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of Arrangement
In Re VEON Holdings BV (“VHB”)4 , the Court sanctioned a scheme of arrangement which would enable VHB to extend the maturity dates of a series of notes by 8 months to allow completion of a management buyout of a Russian subsidiary. VHB was an intermediate holding company acting as the treasury company in a group. VHB had raised finance through a series of notes, of which 60% in value were held through the national settlement deposit (NSD) of the Russian Federation.
Unsurprisingly, the NSD was sanctioned in its entirety, including its clearing systems, which meant that, on maturity of the notes, VHB risked being unable to access 60% of the unpaid cash. In addition, VimpleCom (a Russian subsidiary company within VHB’s group) was subject to a Presential Decree in Russia requiring VimpleCom to fulfil obligations owed to Russian bond holders. This risked double payment, as it was not clear whether this would discharge the payment obligations or be recognised by the NSD clearing systems. Further, as a result of the sanctions on VimpleCom, VHB was not able to raise further finance on the international capital markets.
VHB therefore agreed to a management buyout of VimpleCom’s entire share capital. The buyout, along with the scheme of arrangement to extend the notes’ maturity dates, would remove the risk of double payment and reopen international capital markets. Thus, this is an example of a case where insolvency was not a factor, but where the Court recognised that a scheme of arrangement was required to deal with the difficulties caused by sanctions.
Conclusion
Ultimately, the High Court views favourably restructuring and insolvency proposals which are proportionate and reasonable in the circumstances. Applicants are praised if they apply with a considered, well thought-out, and organised plan of action for dealing with companies which face unprecedented difficulties as a result of sanctions.
If you are unclear about how the Regulations impact your business, and would benefit from advice on insolvency and restructuring generally, please contact John Harvey by email on john.harvey@laytons.com
[4] [2023] 1 WLUK 336 (Ch)
John Harvey Partner
john.harvey@laytons.com
+44 (0)20 7842 8000
Rachel Weir
Solicitor rachel.weir@laytons.com
+44 (0)20 7842 8000
