: Haya Holco 2 Plc
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Marcus Smith |
| Judgment Date | 09 May 2022 |
| Neutral Citation | [2022] EWHC 1079 (Ch) |
| Docket Number | Claim No. CR-2022-001333 |
| Court | Chancery Division |
[2022] EWHC 1079 (Ch)
THE HONOURABLE Mr. Justice Marcus Smith
Claim No. CR-2022-001333
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Mr. Daniel Bayfield, QC and Mr Ryan Perkins (instructed by Linklaters LLP) for the Applicant
Hearing date: 9 May 2020
Approved Judgment
A. INTRODUCTION
. Haya Holdco 2 plc (the Company) applies for an order giving the Company permission to convene a single meeting of certain of its creditors (the Scheme Creditors) for the purpose of considering and, if thought fit, approving a scheme of arrangement under Part 26 of the Companies Act 2006 (the CA 2006) (the Scheme).
. The Company is incorporated in England. It is part of a group of companies (the Group) which specialises in the management of non-performing loans and real estate assets, many of which are located in Spain.
. The Group's financial position has significantly deteriorated since 2017. The causes of the Group's financial difficulties include: the COVID-19 pandemic; additional competition within the market in which the Group operates; and the fact that the Group's revenues are principally derived from a relatively small number of contracts, some of which have not been renewed and some of which will need to be renewed in the near future.
. The Scheme relates to two series of senior secured notes (the Existing SSNs), which have an aggregate principal amount of approximately €424 million and are due to mature on 15 November 2022. The ultimate beneficial owners of the Existing SSNs (the Existing SSN Holders) are the Scheme Creditors. The Existing SSNs were issued by a Spanish company called Haya Real Estate S.A.U. (“ HRE”), and the Company recently acceded to the finance documents in respect of the Existing SSNs for the purposes of promulgating the Scheme. The Existing SSNs are governed by English law, the governing law having been changed from New York law for the purposes of promulgating the Scheme, a point I shall return to below.
. Under the Scheme, the Existing SSNs will be redeemed in part, and the balance will be released. The Scheme Creditors will receive a package of consideration comprising: (i) newly issued notes (the New SSNs) equal to the balance of the Existing SSNs to be released; and (ii) shares in a new holding company of the Group representing 27.5% of the equity on a fully-diluted basis (the New Shares).
. Absent the Scheme, it is the position of the Company that it is likely that the Company and HRE would enter into formal insolvency proceedings in England and Spain respectively. Such proceedings would, so I am told, provide a poor return for the Scheme Creditors (in the range of 33% to 80% of the total sums owing to them. This is according to an analysis carried out by Kroll Valuation Advisory Services ( Kroll)). By contrast, if the Scheme is implemented, then it is considered that the Group will be restored to financial health so as to allow a materially greater return to the Scheme Creditors. Of course, these are informed predictions only, but it is easy to see why the Scheme is being promulgated.
. The Company submits that: (i) the Court has jurisdiction in relation to the Scheme; and (ii) the Scheme Creditors should vote in a single class. The Court was therefore asked to make an order convening a single meeting of the Scheme Creditors (the Scheme Meeting). I heard the application to convene the Scheme Meeting on 9 May 2022 and acceded to it, for reasons to be given in writing. These are those reasons. They drawn substantially on the very helpful written submissions I received from Mr. Bayfield, QC and Mr Perkins, who appeared on behalf of the Company.
. In addition to the written submissions from the Company, I have read and considered:
(1) The first witness statement of Enrique Dancausa on behalf of the Company ( Dancausa 1).
(2) The first witness statement of Paul Kamminga on behalf of the Information Agent ( Kamminga 1).
(3) The Explanatory Statement. The Practice Statement issued by the High Court on 26 June 2020 provides that the Court will “consider the adequacy” of the Explanatory Statement to check that it is in an “appropriate form”, but without approving its contents. Creditors were notified of the convening hearing pursuant to a Practice Statement Letter dated 11 April 202 (the PSL).
(4) The Scheme, which contain the essential terms of the arrangement that the Scheme Creditors will be asked to approve at the Scheme Meeting.
(5) The expert report of Professor Pedro De Miguel Asensio and Javier Castresana Oliver on the treatment of interest in a Spanish insolvency proceeding.
(6) The expert report of Daniel Glosband on New York law ( Glosband 1), which explains why the Company's accession to the finance documents in respect of the Existing SSNs (and the change of governing law from New York law to English law) is valid as a matter of New York law.
B. BACKGROUND
. The factual background is set out in Dancausa 1. The key points that emerge are summarised below.
. The Company is incorporated in England. It is a wholly-owned subsidiary of Haya Holdco 1 Ltd (the New Parent). The Group consists of the New Parent and its subsidiaries. The Group is ultimately beneficially owned by investment funds managed and/or advised by Cerberus, a leading private investment firm.
. HRE is the Group's main operating company. Its essential function is to manage a portfolio of non-performing loans ( NPLs) and real estate owned assets ( REOs). An REO is a class of property, typically owned by a lender, that failed to sell immediately after foreclosure. HRE manages such assets (as well as other financial and real estate assets) for a wide variety of clients, from financial institutions to international investors. Real estate services are delivered to a portfolio of approximately 186,000 assets under management ( AUM). In total, as of December 2021, the Group was responsible for approximately €29.5 billion of AUM. The Group's key assets are its service level agreements ( SLAs) with customers. Seven SLAs encompass approximately 95% of the Group's AUM.
. The Group's debt structure is as follows. The Existing SSNs represent the Group's only material financial indebtedness. The Existing SSNs comprise two series of notes: the Fixed Rate Notes, which pay a fixed coupon of 5.25% per annum and have an aggregate principal amount of €214,925,000 plus accrued interest of €5,202,976; and the Floating Rate Notes, which pay a coupon at a floating rate of 5.125% over 3-month EURIBOR and have an aggregate principal amount of €209,025,000 plus accrued interest of €2,202,020.
. The Existing SSNs are secured over a number of assets of the Group and are guaranteed by various companies within the Group. The Existing SSNs were originally issued by HRE, which is incorporated in Spain. As I described further below, the Company has now become a co-issuer in respect of the Existing SSNs.
. The global spread of COVID-19 in early 2020 caused a general decline in economic activity in Spain, resulting in a significant negative impact on the Group's operations during 2020 and 2021. The pandemic caused a sharp reduction in REO transactions, as well as significantly reduced servicing fees. There were also Spanish regulatory changes as a result of the pandemic (such as restrictions on mortgage enforcement) which caused a slowdown in business in the NPL sector. Further, the pandemic caused certain financial institutions to delay or cancel the launch of new servicing contracts, which impacted upon the Group's ability to win new contracts.
. One of the Group's key SLAs was not renewed by the customer, and some SLAs are due for renewal in the near future. The Group also faces additional competition for the services that it provides. As a result of these and other factors, the Existing SSNs are now trading at a significant discount to face value, and credit rating agencies have assessed the Existing SSNs as being subject to very high credit risk.
. The Group has taken a number of steps aimed at maintaining its revenue and margin (including the formation of a new business plan). Whilst these steps allowed the Group to address its cost structure and to reduce its leverage to some extent, they were ultimately insufficient to address the deterioration of the Group's financial position.
. In order to allow the Group to seek to agree renewals of various of its contracts, attempt to win new work and to see the long-term benefits of the implementation of the new business plan, the Group seeks to refinance the Existing SSNs in order to provide it with a stable operating platform and to ensure that HRE is not placed into an insolvency process.
. Since November 2021, the Group has been engaged in discussions concerning the potential terms of the Scheme with a group of Existing SSN Holders who together hold Existing SSNs in excess of 60% of the aggregate outstanding principal amount of the Existing SSNs (the Ad Hoc Group). The Ad Hoc Group is represented by Latham & Watkins and PJT Partners.
. On 18 February 2022, HRE entered into a lock-up agreement (the Lock-Up Agreement) with, among others, the members of the Ad Hoc Group (and/or their affiliates). The commercial terms of the Scheme are set out in a Term Sheet appended to the Lock-Up Agreement. The signatories to the Lock-Up Agreement are required to support the restructuring transaction and, if they are Scheme Creditors, to vote in favour of the Scheme (or, in the case of certain “Restricted Holders”, to abstain from voting).
. A number of Existing SSN Holders have acceded to the Lock-Up Agreement since...
To continue reading
Request your trial
-
Nostrum Oil & Gas Plc (“the Company”)
... ... 2 The Scheme relates to two series of unsecured notes (“the Existing Notes”), with ... As pointed out by Marcus Smith J in Re Haya Holco 2 plc [2022] EWHC 1079 (Ch) , there is a fundamental distinction between a scheme ... ...
-
Project Lietzenburger Strasse Holdco S. À R.L.
...These kinds of work fees have been again considered in a number of authorities that were recently summarised in Re Haya Holdco 2 Plc [2022] EWHC 1079 (Ch) at [72]. In that case the court held that the work fee was not a form of bounty or disguised consideration but was a fee for a commerci......
-
Re Leading Holdings Group Ltd
...Corp [2018] 5 HKLRD 48, Enice Holding Co [2018] 4 HKLRD 736, Re Castle Holdco 4 Ltd [2009] EWHC 3919 (Ch) and Re Haya HoldCo 2 plc [2022] EWHC 1079 (Ch). 130. In my view, these cases are decided in different context and cannot assist P. In particular, I agree with the observations made by M......
-
Nostrum Oil & Gas Plc (‘the Company’)
...can be held until such time as the noteholder can lawfully receive it. He points to a recent example in Re Haya Holco 2 Plc [2022] EWHC 1079 (Ch) per Marcus Smith J. at [72(3)]. I accept his 37 Furthermore, I am satisfied that the holding trust structure does not place the Sanctions Disqua......
-
European Restructuring And Distressed: 2022 In Review
...Re ALL Scheme Ltd [2022] EWHC 1318 (Ch) (sanction hearing). 4. Re ALL Scheme Ltd [2021] EWHC 1401 (Ch). 5. Re Haya Holco 2 PLC [2022] EWHC 1079 (Ch) (convening hearing); Re Haya Holco 2 PLC [2022] 6 WLUK 66 (sanction 6. Re ED & F Man Holdings Ltd [2022] EWHC 433 (Ch) (convening hearing); Re......