Primacom Holding Gmbh and Another (Applicants/Claimants) v A Group of the Senior Lenders & Credit Agricole (Respondents/Defendants)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HILDYARD |
| Judgment Date | 20 December 2011 |
| Neutral Citation | [2011] EWHC 3746 (Ch) |
| Docket Number | Case No: 10990/2011 |
| Court | Chancery Division |
| Date | 20 December 2011 |
[2011] EWHC 3746 (Ch)
Mr Justice Hildyard
Case No: 10990/2011
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
MR D ALLISON (instructed by White & Case) appeared on behalf of the First Claimant
MR R TETT (instructed by Freshfields) appeared on behalf of the Second Claimants
MR A GOODISON (instructed by Linklaters) appeared on behalf of the Defendants
Approved Judgment
This is an application seeking an order convening four meetings of scheme creditors of a company called PrimaCom Holdings GmbH to consider and, if sought, approve a scheme of arrangement proposed by the company pursuant to part 26 of the Companies Act 2006.
As the name of the company indicates, it is a German-incorporated company and one of the matters which I will need to consider is whether the English court has jurisdiction to deal with a creditor scheme in such a context and, if so, what are the guidelines which should be borne in mind.
The scheme creditors are all creditors under financing arrangements entered into by the company. The application is supported by a witness statement of the managing director and chief restructuring officer of the company namely, Mr. Wolf Waschkuhn. The scheme that is proposed is part of a more general restructuring of the group of companies of which this company forms a part. Put very shortly, this company is an immediate holding company of another corporation called Medfort S.a.r.L. ("Medfort"), which is incorporated in Luxembourg, which is, in turn, the immediate 100 per cent-held subsidiary of Perseus Holdings SA ("Perseus"), also incorporated in Luxembourg.
I can take the following description of the proposed restructuring from the Applicant's skeleton argument:
"The key feature of the Proposed Restructuring (including the Scheme) are set out in the Explanatory Statement [2/C/378–380; 2/C/382–298] and at Waschkuhn, paragraph 54. In summary:
(1) The Company (on behalf of the Scheme Creditors) will execute and deliver the Security Agent Instruction Letter, the Senior Agent Instruction Letter and the Mezzanine Agent Instruction Letter by which the Scheme Creditors will irrevocably instruct the Agents under the finance documents to execute all relevant Restructuring Documents;
(2) A €20,000,000 bridge facility loan ('the Bridge Facility') will be advanced to the company to bridge the period from the effective date of the Scheme until the New Senior Facility A (as described below) is drawn. In summary:
(a) It is envisaged that the Bridge Facility will be available until on or before 31 March 2012 when the New Senior Facility A will be drawn and the Bridge Facility repaid.
(b) The Bridge Facility will have the same ranking as the New Senior Facility A (i.e. super senior and pari passu with the claims of the Super Senior Hedging Scheme Creditors).
(c) The Bridge Facility will be available to all Senior Scheme Creditors pro rata to their commitments under the Senior Facilities Agreement. The Senior Scheme Creditors will have until 5:30pm in 11 January 2012 to elect to participate in the Bridge Facility. If all the Senior Scheme Creditors do not agree to fund their pro rata share of the Bridge Facility, the balance will be available to those Senior Scheme Creditors who wish to participate in the Bridge Facility to fund. Following this, if there is still any part of the Bridge Facility that remains unfunded, the Investor Scheme Creditors will commit to funding it. This gives the Company certainty that the Bridge Facility will be taken up in full by the Senior Scheme Creditors.
(d) It is envisaged that the Bridge Facility will be available until on or before 31 March 2012 when the New Senior Facility A will be drawn and the Bridge Facility repaid.
(3) The Company will execute the Senior Facilities Amendment Agreement on behalf of the Super Senior Hedging Scheme Creditors and the Senior Scheme Creditors. The Senior Facilities Amendment Agreement will contain the following key amendments to the Senior Facilities Agreement:
(a) A New Senior Facility A term loan will be advanced to PrimaCom Holding in the amount of €20,000,000 with a backstop maturity date of 30 September 2015. The lenders under the Bridge Facility have the option to participate in the New Senior Facility A pro rata to their participation under the Bridge Facility. If the lenders under the Bridge Facility do not all agree to fund their pro rata share of the New Senior Facility A, the lenders under the Bridge Facility that choose to participate may fund the full remaining amount of the New Senior Facility A. Following this, if there is still any part of the New Senior Facility A that remains unfunded, the Investor Scheme Creditors will commit to funding such part. This gives the Company certainty that the New Senior Facility A will be taken up in full by the Senior Scheme Creditors.
(b) The outstanding amounts under each of the facilities which together make under the Senior Facilities Agreement will be combined into a New Senior Facility B loan with a repayment dated of 31 March 2017.
(c) A new uncommitted Accordion Facility of €40,000,000 will be created and it will rank pari passu with the New Senior Facility B and have a maturity date of 31 March 2017.
(4) The Company will execute the Mezzanine Facility Amendment Agreement on behalf of the Mezzanine Scheme Creditors pursuant to which the claims of the Mezzanine Scheme Creditors will be pushed up to Medfort. This will result in the Company's total debt burden decreasing by €36,730,447.
(5) The Company will execute the Mezzanine Deed of Variation on behalf of the Existing Mezzanine Scheme Creditors. The Mezzanine Deed of Variation will confirm that the claims of the Existing Mezzanine Scheme Creditors shall continue to be regulated on the same terms as the Mezzanine Facility Agreement notwithstanding the push up of the claims of the Mezzanine Scheme Creditors to Medfort.
(6) The Second Lien Creditors will execute the Second Lien Agent Instruction Letter and deliver it to the Second Lien Agent to irrevocably instruct it to execute the Second Lien Restructuring Document including the Second Lien Facility Amendment Agreement pursuant to which the claims of the Second Lien Creditor will be pushed up to Medfort in the event that no change of control occurs by 1 December 2012. This would result in the Company's total debt burden decreasing by €32,794,923.59.
(7) The Intercreditor Agreement will be amended (with the Company acting on behalf of the Scheme Creditors) so that the claims rank as follows:
(a) The Super Senior Hedging Liabilities and the liabilities under the Bridge Facility or the liabilities under the New Senior Facility A, as appropriate;
(b) The liabilities under the Senior Facilities Agreement;
(c) The liabilities under the Second Lien Facility Agreement; and
(d) The liabilities under the Existing Mezzanine Facility Agreement.
(8) Medfort and the Company will execute the Mezzanine Deed of Assumption and, at least one business day afterwards (for German tax reasons), the Mezzanine Deed of Consent pursuant to which Medfort will assume the Company's obligations for the claims of the Mezzanine Scheme Creditors.
It is a pre-condition to the Scheme becoming effective that the above steps have been completed in the appropriate sequence. These pre-conditions are appropriate and unobjectionable."
The context or immediate background in which the scheme is put forward is that the group of which the company is part, and which is a provider of basic and digital cable television high speed Internet and telephony products in Germany serving approximately 1 million households in Germany, has experienced a decline in its financial performance through 2011 when compared to its original business plan.
Its immediate preoccupation is that on 31 December 2011 and then on 25 January 2012 two interest payments are due. It is the view of the directors of the company, who are separately advised as to their duties under German law to the company, that if the proposed restructuring, including this scheme, is not completed by 25 January 2012 and no further forbearance is granted, that they will likely be required to place the company into an insolvency proceeding in Germany.
In that context, and as I will further explain, in the hearing I was furnished with a further witness statement from the same managing director and chief restructuring officer which injected an even greater sense of urgency into the matter, indicating that, unless by the end of this term this court had convened scheme meetings in respect of the company, the directors, on advice, would see no alternative but to place the company into such an insolvency proceeding in Germany.
It is, as I understand it, not disputed at present that an insolvency process in Germany would be likely to lead to very substantially less recoveries on behalf of the broad constituencies of creditors than could be available if a scheme is successfully promulgated under the provisions of the English statute.
In short, it is put forward by the promulgators of the scheme in the shape of the company that the restructuring generally, and including this scheme, represents the only credible alternative to a formal insolvency proceeding which would result in significant lower recoveries for all the scheme...
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