Jurisdiction(s):
United Kingdom

Re Codere Finance 2: English High Court guidance on scheme class composition, lock-up/work fees, advisers' fees, and interim notes/backstops, considering rights differences against liquidation

Published on: 01 October 2020

Published by a LexisNexis Restructuring & Insolvency expert

Legal News

Article summary

Falk J held that the interim notes—together with any associated discounts and backstop fees—and the advisers’ fees did not bear on class composition. Although the judge regarded the work fee as relevant to class formulation, and even if the interim notes were also pertinent, the scheme creditors could still be consulted in a single class because their rights were not materially distinct, especially given that the most likely alternative to the scheme was the Codere group’s liquidation. Re Codere Finance 2 (UK) Ltd [2020] EWHC 2441 (Ch)

What are the practical implications of this case?

The decision offers clear guidance for practitioners assisting companies proposing schemes of arrangement on the correct approach to defining creditor classes for voting. Matters practitioners should keep in mind when advising an applicant scheme company include:

the creditors’ existing rights and the effect the scheme terms would have on those rights, determined through a careful analysis and application of class composition principles drawn from authorities such as Sovereign Life Assurance v Dodd [1892] 2 QB 573 and Re Hawk Insurance Company [2001] All ER (D) 289 (Feb), [2001] EWCA Civ 241...

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