New Judgment – Re Logan Group Company Limited [2026] CIGC (FSD) 65 (sanction hearing)

On 4 August 2026 the Grand Court of the Cayman Islands (Doyle J) sanctioned a scheme of arrangement under section 86 of the Companies Act (2026 Revision) proposed by Logan Group Company Limited, with reasons to follow. The reasons have now been handed down. The Cayman scheme is inter-conditional with a parallel Hong Kong scheme, which was sanctioned by Linda Chan J on 10 August 2026.

The Company is the Cayman-incorporated, Hong Kong-listed parent of a PRC property development group. The scheme compromises approximately US$11.9 billion of notes, loans and guarantee claims in exchange for a choice of five options: cash at 15% of entitlement (capped at US$813 million), asset-backed instruments of two kinds and mandatory convertible bonds. Each creditor’s ‘Distribution Entitlement Amount’ is the principal amount of its claim less the assessed value of any third-party security over assets of non-obligor group companies (the ‘Excluded Collateral’), which creditors remain free to enforce. Accrued interest is disregarded for distribution save that 30% of ordinary interest to 31 December 2024 is counted under two options. Default interest is disregarded throughout. Voting entitlements were calculated on the full claim including interest and without deduction for Excluded Collateral. Existing shareholders retain at least 42% of the equity.

The convening judgment ([2026] CIGC (FSD) 47) is noted separately. Following the Hong Kong convening hearing before Linda Chan J on 26 June 2026, at which the judge raised questions about the treatment of accrued interest, the ad hoc group’s work fee and the longstop date, the Company amended the explanatory statement before circulation on 2 July 2026 and issued a supplemental explanatory statement on 17 July 2026 increasing the Option 1 cap and recording a negotiated reduction in the work fee. The scheme meeting was held on 24 July 2026 as a single combined meeting for both schemes. Of 928 creditors voting, 916 (98.7% by number, 89.3% by value) voted in favour, on a turnout of over two-thirds by value. No creditor appeared to oppose sanction.

The judgment

Doyle J framed the enquiry as eight ‘hurdles’: compliance with the convening order; the statutory majority; fair and adequate representation; bona fides of the majority; permissible purpose and the limited rationality test; absence of blots or defects; the court not acting in vain; and residual discretion. He reviewed at length three recent Hong Kong sanction judgments, Re CIFI Holdings (Group) Co Ltd [2025] HKCFI 3250 (Harris J), Re Fantasia Holdings Group Co Ltd [2026] HKCFI 3449 (Linda Chan J) and Re Powerlong Real Estate Holdings Ltd [2026] HKCFI 3836 (Segal J), alongside the English and Cayman authorities, and adopted Snowden LJ’s observation in Re AGPS Bondco plc [2024] Bus LR 745 at [123] that the greater the majority, the greater the court’s confidence that the scheme is in the interests of the class. Each hurdle was cleared. Points of wider interest:

• Accrued and default interest. The Court adhered to its convening decision that the treatment of interest did not fracture the class. All creditors were treated in the same way; differences in interest-to-claim ratios were differences in commercial outcome, not rights. It would be wrong to constitute a separate class of creditors entitled to default interest, which would be class proliferation of the kind the authorities caution against. The scheme had been strongly supported across the range of interest-to-claim ratios. Comfort was drawn from Powerlong at [50e] and [62]–[70]. Applying Re Global Garden Products Italy SpA [2017] BCC 637 at [43], there was no reason to revisit the convening findings absent any creditor contending otherwise.
• Work fee. The fee payable to the ad hoc group did not fracture the class. Even had the group voted separately, the scheme would have been approved by both classes. In response to the Hong Kong court’s concern, all but one member of the group had agreed to reduce the remaining fee payable on the restructuring effective date from 1.0% to 0.4%, disclosed in the supplemental explanatory statement.
• Longstop date. Raised orally at the Court’s request. The longstop of 31 March 2027 had been revised before circulation to remove an automatic extension to 30 June 2027 and to require any extension to be approved by 75% in value of scheme creditors or by the Court. On the evidence the restructuring conditions, including NDRC approval and shareholder approval of the convertible bond issue, could be satisfied in time.
• Representation and fairness. Turnout was relatively high, the creditors were sophisticated and properly consulted, and the scheme was supported by creditors with a broad range of interests. The Court held the scheme ‘plainly objectively beneficial’ on the comparator evidence (liquidation recoveries of 2.95%–4.04% from the Company against scheme recoveries of 11.4% to 42% by option), citing E-House at [113], and found no evidence to the contrary.
• Third-party releases. The scheme releases the co-obligors, the shareholders of co-obligors, the issuer of two series of private participation notes on-lent to the group (Shannon Assets DAC), and the Company’s directors and advisers. Applying Re Thames Water Utilities Holdings Ltd [2025] Bus LR 2108 at [239]–[240], releases are permitted where necessary to give effect to the arrangement, the ricochet claim being the paradigm but not the only justification. Because some co-obligors are principal debtors with the Company as guarantor, the Company had executed a deed conferring rights of contribution on them, creating the ricochet exposure. The Court described this as ‘rather artificial and somewhat contrived’ but, following Re SWS Holdings Ltd [2026] BCC 132 and Re Gategroup Guarantee Ltd [2021] BCC 549 at [170]–[174] and [2021] BCC 722 at [15], held it was not a blot. A deed poll by which the Company assumed the Shannon liabilities, executed at the request of the noteholders, was commercially justified. The director and adviser releases were justified by the indemnity in the Company’s articles and the absence in Cayman of any equivalent to section 232 of the Companies Act 2006, distinguishing Thames Water.
• Objecting creditors. Luso International Bank, whose disputed claim (c. 0.1% of scheme debt) is the subject of proceedings in Macau, had written but not appeared. Its entitlements are held on trust pending the Macau outcome, and voting or electing involved no concession of creditor status. China CITIC Bank International, which had raised class concerns before convening, voted in favour.
• International effectiveness. The Court was satisfied, as at convening, that it would not be acting in vain. The scheme would achieve its purpose subject to sanction in Hong Kong.

The Court concluded that where financially astute creditors with adequate information in a properly constituted class vote overwhelmingly in favour and no opposition is presented, the court should be slow to look for obstacles and ‘fast to respect the will of the majority’, citing Lewison LJ in Procter v Procter [2021] Ch 395 at [8] on oiling the wheels of commerce, while emphasising that an unopposed sanction hearing is not a rubber-stamping exercise.

Adam Al-Attar KC and Ryan Perkins appeared for the Company, instructed by Campbells (Hamid Khanbhai, Jordie Feinberg (Cayman Islands,) and Jane Hale (Hong Kong)) and White & Case (Sophie Lyall, Anthony Chan and Li Yesheng (Hong Kong)).

Read the full judgment here