CR-2025-005763 and CR-2025-005674 - [2025] EWHC 2318 (Ch)

I agree with the MidCo Scheme Company that it is appropriate for all MidCo Scheme Creditors to vote as a single class.

In terms of the “rights in”, all classes of MidCo Scheme Creditor have the same kind of rights and the same priorities in a winding up. They rank pari passu and have a similar security package. Their debt is governed by a common set of contractual terms although the maturity dates and interest rates on the MidCo Scheme Debt do vary.

The differences as to interest rate and maturity, for example, are not, in my judgment, sufficiently different to constitute a separate class. Given the evidence that is before the court on the comparator, in my judgment, all creditors in relation to the MidCo Scheme are voting on the same essential choice: either accept the amendment and extension of their debt, or face an alternative that is likely to involve a liquidation in short order. If they accept the amendment and extension they all obtain the same deal: a harmonised rate of interest payable in kind until 2030, and an extension of their debt to the same date. If they reject the amendment and extension proposed by the MidCo Scheme, given my conclusions for the purposes of today on the comparator transaction, they also obtain the same deal: a right to claim in an insolvency process with no alteration to their respective rankings in that process. I am reassured to note that, in similar context, Zacaroli J reached a similar conclusion at [13] and [14] of Re Lecta Paper Ltd [2019] EWHC 3615 (Ch) case.

Mr Willson, in my judgment, is correct to say that there is more to unite than divide the constituents of the class, given my conclusions as to the comparator.

The presence of a lock-up agreement does not cause me to deviate from that view. Everyone has the same opportunity to participate, and no one is even getting a fee if they do enter into the lock-up agreement.

I have considered the make-whole rights. The PP Notes confer a right to “make-whole payments” (namely a payment of the net present value of future interest) on the occurrence of insolvency triggers that have the effect of accelerating principal due on those notes. The right to those make-whole payments ranks behind other payments due on the MidCo Scheme Debt. The MidCo Facility Agreement confers no right to a make whole payment.

Therefore, ostensibly, the PP Notes confer a right that the MidCo Facility Agreement does not and I have considered carefully whether that puts the PP Notes into a different class. In my judgment, it does not. The make-whole right is subordinated to other payments due on the SWS Scheme Debt. Since the Comparator Report envisages that, in the comparator, only 2.4% of the MidCo Scheme Debt would be repaid, there is no realistic prospect of make-whole payments being paid in that comparator. Since make-whole payments would not be paid in the comparator transaction, they do not constitute a sufficiently meaningful difference in “rights in” to fracture the class. The existence of make-whole payments would be unlikely to feature in any consultation between members of a single class on the MidCo Scheme since the right to make-whole payments is not being varied under the MidCo Scheme.

I note that creditors who sign up to the lock-up agreement are entitled to reimbursement of the fees of professional advisers incurred in connection with that lock-up agreement. In my judgment, this does not fracture the class either. There is no element of bounty or “net benefit” in this arrangement. It simply means that people who enter into the lock-up agreement have costs defrayed. Payment of advisers’ fees is not contingent on approval or sanction of the MidCo Scheme. I respectfully share the conclusion of Zacaroli J in Re Lecta Paper [2019] EWHC 3615 (Ch) to similar effect.

I agree with the MidCo Scheme Company’s proposal that creditors under MidCo Scheme should vote as a single class.