Vending Giant Wins OK To Take Restructuring To Creditors

By Bonnie Eslinger
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Law360, London (October 14, 2020, 3:04 PM BST) -- A judge gave a coffee and vending machine supplier the green light on Wednesday to ask its creditors to vote on a restructuring plan for €125 million ($146.7 million) in new capital as it struggles to meet its financial obligations during the pandemic.

The High Court ruling follows an oral approval the judge granted the coffee and vending machine supplier earlier this month. (iStock)

Judge Adam Johnson's ruling follows an oral approval he granted Selecta at the High Court on Oct. 2, saying he accepts that a vote on the proposal "has a degree of urgency."

"That is not so in the sense that there is any form of immediate financial distress, but on the evidence I am satisfied that the [Selecta] group has obvious liquidity difficulties," the judge said.

The urgency is reflected in the fact that Selecta said it did not feel it could make an interest payment due to the creditors holding senior secured notes that have an aggregate principal of €1.2 billion plus 250 million Swiss franc ($274 million), the court noted.

Selecta told the court that if its proposed "scheme of arrangement" is not approved, the failure to pay the October coupon will trigger an "event of default" at the end of the month. That would entitle the creditors to seek full payment under the notes and other enforcement action against Selecta.

The court was provided with a witness statement at the Oct. 2 hearing by Selecta director Andreas Schneiter. He said that such steps would result in key entities in Selecta's group of companies having to enter into formal insolvency proceedings.

Even some form of forbearance arrangement would very probably involve Selecta being required to sell some of its assets and business on an accelerated basis, Schneiter said.

The alternative plan, which Selecta put before the court and will formally present to creditors, exchanges the three series of outstanding notes for new notes that will have a change of interest rate and be due in 2026 rather than their current 2024 maturity date.

"I accept the proposition that it is desirable to seek to bring matters to a head vis-à-vis the scheme before that end-date," the judge said in his Wednesday ruling.

Selecta told the court that it is the leading provider of self-service coffee and convenience food in Europe. It is beneficially owned by investment funds managed by KKR, described as an alternative asset management company.

Agreeing to a single meeting of creditors, the judge considered several points of concern. A "lock-up" fee equal to 0.25% of the existing senior secure notes would be paid to note holders who agreed before Sept. 21 to amending the terms of their notes.

"For one thing, the entitlement to enter into the lock-up agreement, and therefore to claim the lock-up fee, was made available to all scheme creditors," the judge states, adding that approximately 81% of them gave their early go-ahead to the deal.

The judge said he also did not think the 0.25% fee would exert a material difference in the creditors' voting decisions.

The judge said an agreement Selecta made with some creditors early in the process of creating the recapitalization proposal gave him some  reservations. But he determined that the arrangement was not enough to fracture the interests of a single class of creditors for the purposes of voting on the plan.

That arrangement, made with creditors holding about 45% of the notes, covers the costs of any advisers' fees racked up in helping shape the deal.

The judge said he found it difficult to see that the arrangements conferred any "bounty" or net benefit on the members of the ad-hoc group of noteholders, since they are not receiving any payment under the fee arrangements.

In addition to the €125 million new capital from its shareholders, the debt restructuring also involves a €50 million "liquidity facility" provided in March 2020.

Selecta is represented by Daniel Bayfield QC and Ryan Perkins of South Square, instructed by Kirkland & Ellis International LLP.

The case is In The Matter Of Selecta Finance UK Ltd. And In The Matter Of The Companies Act 2006, case number CR-2020-003850, In The High Court Of Justice of England and Wales, Business And Property Court, Insolvency And Companies List (Chancery Division).

--Editing by Ed Harris.

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