CFG Investments SAC

APPROVED JUDGMENT

This is an application under Part 26A for the sanction of a restructuring plan under section 901F of the 2006 Act. At the hearing today, I have had oral submissions from Mr Allison KC, who appears for the plan company with Mr Philips and Ms Pyper, and I have also heard brief oral submissions from Mr Street of Ptarmigan, whose role I will explain shortly. Prior to the hearing, I have had the benefit of a very detailed skeleton argument on behalf of the scheme company. That gave me an opportunity to read most of the key documents and Mr Allison has taken me through the others in relation to which I had queries at the oral hearing today.

The basic factual position is set out in the judgment on the convening hearing, a judgment of Sir Alastair Norris of 1 October 2021. I incorporate that by reference and will not repeat it, but where appropriate I will use the same definitions as he adopted. I therefore do not think it is necessary to speak into this judgment the basic pattern of the restructuring. I will just mention that there are holders of existing notes referred to in Mr Allison's skeleton as the “existing SN holders” and there are lenders under a revolving credit facility. Where necessary, I will refer to them as the “club lenders”.

Following the convening order, the plan meeting took place on 21 October 2021, when the plan was approved by overwhelming majorities (99.98 per cent of existing SN holders and 94.23 per cent of club lenders by value). However, just before the plan meeting, the plan company was made aware that a company called Sun Securities Limited (“SSL”), a club lender, had filed petitions for the commencement of insolvency proceedings in Peru. The Peruvian body responsible for insolvency matters of that kind is called INDECOPI and it appeared that INDECOPI had accepted petitions on behalf of SSL but, at the same time, that insolvency proceedings had not in fact begun in respect of the group company concerned.

Later, in May 2022, the plan company learned that another company, Ptarmigan and Eden Asset Management Limited (“Ptarmigan”), to whom I have referred already, who had claimed to be an existing SN holder, had also filed proceedings with INDECOPI. Again, that petition had been accepted but INDECOPI had not begun insolvency proceedings in respect of the relevant company.

The SSL and Ptarmigan petitions caused an obvious problem with the implementation of the scheme because, in particular, there was a risk that, if proceedings did begin and progress in INDECOPI and the company was later put into insolvency proceedings, then transactions necessary to the scheme could be declared void.

A further difficulty anticipated on behalf of the plan company was the slowness (which I do not mean in a disrespectful or critical way) of any Peruvian proceedings. It was simply the case that the normal time taken to resolve them was longer than could really be accommodated bearing in mind that the protection afforded by the Chapter 11 proceedings would not last forever.

Therefore, it was decided to enter into settlement discussions with SSL and, in due course, that led to a settlement. Furthermore, it was decided to arrange for Ptarmigan to be repaid in full. In due course, what was necessary to make that happen was a variation of the indenture within the Chapter 11 proceedings to allow the plan company to repay Ptarmigan.

Further steps have been taken as follows. First of all, the plan company has taken steps to make sure that plan creditors have been kept informed of the developments. In particular and most importantly, on 16 August 2022, a letter and supplemental explanatory statement was distributed to plan creditors, along with an updated version of a report by Kroll comparing the likely economic outcomes for creditors under the scheme on the one hand compared with liquidation on the other.

The updated Kroll report did not change the position in any material way from the comparison that had been done in its original report, but it did reflect a modest difference arising from the consideration to be paid to Ptarmigan in particular. But, in fact, the effect of that was to slightly widen the gap between the scheme result and the liquidation scenario. In other words, if anything, the scheme was slightly more attractive compared with the alternative.

Next, given the fact that time had passed since the plan meetings and the settlement with SSL and discussions with Ptarmigan had taken place, it was decided that plan creditors should be invited to confirm — or, if they wanted to, change — their vote. That took place on 7 September 2022, by which time large majorities of club lenders and existing SN holders had confirmed that they remained in favour of the restructuring plan. There were some minor changes, but those are not material to my consideration today in my view.

Against that background, the company now seeks an order sanctioning the restructuring plan. There is some urgency, although perhaps not an overwhelming urgency, because a very large amount of debt is now due and owing to the existing SN holders and the club lenders, interest continues to accrue and, eventually, if the scheme is not sanctioned, the Chapter 11 protection will terminate, as I have mentioned already.

I will say straightaway that, apart from the situation with Ptarmigan, which I am going to deal with in a moment, this is not an especially challenging sanction hearing. All the points that arise are on well-trodden paths where there is a lot of authority for guidance. Having conducted my prereading as I have indicated, my preliminary view was that the scheme ought to be sanctioned subject to certain minor matters that I wanted to canvass with counsel in the oral hearing.

However, in the run-up to this hearing, I have received a number of submissions from Ptarmigan which make the matter somewhat more complicated and which have taken up most of the hearing today. In particular, I received quite extensive materials from Mr Street under an email of 9 September 2022 and further materials just this morning. Mr Street was given the opportunity to follow this hearing (which is, of course, a public hearing) on Teams. After hearing from him briefly, I gave him permission to make submissions on behalf of Ptarmigan and indeed, as he said, on his own behalf. He did that with clarity and conciseness, for which I am grateful.

The first point which I should clear away is that there has been some suggestion that the Ptarmigan petition in Peru (the petition to INDECOPI) is confidential, but I am satisfied by expert evidence put in by Mr Gagliuffi (the former chair of INDECOPI) that, whilst there are confidentiality restrictions in INDECOPI's proceedings, those are for the benefit of the debtor. There is, therefore, I am satisfied, no reason for me not to describe what has happened openly in court.

Ptarmigan's status as a holder of the relevant debt, which I should say is under the existing SNs, is not necessarily...