Scheme of arrangement sanctioned

Court held that a scheme proposed by an English company which had the effect of releasing both the English company and its Spanish subsidiary from joint liabilities should be sanctioned.

This case concerned a scheme of arrangement proposed by an English company (EnglishCo). The company was part of a group that included a Spanish subsidiary (SpanishCo) that had issued loan notes.

As a preliminary to the scheme so as to ensure the English court had jurisdiction to sanction a scheme, EnglishCo became a co-issuer of the loan notes with SpanishCo and the governing law was changed from New York to English law. Under the proposed scheme the loan notes would be released both as against EnglishCo and SpanishCo in return for partial cash redemption and equity in the new parent company in the group. At the convening hearing it was noted that a scheme can compromise a creditor's claim against a third party.

At the sanction hearing, Spanish expert evidence was considered which was to the effect that the scheme’s release of SpanishCo was likely to be recognised in Spain even though the Judgment Regulation (1215/2012) and the Hague Convention on Foreign Judgments in Civil and Commercial Matters 1971 did not apply.

The sanction court also held that the modifications proposed by EnglishCo to the scheme post the creditors’ meeting were technical points or "fine tuning" reasonably necessary to implement the recapitalisation to which the creditors had agreed. In the circumstances, the court held therefore that it was appropriate to sanction the scheme.

In re Haya Halco 2 Plc, sanction hearing 9 June 2022, Fancourt J

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