Galapagos Bidco S.A.R.L v Dr Frank Kebekus
| Jurisdiction | England & Wales |
| Judge | Mr Justice Trower |
| Judgment Date | 28 July 2023 |
| Neutral Citation | [2023] EWHC 1931 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: FL-2019-000015 |
[2023] EWHC 1931 (Ch)
THE HONOURABLE Mr Justice Trower
Case No: FL-2019-000015
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
FINANCIAL LIST
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
David Allison KC and Ryan Perkins (instructed by Kirkland & Ellis International LLP) for the Claimant
Ben Shaw KC (instructed by Keidan Harrison LLP) for the First Defendant
Tom Smith KC and Henry Phillips (instructed by Sidley Austin LLP) for the Second to Fifth Defendants
Alain Choo Choy KC and Ben Griffiths (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Seventh Defendant
Hearing dates: 9, 10, 13, 14, 16, 21 and 22 March 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 28 July 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
THE HONOURABLE Mr Justice Trower
Introduction
The claimant, Galapagos Bidco S.à r.l. (“Bidco”), and the seventh defendant, Signal Credit Opportunities (Lux) Investco II S.à r.l. (“Signal”), both seek declaratory relief in relation to the effectiveness of the restructuring of the financial indebtedness of the group of companies of which Bidco forms part (the “Group”). Bidco seeks the court's confirmation that the restructuring was effective, while Signal, a junior creditor and a minority holder of certain high yield notes, contends (for various reasons) that it was not. The purpose of these proceedings is to resolve the uncertainties which have arisen.
Bidco is incorporated in Luxembourg. It is an intermediate holding company in the Group, the business of which was divided into two operational segments: Kelvion, which specialised in the supply of heat exchangers and Enexio, which specialised in the supply of cooling systems. Bidco has several direct and indirect subsidiaries incorporated in a number of jurisdictions.
At all material times prior to 9 October 2019, Bidco was the wholly owned subsidiary of the eighth defendant, Galapagos S.A. (“GSA”), itself a wholly owned subsidiary of Galapagos Holdings S.A. (“GHSA”). On that date, the entirety of GSA's shareholding in Bidco was sold to Mangrove LuxCo IV S.à r.l. (“Mangrove IV”). Both GSA and GHSA are incorporated in Luxembourg. GHSA is ultimately owned by a consortium of private equity funds managed by Triton Investment Management Limited, along with certain minority co-investors. Mangrove IV was the wholly owned subsidiary of Mangrove Luxco III S.à r.l. (“Mangrove III”) which, in turn, was ultimately owned by a Triton managed fund, Triton Fund IV (“Triton”).
Prior to October 2019, the Group was financed as follows (the “Original Debt”):
i) A €99.8 million multi-currency English law revolving credit facility (the “SSRF”) comprised of €75 million under a super senior revolving facility agreement, and €24.8 million under an additional revolving facility under which GSA, Bidco and Kelvion Finance GmbH (“Kelvion Finance”) were borrowers and guarantors.
ii) A €375 million English law super senior guarantee facility (the “SSGF”) under which GSA, Bidco and Kelvion Finance were borrowers and guarantors. Under the SSGF, the borrowers were entitled to request the lenders to issue a letter of credit (“LoC”) in favour of third party beneficiaries in respect of which the borrower then indemnified the lenders in the event of any claim.
iii) Two series of senior secured noted (“SSNs”) issued by GSA with an aggregate face value of €525 million due in 2021. The SSNs were issued under a New York law indenture dated 30 May 2014 guaranteed by (amongst others) Bidco and Kelvion Finance.
iv) A series of high-yield notes (“HYNs”) issued by GHSA with a face value of €250 million due 2022. The HYNs were issued under a New York law indenture dated 30 May 2014, guaranteed by (amongst others) GSA, Bidco and several subsidiaries and/or affiliates of Bidco including Kelvion Finance.
The rights of creditors (the “Primary Creditors”) in respect of the Original Debt were protected by certain security (the “Transaction Security”). This included pledges granted by GSA over the share capital of Bidco, certain preferred equity certificates issued by Bidco and the intercompany receivables owing to GSA by Bidco and Kelvion Finance (the “Key Secured Assets”). The holders of the HYNs were only entitled to benefit from such parts of the Transaction Security as constituted shares and other equity or debt instruments issued by an entity to its shareholders, including the security over the Key Secured Assets. They also benefited from a pledge granted by GHSA over the shares in GSA (the “HYN Pledge”), which did not form part of the Transaction Security.
The rights of the Primary Creditors in respect of the Original Debt were governed by an English law intercreditor agreement dated 30 May 2014 (the “ICA”) to which GSA and Bidco (amongst others) were also party. Under the terms of the ICA, GSA was called the Parent and Bidco was called the Company, and they both qualified as a “Debtor” (as defined). The ICA made provision for the ranking of the rights of the Primary Creditors inter se and the terms on which those rights could be enforced and discharged. The Key Secured Assets were ultimately vested in the second defendant, GLAS Trust Corporation Limited (the “Security Agent”) as security agent. Its role under the ICA was to hold, administer and (if appropriate) release the Key Secured Assets on behalf of the Primary Creditors in accordance with the terms of the ICA.
The first defendant, Dr Frank Kebekus (“Dr Kebekus”), is the German insolvency administrator of GSA. He was appointed by order of the Düsseldorf Insolvency Court on or about 9 September 2019. That appointment, and his authority to act on behalf of GSA in these proceedings, has not been recognised in England. On 30 June 2022, Bacon J determined that the German insolvency proceedings in relation to GSA did not constitute main proceedings for the purposes of Article 3 of the Recast Insolvency Regulation (Regulation (EU) 2015/848 of 20 May 2016) and made a winding up order against GSA ( Re Galapagos S.A., Barings (UK) Limited v Galapagos S.A. [2022] BCC 1113). An appeal against that order was dismissed by consent on 16 January 2023. GSA is now represented in England by the official receiver, who did not contest the claim. Neither she nor GSA was represented at the trial.
Although Bacon J had concerns about Dr Kebekus' neutrality in the winding up proceedings, she recorded that he was neutral on the central issues raised in these proceedings (i.e., the questions of construction of the ICA), a position which he maintained at the trial. However, he opposes the grant of any declaratory relief and the making of any findings of fact on issues which are before the German courts in certain insolvency claw back proceedings he commenced in Germany in September 2020 against Mangrove IV and the Security Agent (the “Claw Back Action”). Since the conclusion of the trial in these proceedings the Claw Back Action has been dismissed by the Regional Court of Düsseldorf, although Dr Kebekus is exercising his right to appeal; since the trial, I have been supplied with translations of the judgment and the notice of appeal.
The Security Agent and the third to fifth defendants (the “GLAS Defendants”) are all affiliated entities within the GLAS group, the members of which primarily operate a debt administration business. Each of the GLAS Defendants was appointed as agent or trustee pursuant to a global resignation and appointment deed dated 12 July 2019:
i) the Security Agent was appointed the security agent under the ICA;
ii) the Third Defendant, Global Loan Agency Services Limited (the “Revolving Agent”), was appointed the agent for the lenders under the SSRF;
iii) the Fourth Defendant, Global Loan Agency Services Limited (the “Guarantee Agent”), was appointed the agent for the lenders under the SSGF; and
iv) the Fifth Defendant, GLAS Trustees Limited (the “SSN Trustee”), was appointed the agent for the noteholders under the SSNs.
Prior to the execution of this appointment deed, Unicredit Bank AG (London Branch) had been the Security Agent, the Revolving Agent and the Guarantee Agent, and Deutsche Trustee Company Limited had been the SSN Trustee. The GLAS Defendants supported Bidco's application for relief and opposed that for which Signal contended.
The sixth defendant, Deutsche Trustees Limited (the “HYN Trustee”), was, as it remains, the agent for the holders of the HYNs. It did not play any part in these proceedings, other than to confirm that it was content to be bound by the final decision of the court. Bidco relied on the fact that the HYN Trustee, as Signal's creditor representative, did not play a role in supporting Signal's case that the steps taken by the Security Agent were not in accordance with the terms of the ICA.
The seventh defendant, Signal, is a hedge fund specialising in the acquisition of distressed debt and is one of the holders of HYNs. It holds or purports to hold a beneficial or economic interest in HYNs with a face value of approximately €73.3 million of which €1 million is in the form of a definitive note. It opposed the declaratory relief sought by Bidco and counterclaimed seeking alternative declarations that the steps taken by the Security Agent were not in accordance with the terms of the ICA, and that the liabilities and security in respect of the HYNs were not validly...
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