Who Needs New York Law When You Can Have An English Scheme Of Arrangement Instead?

DTEK Finance B.V., Re [2015] EWHC 1164 (Ch)

Following upon the November judgment in Re APCOA Parking Holdings GmbH, last week Mrs Justice Rose sanctioned a scheme of arrangement between the Dutch company DTEK Finance B.V. ("DTEK") and holders of notes issued by DTEK in 2010 (the "Notes"). This is notable in that it reinforces the finding in APCOA that a non-English company without substantial connection to England can nevertheless avail itself of an English scheme of arrangement by changing the governing law in its note documents to English law. A copy of the DTEK judgment can be found here.


DTEK is part of a group of energy companies generating and selling electricity to customers in Ukraine and elsewhere. DTEK initially issued the Notes in 2010 under New York law but due to various financial difficulties did not think it would have the resources necessary to repay the Notes when they matured in April 2015. Given the impending maturity date, DTEK put together a proposal for its noteholders whereby DTEK would acquire and cancel the Notes in exchange for giving the noteholders new notes for 80% of the par value with a 2018 maturity date, and a cash payout for the remaining 20% of the Notes (the "Proposal"). Under the terms of the Indenture, the Proposal could be approved without court sanction if 98% of the Noteholders agreed to it.

On 23 March 2015 DTEK launched an exchange offer and consent solicitation requesting consent to the Proposal and also "invited noteholders to agree to certain changes in the terms of the [Notes], including a change of the governing law [from New York] to English law" to enable DTEK to pursue a scheme of arrangement if sufficient agreement to the Proposal was not obtained (the "Consent Solicitation"). DTEK received agreement from 91.1% to the Consent Solicitation, which was not enough to approve the Proposal but was enough to change the governing law to English law thus enabling DTEK to avail itself of an English scheme of arrangement and restructure the Notes as set out in the Proposal notwithstanding its inability to receive the 98% acceptance to the Proposal as required under the Notes documents.

Permission to convene a meeting of noteholders was granted by Nugee J, and the meeting of the noteholders was held on 23 April 2015. The scheme was approved by over 90% of the noteholders at the meeting.

The Sanction Hearing

At the sanction hearing on the scheme, the court focused its analysis on...

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