The High Court sanctioned a restructuring scheme for Ballantyne Re plc, rejecting objections from ESM Fund I LP, which held $5 million in the company’s class A 3d notes. The ex tempore judgment was delivered by Mr Justice David Barniville on 6 June 2019, after a hearing the previous day.
The company sought approval under section 453(2) of the Companies Act 2014 for a compromise with two classes of noteholders. The scheme was approved by 98.12% in value of Ambac-guaranteed creditors who voted and by all voting Assured Guaranty/A1 creditors. ESM voted against it. The court said those majorities were significant but did not determine whether sanction should be granted.
The company had suffered significant investment losses and was insolvent, with no prospect of full recovery for noteholders if the notes ran to their 2036 maturity, the judgment said. The scheme provides for restructuring its reinsurance obligations and debt, with class A noteholders receiving a dividend of about 51.1% of par. Ambac-guaranteed noteholders would also receive commutation payments; the Assured Guaranty guarantees would remain in place. If implemented, the company was intended to enter solvent liquidation under Irish law.
ESM’s principal objections were that the scheme circular gave materially deficient information about Ambac’s finances, that the court lacked jurisdiction to approve third-party releases, and that sanction could affect ESM’s complaint against Ambac in New York. ESM also raised issues about New York law and asked the court to defer its decision.
The judge found no material deficiency in the information provided to noteholders. He accepted evidence that Ambac was in a difficult financial position, while noting that it had resources to meet obligations as they fell due and was solvent on a UK GAAP balance-sheet and cash-flow basis. He concluded that Part 9 of the 2014 Act permitted the releases in this scheme, subject to the court’s review of fairness and reasonableness. He also declined to defer the hearing, noting that the New York complaint had been filed on 30 May and that a Chapter 15 recognition hearing was scheduled for 11 June.
The court found that the statutory voting and notice requirements had been met, that there was no improper coercion, and that a reasonable, informed creditor could support the scheme. It rejected ESM’s objections and sanctioned the scheme under section 453(2). The ruling concerned sanction of the Irish scheme; the judgment did not decide the New York complaint or the outcome of the planned US recognition hearing.