Judgement Handed Down: Hong Kong Airlines Ltd

It is the first restructuring to be implemented by way of a parallel and overlapping Hong Kong scheme and English plan.  Tom Smith KC, Clara Johnson and Georgina Peters appeared for the company, instructed by teams at Latham & Watkins LLP led by Bruce Bell, Howard Lam, Flora Innes, James Hollingshead and Amy Simmons. PwC (Jacky Wan, Ralph Kou and Tarak Wong) acted as financial adviser to the company .  The company was also advised by Andy Charters and Oliver Haunch at Grant Thornton.

The judgment expressly decides (for the first time) that a class of unsecured creditors can, as a matter of principle, include secured creditors voting on the scheme/plan in respect of the “unsecured portion” of their claims (i.e. after deduction of the value of their security).  The Hong Kong-incorporated company also succeeded in demonstrating that, for purposes of the sufficient connection requirement, the fact that a significant proportion of the debt subject to the plan was governed by English law (42% by value), created the necessary connection with the English Court’s jurisdiction.  The Court held that the sufficient connection test is fact-specific and there is no “numerosity” requirement.  Further, that the presence of a significant proportion of English law governed-debt – combined with the existence of a parallel scheme in the company’s place of incorporation (Hong Kong) – meant that the English Court would not be exercising an exorbitant jurisdiction, applying the policy rationale in Re Drax Holdings Ltd.  The judgment contains a detailed description of the factors relevant to this conclusion.