Non attending creditor crammed down

Chaptre Finance was incorporated for the purpose of financing the construction of a biomass power plant.

Due to delays and alleged defects in the construction of the plant, it was likely that Chaptre Finance would run out of money before the plant could become operational. Once operational, the plant would generate significant cashflow through long-term contracts selling energy at guaranteed prices backed by the UK Government.

In order to avoid insolvency proceedings, Chaptre Finance proposed a restructuring plan under part 26A of the Companies Act 2006. The creditors included several banks as well as a US-based supplier of wood pellets for use as fuel for the plant.

The meeting of finance creditors and hedging banks approved the plan by the relevant statutory majorities but the pellet supplier did not attend its meeting or vote and so was considered a dissenting creditor.

Nevertheless, the court sanctioned the restructuring plan under s. 901G of the Companies Act. The court considered the position of the pellet supplier under the restructuring plan as well as under the relevant alternative which here was formal insolvency proceedings. Under the restructuring plan Chaptre would continue as a going concern and the pellet supplier would be paid in full, whereas in insolvency the financial creditors would receive up to 30% of their debts but the pellet supplier would receive nothing.

Therefore, the court was satisfied that the pellet supplier would be better off under the restructuring plan compared to the relevant alternative. The court also considered that the pellet supplier had not directly opposed the plan, but rather had been inactive regarding it, and so found it appropriate to sanction the plan and apply the cross-class cram down.

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