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Law360, London (February 17, 2021, 6:37 PM GMT) -- A London judge granted Gategroup permission to take its restructuring plan to creditors for approval on Wednesday, after the airline catering company said it needed to amend its debt after planes were largely grounded during the COVID-19 pandemic.
High Court Judge Antony Zacaroli said that the dramatic reduction in flights and passengers over the past 12 months precipitated a massive decline in Gategroup Holding AG's business, as he set out his reasons for okaying the deal.
The judge said he was satisfied on Feb. 11 that Gategroup Guarantee Ltd. should hold two separate meetings of bondholders and senior lenders to vote on the plan. If they approve, the plan will then be reviewed at a sanctions hearing.
The restructuring is part of a wider refinancing that the group, the world's largest provider of airline catering services, has drawn up to address "serious financial difficulties" made worse by continuing restrictions on international travel, Judge Zacaroli said. The group will run out of cash in April or May without further funding, the judge added.
The High Court decision comes after Gategroup put forward a proposal in December to extend the maturity on CHF350 million ($380 million) bonds due to expire in 2022 and its 2015 senior credit facilities agreement.
The plan is to extend the bonds by five years to 2027 and to ask bondholders to waive their current "change of control" provision even as shareholder Temasek Holdings Pte Ltd. will be acquiring more than 50% of Gategroup's shares. The change of control clause normally means bond holders can reevaluate their original investment if there is a significant change in ownership.
Lenders to the senior facilities agreement have been asked to extend the maturity by five years to 2026, while also making other technical amendments. Interest rates on the bonds and loans will be unchanged, although certain margin step-up provisions will no longer apply, and under the agreement, the borrower may elect to capitalize all or part of the interest.
There had been a question of whether the plan could be approved because there is a Swiss jurisdiction clause on the bonds. The court was asked to decide whether the Lugano Convention — a treaty that determines which national courts have jurisdiction — applies.
Judge Zacaroli said he was satisfied that the refinancing plan is to be treated as an insolvency procedure, thereby triggering a bankruptcy exemption clause in the convention.
The judge added that he had been provided with "extensive evidence" that if the refinancing plan was not approved, then the alternative would be insolvency. Creditors have much more of a chance of recovering their investments through the recovery plan, he said.
Gategroup is represented by Felicity Toube QC and Riz Mokal of South Square, instructed by Clifford Chance LLP.
The case is in the matter of Gategroup Guarantee Ltd, case number CR-2020-004615 in the Insolvency and Companies List, Chancery Division of the High Court of Justice of England and Wales.
--Editing by Joe Millis.
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