Restructuring plans sanctioned in respect of Atento group companies (Re Atento UK Ltd)

Dispute Resolution analysis: In November 2023, Mr Justice Miles sanctioned restructuring plans under section 901F of the Companies Act 2006 in respect of two companies within the Atento group. The plans had significant creditor support, did not involve any cross-claim cram down and achieved a demonstrably better outcome for creditors than the alternative, a group-wide liquidation.

Re Atento UK Ltd [2023] EWHC 3076 (Ch))

What are the practical implications of this case?

This is one of the relatively small number of reported judgments in which Courts have considered applications to sanction Part 26A restructuring plans under section 901F of the Companies Act 2006. It should be noted that judgment in this case was handed down prior to the decision of the Court of Appeal in the Adler case [2024] EWCA Civ 24 and does not refer to it. Nevertheless, it confirms that in the case of restructuring plans which do not involve cross-class cram downs and attract significant majority across the creditor classes, the Court will give significant weight to the views of those creditors and will be sympathetic to the prospect of sanctioning them. The judgment also offers a useful summary guidance on the correct approach, drawing from the law on schemes in Part 26, to restructuring plans which involve an international dimension.

What was the background?

Two companies with the Atento group, referred to in the judgment as Atento UK and the Issuer (and collectively as the Plan Companies) applied for an order sanctioning two proposed restructuring plans under section 901F of the Companies Act 2006. The plans were part of a wider restructuring and involved the injection of US$58 million from creditors of the Plan Companies falling into 4 groups and a further US$18 from an affiliate of one of those creditors. The debts owed to each of the 4 groups of creditors, categorised as Class A, B, C and D were to be affected by the plans. The directors of the Plan Companies concluded that the proposed restructuring and plans were in the best interests of the creditors of the Plan Companies’ creditors and the Atento group as a whole. They determined that the alternative would be a group-wide liquidation and that each of the classes of creditors would be better off (or at least no worse off) than in the event of this group-wide liquidation. At a convening hearing, Mr Justice Miles made a number of findings as to the positive consequences of the plans for the creditors and the group and ordered meetings to take place of the various creditor classes. Each of those classes overwhelmingly supported the plans. At the sanctioning hearing, a group of creditors appeared to support the plans and no creditors appeared to oppose them.

What did the court decide?

The restructuring plans were sanctioned. The Court noted that a sanction hearing where the requisite majorities have approved the plan at each of the meetings such that no issue of cross-class cram down the court follows the approach to the exercise of a discretion which applies in Part 26 schemes. The relevant questions at the sanction stage are: (a) whether there has been compliance with the statutory requirements; (b) whether the class or classes were fairly represented and the majority acted in a bona fide manner; (c) whether the plan is one which a plan creditor acting in respect of its own interests could reasonably approve and; (d) whether there is some blot or defect in the plan. Due to the cross-border aspect of these companies and creditors, the Court had also to consider whether there is a sufficient connection with the jurisdiction and whether the plans will have had a substantial effect. In relation to the second issue, the Court noted that in respect of the Class D creditors, the consent fee was relatively high in comparison to the value of the plan consideration for those creditors. Nevertheless, overall the Court was satisfied that the majority acted in a bona fide manner. In relation to the third issue, the Court noted that the creditors were all well-advised and were the best judges of whether the plans were in their interests. The Court, accordingly, gave considerable weight to the views expressed in the respective meetings. In relation to both schemes and restructuring plans with an international dimension, following the decision of Snowden J in Re ColourOz Investment 2 LLC [2020] EWHC 2464 (Ch), the Court must consider two questions: (a) does the company have a sufficient connection with England to justify the court exercising its jurisdiction; and (b) will the scheme or plan have, or is it likely to have, substantial effect in other jurisdictions in which those of the group companies which are liable for the debt which is the subject of the scheme or plan are incorporated or have operations and substantial assets, such that the court will not be acting in vain in sanctioning the scheme or plan. As to sufficiency of connection, this applied only to the Issuer. In relation to the effect in other jurisdictions, the Court noted that the plan liabilities are governed by English law and the plans were likely (based on expert evidence) to be given effect in the other affected jurisdictions.

Case details

• Court: Business and Property Courts, Insolvency and Companies List (ChD)
• Judge: Mr Justice Miles
• Date of judgment: 17 November 2023

Article by Phillip Patterson – first published by LexisNexis