Port Finance Investment Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 23 February 2021 |
| Neutral Citation | [2021] EWHC 378 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2021-000179 |
| Date | 23 February 2021 |
[2021] EWHC 378 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST
Rolls Building,
Fetter Lane
London
EC4A 1NL
Mr Justice Snowden
Case No: CR-2021-000179
Tom Smith QC and Stefanie Wilkins instructed by Baker McKenzie LLP for the Company
Hearing dates: 4, 11 and 17 February 2021
Approved Judgment
This is an application by Port Finance Investment Limited (the “Scheme Company”) for an order convening a meeting of its creditors (the “Scheme Creditors”) for the purposes of considering and, if thought fit, approving a scheme of arrangement under Part 26 of the Companies Act 2006 (“Part 26”, the “CA 2006” and the “Scheme”).
I adjourned the hearing on Thursday 4 February 2021 and again on Thursday 11 February 2021 for the Scheme Company to provide further evidence in relation to various aspects of the restructuring, including the proposal to pay a success fee to an adviser to a group of Scheme Creditors, together with corresponding changes to the draft explanatory statement to be sent to all Scheme Creditors.
At the reconvened hearing on Wednesday 17 February 2021 I indicated that I would make the order sought by the Scheme Company with certain modifications. I indicated that I would give my reasons in writing, which I now do.
The Global Ports Group
Global Ports Holdings Plc (“GPH”) is an English public limited company. GPH, and its direct and indirect subsidiaries (together, “the Group”), is a leading global cruise port operator, and operates cruise ports throughout Europe, Asia, and the Caribbean.
The Group has two primary sources of revenue:
i) Core port services: the Group derives revenues from handling cruise ships and their passengers and crew through terminal and marine services. The Group's customers are cruise operators who make payment on their own behalf and on behalf of their passengers. The main driver of cruise port operations is cruise passenger volumes and gross tonnage. The Group receives cruise revenues primarily on a per-passenger basis.
ii) Ancillary services: at each port, the Group derives revenue from additional services, which vary according to the port, but include vessel and port services, destination and shoreside services and area and terminal management.
The COVID-19 pandemic has had a material adverse effect on the global cruise industry, and consequently on the Group's finances. The Group's total consolidated revenue in the nine months ended 30 September 2020 declined by 52% compared to the equivalent period in 2019 and consolidated adjusted EBITDA declined by 73% compared to the equivalent period in 2019. There is continuing uncertainty about the duration of the COVID-19 pandemic, and its overall effect on the Group's revenue is correspondingly unclear.
The Existing Notes
The Group's indebtedness includes unsecured senior notes due 14 November 2021 with an aggregate principal amount of US$250 million (the “Existing Notes” and the “Existing Indenture”). These were issued by Global Liman Isletmeleri A.S. (“GLI” or the “Original Issuer”), a Turkish company, which is a direct wholly-owned subsidiary of GPH. The trustee for the Existing Notes is The Bank of New York Mellon acting through its London Branch as the trustee (the “Trustee”). Interest, at 8.125%, is payable semi-annually in arrears on 14 May and 14 November of each year prior to their maturity. The Existing Notes are unsecured, but are guaranteed by a subsidiary of the Original Issuer, Ege Liman Isletmeleri A.S. (“Ege Liman”).
Beneficial interests in the Existing Notes may be held by participants in Depository Trust Company, Euroclear Bank SA/NV and Clearstream Banking S.A. (collectively the “Clearing Systems”) and are traded through the Clearing Systems. The beneficial interests of participants in the Clearing Systems are recorded in the books and records of the Clearing Systems. Those participants may hold beneficial interests on their own behalf, or on behalf of one or more third parties.
Under section 2.06(a) of the Existing Indenture, the holders of book entry investments in the Existing Notes have the right to acquire direct rights against the Original Issuer, in certain circumstances, by calling for the issuance of a definitive registered note. Such persons can therefore, be regarded as “contingent creditors” of the Scheme Company for the purposes of Part 26: see Re Castle Holdco 4 Ltd [2009] EWHC 3919 (Ch), [22]–[24]; Re Noble Group [2018] EWHC 2911 (Ch), [2019] BCC 349, [161]–[164]. The Scheme is therefore based upon treating such persons who have beneficial interests in the Existing Notes, who I shall refer to as “Noteholders”, as the primary Scheme Creditors.
Under section 12.07 of the Existing Indenture, the Existing Notes are governed by New York law and the parties irrevocably submitted to the jurisdiction of the courts of New York.
Other debt of the Group
In addition to the Existing Notes, the Group has the following principal sources of indebtedness which are unaffected by the proposed Scheme:
i) US$125.0 million 8.0% unsecured notes due 2040 issued by Nassau Cruise Port Limited (GPH owns a minority stake in Nassau Cruise Port Limited but this indebtedness is consolidated into the Group's consolidated financial reports), which is non-recourse to the Group; and
ii) Additional project finance and working capital facilities incurred partially by the Original Issuer in an aggregate principal amount of US$105.3 million (equivalent) as of 31 December 2020.
The Scheme
The continuing uncertainty caused by the COVID-19 pandemic has led the Group to conclude that in order to maintain its liquidity position, it will be necessary for it to defer the interest payments on the Existing Notes. The Group also does not consider that it will be able to repay the Existing Notes in full on their maturity in November 2021. Nor does it envisage that it will be able to find an alternative source of funding to enable it to refinance the Existing Notes.
Against this background, the principal objective of the Scheme is to cancel and release the Existing Notes, in consideration for Scheme Creditors being given an entitlement to new notes with an extended maturity date of 14 May 2024 (the “New Notes” and the “New Notes Entitlements”). The New Notes will be issued by a new issuer which will be a newly formed English company that will become the immediate parent of the Original Issuer.
The New Notes
The principal feature of the New Notes are as follows:
i) The New Notes will be issued in an aggregate principal amount equal to the outstanding Existing Notes (subject to reduction in accordance with the cash option – see below). The New Notes will mature on 14 May 2024.
ii) The New Notes will be issued by the “New Issuer”, a company newly incorporated under the laws of England and Wales which will be a wholly-owned subsidiary of GPH.
iii) Under the New Notes, interest falling due on or prior to 14 May 2022 will be at 8% per annum but the New Issuer will have the ability to pay part or all of the interest in kind. Interest falling due after 14 May 2022 will be paid in cash at 6.5% per annum. Where the New Issuer pays interest in cash, there is provision for the New Issuer to use certain additional cash to make an offer to all holders of the New Notes to repurchase all or part of such holders' New Notes.
iv) No later than 90 days after the Scheme becomes effective, GPH will distribute or otherwise transfer the Original Issuer and its subsidiaries to the New Issuer, so that the Original Issuer will become a direct wholly-owned subsidiary of the New Issuer (the “New Issuer Reorganisation”).
v) In addition, GPH, the New Issuer and the Original Issuer will use commercially reasonable efforts to distribute or otherwise transfer the Original Issuer's investments in its non-Turkish operating subsidiaries to the New Issuer, so that the Original Issuer's international operating subsidiaries will be directly or indirectly held by the New Issuer.
vi) The New Notes will be guaranteed not only by the guarantors of the Existing Notes but also by GPH, the ultimate parent company in the Group.
vii) No later than three business days following the completion of the New Issuer Reorganisation, the New Notes and the accompanying guarantees will be secured by a pledge over the shares of the New Issuer.
The Cash Option
Scheme Creditors may elect to have an opportunity to receive cash in lieu of part or all of their New Notes Entitlement (the “Cash Option”). Payments made to Noteholders who participate in the Cash Option will be funded from the proceeds of the sale by the Group of the shares in one of its subsidiaries (Port Akdeniz-Antalya) in Turkey to an unaffiliated third party (the “Disposition”). The Disposition was completed on 25 January 2021. The Port Akdeniz-Antalya subsidiary was also a guarantor of the Existing Notes but was released as such on 26 January 2021, following the Disposition.
The maximum amount of consideration available for distribution under the Cash Option (the “Cash Option Consideration”) will be US$85.0 million, less: (a) accrued and unpaid interest, and (b) additional amounts, if any, owing on the aggregate principal amount of the Existing Notes represented by New Notes Entitlements that have been validly tendered and accepted in the Cash Option.
There will be a modified reverse Dutch auction procedure to determine which of the New...
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