ch) (05 May 2021)
Cite as:  EWHC 1456 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Strand, London, WC2A 2LL
B e f o r e :
| IN THE MATTER OF DTEK ENERGY BV
|IN THE MATTER OF DTEK FINANCE PLC
David Allison QC (instructed by Hogan Lovells International LLP for the Banks' Ad Hoc Committee and by Dechert LLP for the Noteholders' Ad Hoc Committee
Hilary Stonefrost (instructed by Ivanyan & Partners) for Gazprombank (Switzerland) Ltd
Hearing date: 16 April 2021
Crown Copyright ©
Sir Alastair Norris:
i) to consider whether adequate notice of the convening hearing has been given which affords those affected by the scheme a fair opportunity to raise relevant issues at the hearing;
ii) to consider threshold issues relating to the existence of jurisdiction (leaving to the sanction hearing issues relevant to the exercise of the jurisdiction);
iii) to consider matters of class composition;
iv) to consider the arrangements for ascertaining the wishes of scheme creditors at scheme meetings; and
v) to and consider whether there exists any "roadblock", any matter that would stand in the way of sanction being given even if the scheme were approved at the scheme meeting, such that the convening of the scheme meeting is without point.
i) Energy is a Netherlands company: as such it is a foreign company liable to be wound up as an unregistered company under the Insolvency Act 1986, for that reason falls within section 895 of the Companies Act 2006 and is able to invoke the scheme jurisdiction if it can establish "a sufficient connection" (for example seeking to compromise English law obligations or to comply with an English exclusive jurisdiction clause). This is ultimately a matter for the sanction hearing; but there is no present reason for thinking that jurisdiction cannot exist.
ii) Finance is an English company.
iii) The Bank Scheme Creditors are undoubtedly creditors whose claims can be compromised by a scheme.
iv) The beneficial owners of the Notes (which are issued in global form) are properly regarded as contingent creditors of Finance since under the terms of the Note a beneficial owner of a Note can call for the creation of a direct relationship with the issuer: see most recently Re Port Finance Ltd  EWHC 378.
v) Each scheme is properly regarded as "a compromise or arrangement" with the requisite element of "give and take" which Hildyard J regarded as the fundamental requirement in Re Lehman Bros International Europe (No2)  BCC 155 at .
vi) The fact that Energy assumed its liability as primary obligor shortly before promoting the scheme does not undermine the existence of jurisdiction (though any issues of "fairness" arising from that circumstance will need to be addressed at the sanction hearing): Re Gategroup Guarantee Ltd  EWHC 304 (Ch).
"Given the significance of the Group's share in the country's electricity generating capacity and the potential economic damage the disruption of its production might cause, the Group would not necessarily be subject to an insolvency process customary for commercial companies."
She submitted that this did not constitute the requisite proof that Energy itself faced imminent insolvency.
i) The Cypriot freezing order certainly does not, and the Dutch conservatory attachment apparently does not, confer upon Gazprombank any immediate security interest: and it is not clear that either will be in place at the date of the scheme meeting or that a conservatory attachment could survive an intervening insolvency process.
ii) Successful restructuring proceedings are dependent upon a collaborative approach by affected creditors. Just as insolvency processes are designed to avoid a scramble for assets, so a court should be cautious about giving effect to an ex parte scramble for rights out of which a separate class can be reverse-engineered for the purpose of obtaining a veto right.
iii) The creation of small classes with veto rights should where, in justice, possible, be avoided. The justice of the case is assessed by asking whether there is more to unite than to divide potential class members in respect of the key issues for decision. The key issue here is: imminent insolvency? or delayed payment in full?
iv) Sufficient doubt attends the prospect of Gazprombank obtaining a successful executory attachment for the Court to find that its present rights are not so dissimilar from the other Bank Scheme Creditors as to make it impossible for them to consult together with a view to their common interest (their common interest being whether to prove for their full claim in an insolvency or to accept the negotiated scheme terms).
i) Payment of a "transaction fee" in return for entering a "lock-up agreement" does not fracture the class where it is openly available to all creditors and where it is not at a level where it is likely to exert a material influence upon a voting decision (both conditions being satisfied in the instant case).
ii) Payment of a "work fee" which is not disguised consideration, which reflects in broad terms the true value of the work undertaken and the detriment suffered by the creditors undertaking negotiation, which is available to all those who wish to participate in that way, and which is not dependent upon sanction being given to the scheme, does not in general fracture the class; those conditions being satisfied it does not do so here.
iii) Payment of fees to financial and legal advisers to the ad hoc groups pursuant to engagement letters which predate the scheme, which are not dependent upon sanction being given to the scheme, and which are paid directly by the applicant companies to the advisers for services actually rendered (as is the case here), will not fracture the class.
iv) A "success fee" is payable directly to the financial adviser to the bank ad hoc committee (of which full disclosure will be made in the Explanatory Statement). This does not fracture the class of Bank Scheme Creditors because it does not amount to differential treatment of class members: it cannot constitute some form of disguised additional consideration which members of the ad hoc committee receive but others do not.