Selecta Finance UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Adam Johnson |
| Judgment Date | 14 October 2020 |
| Neutral Citation | [2020] EWHC 2689 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2020-003850 |
| Date | 14 October 2020 |
[2020] EWHC 2689 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST (Ch D)
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Justice Adam Johnson
Case No: CR-2020-003850
Daniel Bayfield QC and Ryan Perkins (instructed by Kirkland & Ellis International LLP) for the Company
Hearing dates: 2 October 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On 2 October 2020 I heard an application by Selecta Finance UK Limited (“ the Company”), by which it sought an Order convening a single meeting of certain of its creditors (“ the Scheme Creditors”), for the purpose of considering a scheme of arrangement (“ the Scheme”) under Part 26 of the Companies Act 2006 (“ CA 2006”). At the conclusion of the hearing I indicated that I would make the Order sought, but would give reasons separately. This Judgment sets out those reasons.
Background
The main evidence relied on by the Company was a Witness Statement of a director, Mr Schneiter. The Company is incorporated in England. It was incorporated only on 13 August 2020, and so is a recent addition to the Selecta group (“ the Group”). I am told that the Group is the leading provider of unattended self-service coffee and convenience food in Europe. It is ultimately owned beneficially by various investment funds managed by KKR, which is described as an alternative asset management firm.
The Scheme concerns three series of senior secured Notes (“ the Existing SSNs”), which have an aggregate principal amount of €1.24 billion plus CHF 250 million.
The Existing SSNs were issued originally not by the Company but by Selecta Group BV (“ the Parent”), a company incorporated in the Netherlands. They were issued pursuant to a Trust Deed dated 2 February 2018 (the “ Trust Deed”), and were originally governed by New York law and subject to a provision for the New York Courts to have exclusive jurisdiction.
The Existing SSNs are more particularly described as follows:
i) a series of senior secured notes (due in 2024) with an aggregate principal amount of €865 million and a fixed interest rate of 5.875% per annum;
ii) a series of senior secured notes (due in 2024) with an aggregate principal amount of €375 million and a floating interest rate of EURIBOR + 5.375% per annum; and
iii) a series of senior secured notes (due in 2024) with an aggregate principal amount of CHF 250 million and a fixed interest rate of 5.875% per annum.
The Existing SSNs form part of a wider set of financing arrangements for the Group. The Parent and other Group entities are borrowers under a €150 million revolving credit facility with a group of bank lenders (the “ RCF”), which is fully utilised, and they are also borrowers under a €50 million term loan facility (the “ Liquidity Facility”) advanced by various lenders affiliated to KKR in March 2020.
The Existing SSNs, the RCF and the Liquidity Facility share the same guarantee and security package. Guarantees and security have been provided by numerous Group companies.
The ranking as between the Existing SSNs, the RCF and the Liquidity Facility is the subject of an intercreditor agreement dated 31 January 2018 (“ the Intercreditor Agreement”). Under the terms of that Agreement, the financial liabilities of the Group rank in the following order of priority (in the event that the security is enforced):
i) first, the RCF and the Liquidity Facility (on a pari passu basis in the event of any shortfall); and
ii) second, the Existing SSNs.
The Existing SSN's are therefore contractually subordinated to the RCF Facility and the Liquidity Facility.
Each of the Existing SSNs is issued in the form of a global note, legally held by a nominee entity, and with beneficial interests in the global notes being traded through Euroclear and Clearstream (the “ Clearing Systems”). An institution (Lucid Trustee Services Limited) acts as the trustee of the Existing SSNs (the “ SSN Trustee”) to represent the interests of the SSN Holders.
For the purposes of the present application, the Company's submission, which I accept, is that the relevant parties in interest who qualify therefore as the Scheme Creditors (see above) are the ultimate beneficial owners of the Existing SSNs (referred to before me as “ SSN Holders” or “ Existing SSN Holders”). That follows because the SSN Holders are entitled to call for the issuance of “ definitive notes” in certain circumstances (see section 2.06 of the Trust Deed), and since a definitive note would represent a direct payment obligation owing by the issuer to the ultimate beneficial owner of the relevant notes, the SSN Holders are to be treated as contingent creditors for the sums due under the Existing SSNs. That logic has been applied in a number of previous cases, see e.g. Re Castle Holdco 4 Ltd [2009] EWHC 3919 (Ch) at [23] per Norris J; Re Co-operative Bank plc [2013] EWHC 4072 (Ch) at [23] per Hildyard J; and Re Noble Group Ltd [2019] BCC 349 (convening judgment) at [161]–[164] per Snowden J.
The evidence is that the Group has experienced a significant decline in financial performance as a result of the COVID-19 pandemic; that there is therefore a need to reduce the Group's financial indebtedness; and that the Scheme is part of a wider restructuring designed to achieve that objective. Shorter term liquidity pressures were addressed by certain measures taken by the Group (including the entry into of the Liquidity Facility mentioned above), but the evidence is that by about May 2020, the view had been taken that a more extensive restructuring was required.
Consequently, at about that time, negotiations were opened up with a number of the Group's key financial stakeholders. These included discussions with an ad hoc group of SSN Holders (the “ AHG”), comprising approximately 45.44% of the Existing SSNs. Thereafter, a number of things followed.
The Company was incorporated on 13 August 2020. As I understand it, this was with a view to taking advantage, so far as the Existing SSNs are concerned, of the scheme jurisdiction in Part 26 CA 2006.
On 8 September, the Parent announced that it had reached an agreement in principle with its key financial stakeholders to a proposed restructuring of its balance sheet (the “ Restructuring”). A press release was issued and publicised via (amongst other means) a website managed by Lucid Issuer Services Limited, which has been engaged to co-ordinate communications with the SSN Holders (the “ Information Agent”). The Restructuring includes steps both in relation to the RCF and the Liquidity Facility (for example, if the Restructuring is effective the maturity date of the RCF will be extended to 1 January 2026), but also, critically for present purposes, steps in relation to the Existing SSNs. It is such steps which are the subject of the Scheme. I will describe the proposals in more detail below.
Also on 8 September 2020, the Parent and the AHG (among others) entered into a lock-up agreement (the “ Lock-Up Agreement”) reflecting the proposed Restructuring, including the Scheme. Among other provisions, the Lock-Up Agreement obliges the parties thereto to take all actions which are reasonably requested and necessary in order to support, facilitate, implement and consummate the Restructuring. Additionally, a consent fee equal to 0.25% of the Existing SSNs held by each signatory to the Lock-Up Agreement is payable in cash upon the completion of the Restructuring (the “ Lock-Up Fee”).
On 9 September 2020, a consent request was issued to the Existing SSN Holders, seeking their agreement to amend the terms of the Existing SSNs. The proposed amendments — to be given effect under the then governing law of the Existing SSNs, namely New York law — were again made with a view to engaging the scheme jurisdiction of this Court under CA 2006, Part 26. The evidence is that by 14 September 2020, the Existing SSN Holders holding a majority by value of the Existing SSNs had provided their consent to (among others) the following key changes to the terms of the SSNs:
i) Amendment of the governing law provisions of the Trust Deed so that the Existing SSNs are governed by English rather than New York law.
ii) Amendment of the jurisdiction provisions of the Trust Deed so that the Existing SSNs are subject to the exclusive jurisdiction of the English Court in relation to any proceedings commenced by an obligor of the Existing SSNs, and the non-exclusive jurisdiction of the English Court in relation to other proceedings (I will set out the terms of the relevant amendment below).
iii) Accession of the Company to the Trust Deed as a co-issuer of the Existing SSNs.
I should say that I have been referred to an expert report of Professor Anthony J. Casey, an expert on United States and New York law, whose evidence confirms that the amendments to the governing law and jurisdiction clauses of the Trust Deed are valid under New York law and would be regarded as effective in any United States court applying that law.
The Company entered into a Supplemental Trust Deed on 14 September 2020 and thereby became a co-issuer of the Existing SSNs under the Trust Deed.
Additionally, the Company acceded as a guarantor of the Group's RCF on 14 September 2020. As a consequence of becoming a co-issuer of the Existing SSNs and a...
To continue reading
Request your trial
-
: Haya Holco 2 Plc
...1917 (Ch) at [22] per Norris J; Re ColourOz Investment 2 LLC [2020] BCC 926 at [46]–[48] per Snowden J; Re Selecta Finance UK Ltd [2020] EWHC 2689 (Ch) at [37]–[41] per Adam Johnson 46 . In Re NN2 Newco Ltd [2019] EWHC 1917 (Ch) at [22], Norris J identified three relevant factors in decid......
-
: Vue International Bidco Plc
...Re NN2 Newco Limited [2019] EWHC 1917 (Ch), Re ColourOz Investment 2 LLC [2020] BCC 926 (“ ColourOz”) and Re Selecta Finance UK Limited [2020] EWHC 2689. From these authorities it is clear that the question is fact sensitive (as is also clear from the Practice Statement at paragraph 8) and......