Standard Profil Automotive GmbH, Re

Introduction

1. Today, I oversaw the convening hearing on the claim of Standard Profil Automotive GmbH ( Company ) at which it sought permission to convene a single meeting of creditors ( Scheme Meeting and Scheme Creditors ), that meeting to consider, and if thought fit, to approve a scheme of arrangement ( Scheme ), under Part 26 of the Companies Act 2006 ( Act ).

2. The Company is a holding company incorporated in Germany in 2009. It is part of a wider corporate group ( Group ). I was taken again today, helpfully by Mr Al-Attar, to the Group structure. The Company is directly and wholly owned by a company called Sealing Technologies S.à.r.l. ( Sponsor ). The Company is the Group’s primary financing entity, its principal assets comprising direct and indirect ownership interest in the Group subsidiary companies, which feature in the corporate structure chart I was shown.

3. The claim is supported by the witness statement of Mr Ulrich Kranz, director and CFO of the Company, who explains the rationale for, and substance of, the proposed Scheme. I have read that, together with the witness statement of Mr Vivek Mudholkar, who explains the steps taken to ensure the availability of information to the proposed Scheme Creditors. In addition, I have read the Practice Statement Letter from 8 July 2025 and the draft Explanatory Statement.

4. In his evidence, Mr Kranz explains that the Group is a leading supplier of automotive sealing solutions. It operates ten production sites and ten sales and R&D offices across 11 countries, with, I understand, approximately 7,000 employees. Background

5. The Company's primary financial indebtedness comprises (i) € 270m 275m of senior notes with a 6.25% coupon ( Existing Senior Notes ) due on 30 April 2026, issued under the original indenture dated 10 May 2021 (ii) a €30m loan ( Term Loan ) due on 30 September 2025 (with an option to extend up to 30 November 2025) and (iii) a bridge loan facility for nearly €43.5m ( Bridge Loan ) due on 30 September 2025 (with an option to extend to the same date). Those three debt elements together are known as the Senior Secured Debt . Finally, there is also a €15m shareholder loan due on 30 April 2027 ( Existing Shareholder Loan ).

6. It is perhaps important to say at the outset that the debt interest the subject of the proposed Scheme is the Existing Senior Notes. The Scheme Creditors are the ultimate beneficial holders of those notes. However, in certain circumstances, including default, they enjoy a right to ‘definitive’ notes which, as I was shown today by reference to the notes documentation, will cause them to become registered holders and, as such, creditors of the Company for Part 26 purposes (see also Re Co-operative Bank Plc [2013] EWHC 4072 (Ch) at [36] to [40]).

7. The Group itself has encountered financial difficulties, as a result of the challenges described by Mr Kranz and experienced by that Group and the automotive industry generally, particularly in the key markets in which the Group functions. In view of these difficulties and the impending maturity of the Senior Secured Debt, the Company proposes to implement a restructuring.

8. Amongst other things, the restructuring will ensure the injection of €145m of funding from the Existing Senior Note holders through the issue of New Super Senior Notes , the use of that funding to include repayment of the Term Loan and the Bridge Loan. It will also involve the reinstatement of €83m of new senior secured notes ( Reinstated Senior Notes ) to Existing Senior Note holders in return for the release of their Existing Senior Notes as well as the transfer of the Sponsor’s interest in the Group to the New Funding Providers and to the Scheme Creditors. The Existing Shareholder Loan will be transferred by the Sponsor to a new holding company ( Topco ) and the Company will be released from its obligations thereunder.

9. The Scheme, as I say, is intended to facilitate the implementation of the restructuring in relation to the Existing Senior Notes. The Scheme Creditors are the Existing Senior Note holders in respect of whom the Company considers it appropriate to convene a single meeting.

10. If the Scheme is not approved by the Scheme Creditors or sanctioned by the Court, the likely outcome is said to be the Company entering an insolvency process in Germany and an accelerated sale of the business as a going concern, likely resulting in lower recoveries for the Scheme Creditors.

11. The Senior Secured Debt is also the subject of an intercreditor agreement dated 10 May 2021 ( ICA ), under which all Senior Secured Debt benefits from the same guarantee and security package consisting of security over the shares in the Company and certain other Group companies, bank accounts in Germany, intercompany receivables and plant and machinery.

12. The Senior Secured Debt ranks pari passu but, under the ICA, the enforcement waterfall would be applied to repayment of the Senior Secured Debt in a certain order of priority, namely (i) the Bridge Loan and the Term Loan and (ii) the Existing Senior Notes. The lenders under the Bridge Loan and the Term Loan have further agreed under a side letter dated 1 May 2025 that, on enforcement, the Bridge Loan facilities would be discharged in priority to the Term Loan.

13. The Existing Shareholder Loan is subordinated to the Senior Secured Debt and is unsecured.

14. In addition, certain Company subsidiaries have in place a number of local credit agreements and factoring lines, bank overdrafts and the like at the subsidiary level. Those operational facilities will not be affected by the Scheme or the restructuring more generally.

15. In light of the Group’s deteriorating financial position from the end of 2021, including on account of COVID, inflationary pressures and automotive industry volatility, and given the original maturity of the Term Loan (since extended) and the impending maturity of the Existing Senior Notes, the Group has explored various turnaround efforts, including in relation to receivables, employee remuneration, the review of CapEx and expanding local financing to reduce the funding requirement from the Company. The Company has also approached external funding providers and considered equity finance options but there was limited market interest.

16. That led, in turn, to the Company entering into discussions with the Sponsor seeking shareholder support, which led to the provision of the Existing Shareholder Loan, which the Company drew down fully in November 2024. On 4 February 2025, the Company and the Sponsor agreed to extend the maturity of the Existing Shareholder Loan to April 2027.

17. The Company also commenced discussions with an ad hoc committee of the Existing Senior Note holders ( AHC ), comprising institutions holding approximately two-thirds of the outstanding amount of the Existing Senior Notes.

18. On 26 March 2025, the Company and the AHC concluded an amendment to the original 2022 €30m revolving credit facility to approve the transfer of the related commitments to certain AHC members and to convert it into the Term Loan, aligning the interest periods to end on 30 April 2025.

19. The Company and the AHC then agreed to implement a transaction involving the amendment and restatement of the Term Loan to (i) extend the maturity of the Term Loan to 30 September 2025, with an option to extend up to 30 November 2025 and (ii) have certain AHC members provide the Bridge Loan, to mature in line with the Term Loan (and a corresponding option to extend), with the Company and AHC continuing to negotiate a more comprehensive restructuring.

20. On 14 April 2025, the Company launched a consent solicitation of the Existing Senior Notes to implement certain amendments to the Existing Senior Notes Indenture , including to allow the debt contemplated by the Bridge Loan to be incurred. This was approved on 25 April 2025 and became effective on 30 April 2025.

21. On 8 July 2025, the AHC and the Sponsor entered into a lock-up agreement ( Lock-Up Agreement ) under which the parties have agreed to support the proposed restructuring.

22. All Senior Creditors (comprising the Existing Senior Note holders, the Term Loan lenders and the Bridge Loan lenders are entitled to accede to the Lock-Up Agreement and were provided with instructions for doing so on 8 July 2025.

23. There is a consent fee under the Lock-Up Agreement of 0.5% of the aggregate principal amount of that Senior Creditor’s holding in the Senior Secured Debt the subject of the Lock-Up Agreement, payable in the form of Reinstated Senior Notes ( Early Bird Lock-Up Fee ), subject to certain conditions.

24. As at 24 July 2025, the Lock-Up Agreement has been entered into or acceded to, by Scheme Creditors holding (before today’s hearing) over 87% (since increased to 89%) of the total amount of the Existing Senior Notes, Term Loan lenders holding 100% of the total amount of the Term Loan and the Bridge Loan lenders also holding 100% of the total amount of the Bridge Loan. The Early Bird Lock-Up Fee remained open to Senior Creditors who acceded to the Lock-Up Agreement by 21 July 2025.

25. On 8 July 2025, the Company also launched a consent solicitation in respect of the Existing Senior Notes as a precursor to the Scheme, the purpose of which was to propose and effect various amendments and/ or waivers, including (i) an amendment of the governing law of the Existing Senior Notes Indenture and the existing ICA to the laws of England and Wales (ii) an amendment to the jurisdiction clause of the Existing Senior Notes Indenture and the existing ICA to the exclusive jurisdiction of the courts of England and Wales (iii) an amendment and waiver of certain provisions under the Existing Senior Notes Indenture, including (a) in connection with the delivery by the Company of its annual reports relating to the year ended 31 December 2024 and (b) on a precautionary basis, certain insolvency and bankruptcy events of default. That further solicitation was approved by the requisite majority of the Existing Senior Note holders on 15 July 2025. The Scheme

26. The primary objectives of the restructuring and the scheme are to (i) inject €145m by way of the New Super Senior Notes to address liquidity requirements in the near to medium term, including in connection with the approaching maturity of the Term Loan and the Bridge Loan (ii) ‘right size’ the Company's balance sheet to a more sustainable level through the release of the Existing Senior Notes and the issue of the Reinstated Senior Notes and the New Super Senior Notes, the transfer of and release of the Existing Shareholder Loan and the repayment of the Bridge Loan and the Term Loan and (iii) establish a viable ‘maturity runway’, with the Reinstated Senior Notes maturing later down the track in June 2030 and the New Super Senior Notes maturing in January 2030 and (iv) mitigate the risk of the Company having to enter into an insolvency process and the Group being the subject of an accelerated sale.

27. More specifically, the restructuring will involve the transfer of the Sponsor’s interest in the Group to the New Funding Providers and the Scheme Creditors, with new top and intermediate holding companies being incorporated under Luxembourg law and the New Funding Providers and Scheme Creditors acquiring Topco’s share capital.

28. The equity will be allocated as to 90% pro rata to the New Funding Providers, 4% to Scheme Creditors pro rata to their share of the total outstanding principal amount under the Existing Senior Notes and 6% pro rata to those New Funding Providers who are what will become the Backstop Providers .

29. The €145m New Funding will be facilitated from the Existing Senior Note holders through the issue by the Company of the New Super Senior Notes and will be applied towards repayment of the Term Loan and the Bridge Loan in full.

30. The New Super Senior Notes will be New York law governed, will mature on 1 January 2030, have a coupon of 8.5%, an upfront fee of 2.5% and an exit fee of 20% and will rank super senior to the Reinstated Senior Notes. They will benefit from the existing security and guarantee package in respect of the Senior Secured Debt, with certain additional security.

31. Each Existing Senior Note holder can, without obligation, participate in the New Funding, those participants to be known as the New Money Providers .

32. On 8 July 2025, the Company and certain members of the AHC also entered into a Backstop Agreement pursuant to which certain AHC members, the Backstop Providers, have committed to participate in and underwrite the New Funding. That Backstop Agreement is exclusively open to participation by Existing Senior Note holders who are members of the AHC. Each Backstop Provider is entitled to a pro rata share of the Backstop Shares .

33. The Company will issue the Reinstated Senior Notes with an outstanding principal amount of €83m to be allocated (i) to Existing Senior Note holders in consideration for the cancellation and release of their Existing Senior Notes (ii) to those eligible to receive the Early Bird Lock-Up Fee and (iii) any remainder to the New Money Providers pro rata in consideration for their participation in the New Funding.

34. The Existing Senior Note holders will receive Reinstated Senior Notes in an amount equal to its pro rata share of €49.5m, with such pro rata share being the proportion of its holding in the Existing Senior Notes, representing an effective compromise of 82%. The Reinstated Senior Notes will be New York law governed and will mature on 30 June 2030 with a 7% coupon and an exit fee of 10%. They will be subordinated to the New Super Senior Notes. Existing Senior Note holders have a coupon of 6.25% and a 10% exit fee. They will benefit from the existing security and guarantee package in respect of the Senior Secured Debt.

35. The Existing Shareholder Loan will be sold and transferred by the Sponsor to Topco, following which, the Existing Shareholder Loan will be terminated and the Company will be released from its obligations. In return for the sale and transfer of the Existing Shareholder Loan, Topco will, amongst other things, issue a new convertible PIK loan instrument to the Sponsor or an entity nominated by the Sponsor. This will be subordinated to the New Super Senior Notes and the Reinstated Senior Notes, and, like the Existing Shareholder Loan, will be unsecured.

36. To implement the restructuring, including the new priority and ranking arrangements as between the New Super Senior Notes, the Reinstated Senior Notes and the PIK instrument, the ICA will be amended and restated in the form of a new intercreditor agreement.

37. The Company does not consider that it will be possible for the restructuring to be implemented by agreement which would require the consent of at least 90% of the Existing Senior Note holders. Scheme Comparator

38. Under the Lock-Up Agreement, the consenting creditors would be obliged to consider an alternative process to implement the restructuring other than through the Scheme. However, it is said that this would be unlikely to be achieved before the Company's liquidity is exhausted on the maturity of the Term Loan and the Bridge Loan.

39. As a result, if the Scheme is not sanctioned, the majority consenting Existing Senior Note holders would likely exercise their termination right, exercisable from 19 September 2025. In any event, the Lock-Up Agreement will terminate automatically on 30 September 2025 unless itself extended by consent, said to be unlikely. The Backstop Agreement will also automatically terminate on termination of the Lock-Up Agreement.

40. The Company’s managing directors are subject to duties under German law, including to file for insolvency without undue delay if the Company is considered to be illiquid or over-indebted. If the Scheme fails, and without an alternative platform to put in place the restructuring, the Company’s managing directors would, it is posited, likely determine that there is no reasonable prospect of securing long term finance to justify continuing to trade on a going concern basis and, therefore, file for insolvency.

41. Given the invaluable role that the Group plays in the automobile manufacturing supply chain, it is also anticipated, however, that car manufacturers in the Group’s customer base would be willing to provide short-term finance to ensure the going concern of the Group's operating subsidiaries. It is considered likely, including by reference to past experience in the market, that sufficient liquidity would be provided to facilitate an accelerated sale of the Group on a going concern basis out of the insolvency of the Company. That scenario is the suggested Comparator for this case.

42. In that regard, the Company has obtained independent expert reports from Ms Gread and Mr Dickens of PwC concerning valuation and the likely outcome for Scheme Creditors. It was fairly explained to me today how the expectations of management may, in some senses, appear to give a different outcome from how the experts look at matters but the experts consider that those expectations have to be viewed from the perspective of the market which would look at other matters, such as the historic performance of the Company and by reference to its peers as well.

43. I was also helpfully taken today to some relevant parts of their analyses and how the valuation fits together with the Comparator. Those analyses show that, in the Comparator, returns to Scheme Creditors would be 0.2% (in the low case), 4.3% (in the mid case) and 14.7% (in the high case), compared with recoveries for non-participating Scheme Creditors under the Scheme of 10 12 % (in the low case), 16.1 17.2 % (in the mid case) and 18 17.7% (in the high case). The enterprise value upon which these calculations are based is derived principally from a market approach that looks to comparable companies and a judgment as to an appropriate EBITDA multiple, supplemented by an income approach based on a discounted cash flow calculation. Based on the figures, a Scheme Creditor who does not participate in the new money or in the consent fee is still said to be better off under the Scheme than in the Comparator. The purpose of the convening hearing

44. Turning now to the purpose of today’s hearing, s.896(1) of the Act provides that: “The court may, on an application under this section, order a meeting of the creditors, or class of creditors, or of the members of the company, or class of members (as the case may be), to be summoned in such manner as the court directs.” The procedure at a convening hearing such as this is governed by the Practice Statement (Companies Schemes of Arrangement under Part 26 and Part 26A of the Companies Act 2006 ).

45. Essentially, at the convening stage, the court is required to consider (i) jurisdiction (ii) any issues not going to the merits or fairness of the scheme, but which might lead the court to refuse to sanction it (iii) class composition and (iv) practical issues, such as the notice and the conduct of the meeting of creditors. The function of the court at this convening stage is not to consider the merits or fairness of the scheme, which will arise for consideration at any future sanction hearing if the scheme is approved by the requisite statutory majority of creditors ( Re Telewest Communications Plc (No. 1) [2004] BCC 342 at [14]).

46. Rather, the issues that are generally suitable for consideration at the convening hearing are the proper class composition of the scheme meetings and other essential issues which, if decided adversely to the scheme company, would mean that the court had no jurisdiction or would unquestionably refuse to sanction the scheme, sometimes referred to as jurisdictional roadblocks. Notice of this convening hearing

47. Turning then to matters falling for consideration today, the Practice Statement envisages notice to scheme creditors of the convening hearing, the appropriate period of notice being a fact sensitive question depending on matters such as the complexity of the scheme, the urgency of the company’s financial position and the sophistication of the creditors ( Re Selecta Finance UK Limited [2021] BCC 168 at [37]-[41]).

48. In this case, the Practice Statement Letter was issued on 8 July 2025. The Company says that 21 days is adequate notice in all the circumstances, not least given the execution of the Lock-Up Agreement on 8 July and the fact that 87% or today, nearer 89%, of the Scheme Creditors, who are sophisticated lenders and note investors, have locked up in support of the Scheme. Mr Mudholkar explains the process of dissemination of the Practice Statement Letter (and related documents) to Scheme Creditors through the Scheme website, with an announcement sent by e-mail to the corporate actions areas within each of the relevant clearing systems, accompanied by an instruction to distribute it directly to the account holders of the Existing Senior Notes. I should also add that the Company has pointed out, both in its skeleton argument and in oral submission today, that a revised Practice Statement Letter was circulated on 18 July 2025, to include certain minor clarifications. However, I agree that they do not affect consideration of the compliance with the notification requirements. In the circumstances I have described, I am satisfied that proper notice of this convening hearing has been provided. Jurisdiction

49. As to the court’s jurisdiction, this is only available if the scheme is a compromise or arrangement between a company and its creditors, or any class of them ( s.895(1) (a) of the Act ). I have already explained how the noteholders here are creditors. In this context, “company” means a company liable to be wound up under the Insolvency Act 1986 ( s.895(2) (b) of the Act ), and a foreign company is liable to be wound up as an unregistered company under Part V of the Insolvency Act 1986 and therefore constitutes a company for the purposes of Part 26 ( Re Drax Holdings Ltd [2004] 1 WLR 1049 at [20] and [28]).

50. The word “arrangement” is to be construed broadly. As was said in Re Lehman Brothers International (Europe) [2019] BCC 115 (at [64]), “all that is really required is a sequence of steps involving some element of give and take, rather than merely surrender or forfeiture.” I am satisfied for present purposes that no issue arises with respect to these threshold jurisdictional requirements. Class composition

51. Turning to the important question for today’s purposes of class composition, the court’s power to sanction a scheme of arrangement arises subject to the correctly convened classes having considered and approved the scheme in the requisite statutory majorities. The Practice Statement explains (at [2]) that the applicant has the responsibility for determining whether more than one meeting of creditors is required in relation to a particular scheme, and if so, to ensure that those meetings are properly constituted. The court will consider whether more than one meeting of creditors is required, and if so, their appropriate composition (Practice Statement at [11]).

52. The basic principle is that a class “must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest” (see, for example, Re Hawk Insurance Company Limited [2001] 2 BCLC 480 at [30]-[33]). In this context, the analysis is “ .. (i) of the rights which are to be released or varied under the scheme and (ii) of the new rights (if any) which the scheme gives, by way of compromise or arrangement, to those whose rights are to be released or varied” (Hawk at [30]). For these purposes, it is the legal rights of creditors, not their separate commercial or other interests, which will determine whether they form a separate class or a single class. In this case, the Company says that the rights of the Scheme Creditors are not so dissimilar as to make it impossible for them to consult together with a view to a common interest and they may therefore consult together and it proposes a single Scheme Meeting to consider and, as appropriate, approve the Scheme.

53. As to the Scheme Creditors existing rights , they are the holders of Existing Senior Notes, with identical pari passu ranking rights, pursuant to the indenture and the existing ICA. Although certain of the Scheme Creditors have holdings in the Term Loan and the Bridge Loan, it is said to be well established that cross-holdings are not relevant to, and should not be considered for the purposes of, class composition as they relate to interests as opposed to rights (see, for example, Re Primacom Holdings GmbH [2013] BCC 201 at [44] to [49]).

54. As to the rights under the proposed Scheme , all creditors will:- (i) have their existing claims under the Existing Senior Notes compromised and receive a ratable share of Reinstated Senior Notes proportionate to their relative holdings of the Existing Senior Notes; and (ii) be entitled to elect to participate in the New Funding and, in doing so, receive Equity Shares, Reinstated Senior Notes and New Super Senior Notes in ratable proportions by reference to their holdings of the Existing Senior Notes and New Super Senior Notes.

55. Any fees which are payable in connection with the Reinstated Senior Notes and the New Super Senior Notes (the upfront fee and the exit fees) are payable to all holders of the Reinstated Senior Notes and the New Super Senior Notes (as applicable) and thus are available to all Scheme Creditors.

56. The Company fairly identifies certain other elements which are appropriately considered in the context of class composition, albeit it says for the reasons I will turn to that these do not fracture the single class of Scheme Creditors in this case.

57. As to the Lock-Up Agreement , entry into such an arrangement does not in itself fracture the single class ( Re Telewest Communications Plc (No.1) [2005] 1 BCLC 752 at [53]) since the Scheme will impact the rights of Scheme Creditors in the same way, regardless of whether they are a party to the Lock-Up Agreement. Moreover, if a consent fee is paid under a lock-up agreement, “the simple fact that a benefit has been conferred in return for an agreement to vote in favour” is not sufficient to require the relevant creditors to be put into a separate class ( Re Seat Pagine Gialli SpA [2012] EWHC 3686 (Ch) at [22]). Relevant considerations in this regard will be (i) whether the offer to enter the Lock-Up Agreement has been extended to all scheme/ plan creditors (ii) the size of the payment and (iii) whether the payment is likely to have impacted on the way creditors vote. In this case, the Company says that the Scheme Creditors were given an equal chance (all with sufficient notice) to sign up to the Lock-Up Agreement, and, if they did so by the deadline, to become entitled to receive the Early Bird Lock-Up Fee. It is also said that the quantum of the Early Bird Lock-Up Fee (0.5%) is not material when compared to the difference in the expected recoveries between the restructuring and in the Comparator, and is unlikely to cause Scheme Creditors in receipt of the Early Bird Lock-Up Fee to assess the Scheme differently. I accept that the Lock-Up Agreement and the Early Bird Lock-Up Fee do not have a fracturing effect.

58. Participation in the Backstop Agreement , and therefore entitlement to receive the Backstop Shares, is limited to members of the AHC. However, the Company says that this does not fracture the proposed single creditor class either, the purpose of the Backstop Agreement being to guarantee the full availability of the New Funding, essential for the implementation of the restructuring, the Backstop Shares said to reflect compensation for provision by the members of the AHC of a commercial service in circumstances in which external funding was not available to the Company and there being an urgent need to have a backstop arrangement in place to ensure the implementation of the restructuring.

59. In this case, the financial advisers to the AHC, Houlihan Lokey (Europe) GmbH, have analysed the value of the Backstop Shares, concluding that this depends upon the Company’s equity value. Adopting the higher end of the valuation contained in the Comparator report, the value of the Backstop Shares is 1% of the Backstop Provider’s backstop commitment. That value is said to be less than a third of both the mean and median fees commonly paid under comparator schemes, other precedents between 2019 and 2024 being listed in their analysis to which I was again taken helpfully today in submission.

60. The Company says that there are many cases in which the court has held that backstop fees do not fracture the class and there are none where such a fee has fractured the class (see, for example, Re Pizza Express Financing 2 Ltd [2020] EWHC 2873 (Ch) at [42]). Provided that a backstop fee is set at a normal market rate, the class will not be fractured, the fee not being a bounty or collateral benefit that might create a material difference in rights. I accept that the Backstop Shares in this case are properly regarded as appropriate compensation for the agreed underwriting service of those in receipt of them and that it, too, is not of fracturing effect.

61. In terms of the other matters potentially relevant to class composition, the Company has agreed to provide a work fee to certain AHC members in the total amount of 1.5% of the aggregate Existing Senior Notes held by the relevant AHC, allocated on a non-prorated basis as at the date of the Lock-Up Agreement. The work fee will be paid in cash on 7 October 2025 (or later date to be agreed). In Re Haya Holdco 2 Plc [2022] EWHC 1079 (Ch) , Marcus Smith J summarised the authorities concerning such fees and their potential fracturing effect (at [72(6)]. He explained there that “[w] ork fees are not uncommon in schemes of arrangement, and in previous cases, they have not caused the class to fracture.” Having noted the cases concerned, he went on to explain in the context of the case before him that:- “ I do not consider this case to be any different, and find that the Work Fee does not fracture the class. There are two key points in this regard. First, the Work Fee is very small in comparison to the benefits of the Scheme, and far smaller than the work fees charged in other cases. Second, the Work Fee is paid in consideration of the work carried out by the Ad Hoc Group, which requires significant time to be spent by senior management at the relevant creditor entities, and in consideration of their inability to trade the Existing SSNs during the period when the Scheme was being negotiated. The Work Fee is not a form of bounty or disguised consideration, but is simply a fee for a commercial service that benefited all Scheme Creditors by enabling the Scheme to be negotiated and implemented .”

62. The Company says, consistent with that reasoning, that although the work fee in this case is not available to all Scheme Creditors, it does not represent a class issue here either, the fee being genuine consideration for the time, effort and expense that the relevant AHC member incurred in negotiating the Scheme and for having been subject to restrictions on its trading of the Existing Senior Notes during this period of time. Moreover, the fee is not conditional on the restructuring or the Scheme becoming effective. The restructuring, resulting from the participation by the AHC in negotiations with the Company and its stakeholders, is a benefit to, and in the best interests of, the Group’s creditors as a whole. Finally, it is said that the quantum of the work fee is de minimis when viewed against the difference between the likely recoveries of the Scheme Creditors in the Comparator and under the Scheme. Having considered the arrangements for the work fee in this case, I am satisfied that it is not of fracturing effect here either.

63. The Company also points out that it is responsible for the payment of all reasonable fees, costs and expenses of the advisers to the AHC . By analogy with Re Lecta Paper UK Ltd [2019] EWHC 3615 (Ch) (at [18]), and Re Selecta Finance UK Ltd [2021] BCC 168 (at [64]), I accept that these arrangements do not fracture the class, not conferring a bounty or net benefit on the relevant creditor, rather than defraying costs and expenses that the creditor has actually incurred as a result of the restructuring transaction that it would not otherwise have incurred without the Scheme and the restructuring.

64. Finally, in terms of potentially relevant class composition matters, the Company points out the shareholders’ agreement will be which will be entered into, and how this gives certain board and governance rights to majority shareholders according to the value held. According to the Company, none of those rights is of the nature of a substantial controlling right rather than reflecting usual governance rights. Moreover, their allocation is equal to all equity holders and the exercise is dependent upon holding or acquisition of defined threshold shareholdings, with no allocation of rights based upon particular shareholder or creditor identity. Following cases such as Re New Look Financing Plc [2021] 2 BCLC 776 (at [40]) and Re Nostrum Oil & Gas Plc [2022] EWHC 1646 (Ch) (at [37]), and considering the relevant shareholder rights in this case, I accept that the rights conferred by the shareholders’ agreement would not be of fracturing effect either.

65. As such, I also accept that it is appropriate for a single Scheme Meeting of the Scheme Creditors to be convened for the purpose of considering, and if those Scheme Creditors think fit, approving the Scheme. The Scheme Meeting, documentation and timing

66. As to the Scheme Meeting itself and related arrangements and documentation, the proposed timetable envisages the Scheme Meeting being held in hybrid form on 1 September 2025, with any sanction hearing shortly thereafter on 9 September. I will consider with Mr Al-Attar shortly the proposed arrangements for that.

67. As to the Explanatory Statement, as Mr Al-Attar said, it is not the court’s role today to approve the drafting but rather it should consider the statement and may decline to convene the scheme meeting if it detects, or attention is drawn to, manifest deficiencies in the document. Having considered the statement, I have not discerned any such deficiencies here. The statement is proposed to be transmitted to Scheme Creditors by essentially the same means as the Practice Statement Letter. I will discuss that shortly, but I am satisfied, again, that this is the appropriate course. Roadblocks

68. As to potential roadblocks to sanction, I will mention at the outset that I was informed that no objections have been received to today’s proceedings.

69. Moreover, the Company says that there are no issues which, if decided adversely to it, would require the court to decline sanction of the Scheme. In this case, the Company says in its skeleton that there is no conditionality affecting the scheme that might, depending on the nature of the condition concerned, be an impediment to sanction.

70. As to the question of a sufficient connection with England, it is said that there clearly is such a connection as a result of the Existing Senior Notes and existing ICA now being governed by English law and providing for the exclusive jurisdiction of the courts of this jurisdiction. The Company has obtained an opinion from an independent expert in New York law confirming the validity and enforceability of the change of governing law and the jurisdiction clause. The Company says that the deliberate change of governing law and jurisdiction in this case was appropriate to achieve the best outcome for creditors and such actions are consistent with the approach indicated in Re Light SA [2024] EWHC 2733 (Ch) (and the authorities cited there).

71. The question of international effectiveness will also fall to be considered at the sanction stage, as to which, the question for the court will be whether there is a reasonable prospect that the scheme will be recognised internationally ( DTEK Energy BV [2022] 1 BCLC 260 and the well known principles cited (at [27]). The issue is also sometimes expressed in another way, as the court needing to be satisfied that it would not act in vain by sanctioning the scheme before it.

72. In the present case, the Company has instructed Professor Dr Christoph Thole to prepare a report on the prospect of the recognition of the Scheme in Germany. It was also pointed out that other cases have held that a UK scheme of arrangement in respect of English law debt is likely to be recognised and given effect to in Germany, even within the post-Brexit regime (see for example, Re Safari Holdings Verwaltungs GmbH [2022] EWHC 1156 (Ch) at [10]). It was also explained how Professor Thole concludes in this case that there would indeed be such recognition in Germany. There is certainly no basis for this court at this stage to consider that it would be acting in vain were it to go on to sanction the Scheme. I discern no roadblock for the purpose of today's convening hearing. Conclusion/ disposal

73. I will therefore grant the Convening order subject to discussion now with Mr Al-Attar as to the form of order and the various practical arrangements going forward. Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof. Lower Ground, 18-22 Furnival Street, London EC4A 1JS Tel No: 020 7404 1400 Email: [email protected]