Finance Update — March 2014: English scheme of arrangement for New York law governed debt

By Brian Cain

For the first time, an English court has sanctioned a scheme of arrangement under the Companies Act 2006 that related wholly to debt that was subject to a New York governing law provision.

Magyar Telecom, a company incorporated in the Netherlands, had issued €345m (£288m) of notes due in 2016 governed by New York law. The notes also stated that they were subject to the non-exclusive jurisdiction of the courts of the state of New York. There had been a failure to pay interest when due on the notes. As part of a financial restructuring of the group, which included Magyar, the company put forward a scheme of arrangement with the creditors under the notes pursuant to part 26 of the Companies Act 2006. The scheme involved the issue of new notes in exchange for the old ones and the balance of the debt being converted to shares in a new holding company of Magyar. At the creditors meeting held to consider the proposed scheme, it was overwhelmingly approved.

A scheme of arrangement can be sanctioned by the English courts in relation to a foreign incorporated company if it is liable to be wound up under the Insolvency Act 1986 — even if the court would not exercise its discretion to wind it up because of circumstances applicable at the time…

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