Re La Seda de Barcelona SA
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE PROUDMAN |
| Judgment Date | 26 May 2010 |
| Neutral Citation | [2010] EWHC 1364 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: 2325 of 2010 |
| Date | 26 May 2010 |
[2010] EWHC 1364 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mrs Justice Proudman
Claim No: 2325 of 2010
Mr M Pascoe QC and Mr T Smith (instructed by Freshfields Bruckhaus Deringer LLP) appeared on behalf of the Applicant Company
Ms C Bryant (instructed by Dickinson Dees) appeared on behalf of a company (not a party)
Approved Judgment
: This is an application by La Seda De Barcelona SA, a company incorporated in Spain, for an order sanctioning a scheme of arrangement pursuant to section 899 of the Companies Act 2006. On 30 April last, Newey J directed the convening of a single meeting of scheme creditors. It was duly convened and took place on 21 May and, as recorded in the chairman's report, the scheme was approved in accordance with the statutory majorities. The percentage of scheme creditors voting in favour exceeded 95 per cent by value.
The company is a parent company of the La Seda group which includes companies incorporated in Spain, the UK and elsewhere. The group's business is the manufacture of a substance used in food and beverage packing. The scheme concerns the rights of lenders under a senior facilities agreement which is governed by English law and which is subject to a jurisdiction clause in favour of the courts of England, which provides working capital for the group. There are four facilities, three term loans and a revolving facility. All liabilities rank pari passu.
The company's obligations under the agreement are secured by charges over shares in several of the subsidiaries. A number of group companies, including Artenius UK Limited, are guarantors.
Partly as a result of the recession, the group's performance has deteriorated over the past couple of years leading to a severe lack of liquidity and closure of plants. There has been a series of defaults under the agreement. Artenius has gone into administration. The directors believe that without restructuring part or all of the group it will enter into insolvency proceedings in Spain and elsewhere.
Under the proposed restructuring there will be a new equity investment of at least € 150 million for new ordinary shares in the company. Three groups of investors have indicated an intention to invest € 100 million and the company is seeking other equity investors. If successful the new investment will account for € 150 million of the proposed € 300 million increase in the share capital of the company. The scheme proposes that the rights of senior lenders under the agreement will be settled and replaced by a combination of debt and equity pro rata to the interests of the scheme creditors under the agreement, consisting of an allotment of new ordinary shares taking up the remaining € 150 million, an allocation of unsecured debt under an amended facilities agreement, and an allocation of unsecured debt under a new payment in kind loan facility under the amended facilities agreement. If the equity investment does not come through and if certain other conditions are not satisfied by a certain date, the scheme will terminate.
The restructuring and the scheme are designed as a means to rectify the currently unsustainable position in the interests of all who have an interest in the group. The board believes that there is no credible alternative to the scheme which is intended to create a stronger foundation for continuing the company's business.
The scheme has been explained to me in some detail and I note the aspects to which my attention has been drawn. There are three points with which I need to deal.
Jurisdiction in relation to an overseas company
First there is the fact that the company is a company established in Spain. At the hearing at which he authorised the scheme meeting Newey J considered the question of jurisdiction under this head. He held that the court had jurisdiction to sanction the scheme. I have seen the submissions made to him which led to that conclusion and I see no reason to revisit it.
Compliance with statutory requirements as to formalities
Secondly, there is the question of compliance with statutory requirements as to formalities. The scheme meeting was summoned, convened and conducted in accordance with Newey J's order and the scheme was approved by the requisite majorities in number and value. Newey J approved the constitution of classes and I do not propose reopen that question either.
However, as a result of...
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