Galapagos Bidco S.À.R.L. v Dr. Frank Kebekus
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli |
| Judgment Date | 19 January 2021 |
| Neutral Citation | [2021] EWHC 68 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: FL-2019-000015 |
| Date | 19 January 2021 |
[2021] EWHC 68 (Ch)
THE HONOUABLE Mr Justice Zacaroli
Case No: FL-2019-000015
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
FINANCIAL LIST (ChD)
7 Rolls Building
Fetter Lane
London EC4A 1L
David Allison QC and Ryan Perkins (instructed by Kirkland & Ellis International LLP) for the Claimant
Andreas Gledhill QC and Shane Sibbel (instructed by Stewarts Law LLP) for the First Defendant
Tom Smith QC and Henry Phillips (instructed by Sidley Austin LLP) for the Second, Third, Fourth and Fifth Defendants
Alain Choo-Choy QC and Ben Woolgar (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Seventh Defendant
The Sixth and Eighth Defendants were not present or represented
Hearing dates: 17 and 18 December 2020; Further written submissions filed on 5, 8 and 13 January 2021
APPROVED JUDGMENT
Introduction
In October 2019 the claimant, Galapagos Bidco S.A.R.L. (“Bidco”) entered into a financial restructuring with certain of its creditors (the “Restructuring”). This was effected under the terms of an intercreditor agreement dated 30 May 2014 to which I refer in more detail below (the “ICA”).
Certain junior ranking creditors, who Bidco alleges would receive nothing under the Restructuring, objected to it.
In September 2019 (before the Restructuring was completed), Bidco issued these proceedings seeking declarations, in summary, that the Restructuring complied with the terms of the ICA. There were originally 14 defendants to the proceedings but, following an amendment made in February 2020 prior to service of the claim form, seven of them were removed, while the first defendant was added to the claim.
The first defendant (domiciled in Germany) and the seventh defendant (which is, for the purpose of this application, accepted to be domiciled in Luxembourg) challenge the jurisdiction of this Court to determine the claim as against them.
The claimant relies, as against both the first and seventh defendants, on Article 8(1) of Regulation (EU) No 1215/2012, the Recast Brussels Regulation (the “RBR”), on the basis that each of the second to sixth defendants is domiciled in the UK and the claims against them and against the first and seventh defendants are so closely connected that it is expedient to hear them together to avoid the risk of irreconcilable judgments.
As against the seventh defendant, the claimant relies in addition on Article 25(1) of the RBR, on the basis of a jurisdiction clause in the ICA in favour of the courts of England.
In the event that Signal is unsuccessful in challenging the jurisdiction of this court, it applies for a stay of these proceedings on case management grounds.
The parties
Bidco is incorporated in Luxembourg. It is the holding company of a group with two operating divisions: “Kelvion”, a supplier of heat exchangers; and “Enexio”, a supplier of cooling systems.
Prior to the Restructuring, Bidco was the wholly owned subsidiary of Galapagos SA, the eighth defendant (“GSA”). In turn, GSA was wholly owned by Galapagos Holding SA (“Holding”). GSA and Holding are incorporated in Luxembourg. Holding was ultimately owned by a consortium of private equity funds managed by Triton Investment Management Limited (“Triton”)
The Galapagos Group (the “Group”, by which I mean Holding and its direct and indirect subsidiaries) was financed by, among other things (collectively referred to as the “Original Debt”):
i) A €99.8 million multi-currency revolving credit facility (“RCF”). The borrowers included GSA and Bidco. The third defendant, Global Loan Agency Services Limited (the “Agent”) was (from 12 July 2019) the Revolving Agent under the RCF, representing the lenders under the RCF.
ii) A €375 million guarantee facility (“GCF”). The borrowers included GSA and Bidco. The Agent (i.e. the same entity as the third defendant) is joined also as fourth defendant, but in its capacity as Guarantee Agent, representing the lenders under the GCF. The Agent was appointed to this role on 12 July 2019.
iii) Two series of senior secured notes (“SSN”) with an aggregate face value of €525 million issued by GSA, due in 2021. Since 12 July 2019 the Senior Secured Notes Trustee has been the fifth defendant, GLAS Trustees Limited (the “SSN Trustee”), authorised to act on the instructions of the holders of SSN.
iv) A series of high-yield notes (“HYN”) issued by Holding and guaranteed by (among others) GSA and Bidco with a face value of €250 million. The High Yield Notes Trustee has at all times been the sixth defendant, Deutsche Trustee Company Limited (the “HYN Trustee”). The HYN are the subject of a New York law governed Indenture dated 30 May 2014 (the “Indenture”).
The ranking of the various tranches of the Original Debt and the rights of the creditors in respect of the enforcement of security over the Group's assets are governed by the ICA. The ICA provides that the RCF, GCF and SSN (the “senior debt”) rank (firstly, the RCF and GCF pari passu among themselves, then the SSN) in priority to the HYN (the “junior debt”).
The security agent under the ICA, since 12 July 2019, has been the second defendant, GLAS Trust Corporation Limited (“the Security Agent”). The Security Agent held security (on behalf of holders of the Original Debt) over a number of assets of the Group and over the shares in Bidco held by GSA.
The Security Agent, the Agent and the SSN Trustee are affiliated companies. Collectively, I shall refer to them as the “GLAS defendants”. They are domiciled in England and Wales. The HYN Trustee is also domiciled in England and Wales.
The first defendant (“Dr Kebekus”) is the German insolvency administrator of GSA. He is domiciled in Germany. On 31 October 2019 the Düsseldorf Court, upon being satisfied that GSA's centre of main interests (“COMI”) had been successfully moved to Germany, as from 25 August 2019, opened main insolvency proceedings within the meaning of the European Insolvency Regulation (EU 2015/848) in respect of GSA. Dr Kebekus was appointed on the same date. This follows an earlier attempt to place GSA into an insolvency proceeding in Germany which was dismissed on 9 September 2019.
The seventh defendant, Signal Credit Opportunities (Lux) Investco II S.A.R.L. (“Signal”) is a company incorporated in Luxembourg. It holds an interest in the HYN, in the following circumstances:
(1) Prior to 14 May 2020 the HYN were constituted by a single “Global Note” registered in the name of Deutsche Bank AG, London Branch as the “Common Depositary”. Under the terms of the Indenture, a “Holder” of a note is a person in whose name a Note is registered. Prior to 14 May 2020, therefore, the Common Depositary was the only Holder of any of the HYN.
(2) Beneficial interests in the HYN were traded through two European clearing systems, Euroclear and Clearstream. Signal had a beneficial interest in 31% by value of the HYN, which was held for it (either directly or via intermediaries) by a “Participant”, defined in the indenture as a person who has an account with Euroclear or Clearstream.
(3) On 14 May 2020, Signal acquired a Definitive Note with a face value of €1,000,000. As such it has from that date been a Holder of HYN in that amount. This represents, however, only a small fraction of its overall beneficial interest in the HYN.
Summary of the Restructuring
According to Bidco, the Group was in financial difficulties by 2019. On 6 June 2019 an initial lock-up agreement was entered into between entities in the Group and certain of the financial creditors. This set out commercial terms for a restructuring of the Group and its debt. The proposed restructuring involved the sale of GSA's shares in Bidco and the release of the Original Debt and of the security granted by those companies (including security granted in respect of the HYN).
A sale process was initiated after the lock-up agreement was signed in order to market the shares in Bidco for sale.
On 8 September 2019 a supplemental lock-up agreement was entered into and the Restructuring was effected on 9 October 2019. The terms of the Restructuring are complex and involve numerous detailed transaction documents. For the purposes of the jurisdiction challenge, it is sufficient to record only the following elements:
i) The entire share capital of Bidco was sold by the Security Agent as a “Distressed Disposal” under the ICA to Mangrove IV Luxco SARL (“Mangrove”), a company owned and controlled by Triton;
ii) The lenders under the RCF and the GCF provided Mangrove with new facilities and Mangrove issued new senior secured notes, a substantial portion of which was issued to the holders of the SSN, in effect for exchange of the SSN;
iii) The Security Agent released the Original Debt and the security granted in respect of it (including all liabilities, including guarantee liabilities, in respect of the HYN and security in respect of the HYN);
iv) So far as the holders of the HYN were concerned, therefore, their rights against GSA, Bidco and the Group were released...
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