Fomento De Construcciones Y Contratas S.A. v Black Diamond Offshore Ltd and Ors
| Jurisdiction | England & Wales |
| Judge | Lord Justice Christopher Clarke,Lord Justice Hamblen,The Senior President of Tribunals |
| Judgment Date | 22 November 2016 |
| Neutral Citation | [2016] EWCA Civ 1141 |
| Docket Number | Case No: A3/2015/1470 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 November 2016 |
[2016] EWCA Civ 1141
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR JUSTICE BARLING
HC2015000148
Royal Courts of Justice
Strand, London, WC2A 2LL
THE SENIOR PRESIDENT OF TRIBUNALS Lord Justice Ryder
Lord Justice Christopher Clarke
and
Lord Justice Hamblen
Case No: A3/2015/1470
Mr David Wolfson QC (instructed by Mishcon de Reya LLP) for the Appellant
Ms Felicity Toube QC (instructed by Boies, Schiller & Flexner (UK) LLP) for the Respondents
Hearing date: 8 th November 2016
The question at issue in this appeal is whether or not an Event of Default has occurred in respect of a € 450 million Loan Note. The sub clause at issue is not particularly well drafted, particularly when contrasted with the admirably concise and well-focused submissions that we have received from both counsel.
The background
Fomento de Construcciones Y Contratas S.A. ("FCC") is a leading publicly quoted Spanish company. It specialises in, inter alia, construction and city sanitation services such as waste removal and waste water treatment. For the year ended December 31 2008 58% of the revenues of the Group which it heads originated in Spain. Out of 2008 non-Spanish originated Revenues, 67% originated in Central and Eastern Europe (mainly in Austria and Germany), 14% in the United Kingdom, 7% in the rest of Europe, 6% in the USA and 6% in the rest of the world. The Group comprised 1,692 companies with nearly 94,000 employees based in over 50 countries.
FCC's borrowing includes two major elements. First, on 27 October 2009 it offered for sale, and later issued, € 450 million 6.5% unsecured convertible notes. Subject to an immaterial exception the Notes are subject to English law and jurisdiction. The Notes were originally due for repayment in 2014, but that has now been extended to 2020. The Notes were subordinated to seven Senior Liabilities whose principal amounts amounted to some US $ 3.6 billion.
Second, on 24 March 2014 FCC entered into a Syndicated Finance Agreement ("SFA") in an amount of some € 4.5 billion. The SFA is subject to Spanish law and Jurisdiction. It is divided into two Tranches. Tranche A is in the amount of some € 3.16 billion. Tranche B was convertible into shares in the initial amount of some € 1.35 billion.
On 14 November 2014 FCC announced its intention to carry out a further restructuring under a New Framework Restructuring Agreement ("the Agreement"). The restructuring was to relate only to Tranche B. It would adversely impact the interests of the Tranche B debt holders in that € 900 million of debt was to be repurchased at a 15% discount and payment in kind interest, currently running at between 11 and 16%, was to be reduced to 5%. The proposed restructuring did not affect Tranche A, or the Notes, or any other relevant class of debt.
The proposal made clear (a) that if the restructuring could not be achieved by the unanimous consent of all affected creditors it would be implemented using the sanction of the court as provided for under the relevant Spanish legislation in what are called homologation proceedings; and (b) that FCC already had consents from a sufficient number of affected creditors to make this course of action possible. In the event, we were told, more than 85% of the of the Amortizable Debt (including Tranche B) consented to the restructuring. As part of the new restructuring proposal a further € 1 billion has been injected into FCC through a rights issue which was nine times oversubscribed. Since this fresh equity will rank behind the Notes this aspect of the restructuring improves the financial profile of the Notes.
On 29 December 2014 FCC applied to the Commercial Court in Barcelona for judicial homologation of the Agreement. On 12 January 2015, the Spanish court approved the Agreement by way of a Homologation Order. There is a challenge to that order pending in respect of which judgment is awaited.
On 16 January 2015, the original claimants, some of whom held Tranche B debt only, issued the present proceedings in which they claim that there has been an Event of Default under the Note. On 3 February 2015 Notices of Discontinuance were served by those of the original claimants who only held Tranche B debt. FCC challenged the jurisdiction of the English court. On 9 March 2015 Asplin J dismissed that challenge. On 16 April 2015 Barling J gave summary judgment in favour of the claimants holding that there had been an Event of Default under clause 10 (f) of the Note. Of the original claimants only one, the third respondent, still pursues a claim.
Events of default under the Note
Clause 10 of the Note provides as follows:
"10 Events of Default
If any of the following events (each an Event of Default) shall have occurred and is continuing:
(a) default is made in the payment on the due date of principal, premium or interest or any other amount in respect of any of the Notes and such failure continues for a period of 5 (five) days in the case of principal or premium and 7 (seven) days in the case of interest; or
(b) the Issuer does not perform or comply with any one or more of its other obligations in respect of the Notes, which default is incapable of remedy or, is not remedied within 30 (thirty) days after written notice of such default shall have been given to the Fiscal agent at its specified office by any Noteholder; or
(c)
(i) any other present or future indebtedness for or in respect of moneys borrowed or raised of the Issuer or any Material Subsidiary becomes, or is declared, due and payable prior to its stated maturity otherwise than at the option of the Issuer or the relevant Material Subsidiary; or
(ii) any such indebtedness for or in respect of moneys borrowed or raised is not paid when due or, as the case may be, within any applicable grace period; or
(iii) the Issuer or any Material Subsidiary fails to pay when due amount payable by it under any present or future guarantee for, or indemnity in respect of, any indebtedness for or in respect of moneys borrowed or raised, provided that the aggregate amount of the indebtedness, guarantees or indemnities in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds €100,000,000 or its equivalent; or
(d) a distress, attachment, execution or other legal process is levied, enforced or sued out on or against any part of the property, assets or revenues of the Issuer or any Material Subsidiary and is not discharged or stayed within 30 (thirty) days provided that the aggregate amount of property, assets and/or revenues involved in any such distress, attachment, execution or legal process equals or exceeds €100,000,000 or its equivalent; or
(e) any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Issuer or any Material Subsidiary in respect of an obligation the principal amount of which equals or exceeds €100,000,000 or its equivalent is enforced (including by the taking of possession or the appointment of a receiver, administrative receiver, administrator manager, or another similar person); or
(f) the Issuer or any Material Subsidiary is insolvent or bankrupt (concurso) or unable to pay its debts, or is declared or a voluntary request has been submitted to a relevant court for the declaration of insolvency or bankruptcy, stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any such debts or a moratorium is agreed or declared or comes into effect in respect of or affecting all or any part of the debts of the Issuer or any Material Subsidiary; or
(g) an order is made or an effective resolution passed for the winding-up (liquidación) or dissolution (disolución) of any Material Subsidiary, or the Issuer or any Material Subsidiary ceases or threatens to cease to carry on all or substantially all of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by a resolution of the Syndicate of Noteholders; or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Issuer or another Material Subsidiary; or
(h) any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, license, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under the Notes; (ii) to ensure that those obligations are legally binding and enforceable; and (iii) to make the Notes admissible in evidence is note taken, fulfilled or done; or
(i) any event occurs which under the laws of any relevant jurisdiction has a similar effect to any of the events referred to in any of the foregoing paragraphs; or
(j) it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes, then (A), up to and including the Subordination End Date, any Note may, by notice in writing given to the Fiscal Agent at its specified office by (i) the Commissioner acting upon a resolution of the Syndicate of Noteholders, in respect of all Notes, or (ii) unless there has been a resolution to the contrary by the Syndicate of Noteholders, any Noteholder in respect of...
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Alison Grant v FR Acquisitions Corporation (Europe) Ltd
...relied further on: (1) Christopher Clarke LJ's recognition, in Black Diamond Offshore Ltd v Fomento de Construcciones y Contratas SA [2016] EWCA Civ 1141 at [32] in relation to a very similar Event of Default in a loan note, which included a near-identical reference to “ a general assignme......