Judgement Handed Down: Hong Kong Airlines Ltd

An important judgment has been handed down sanctioning the Part 26A restructuring plan proposed by Hong Kong Airlines Ltd, the main operating company within the Hong Kong Air Group.

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.

An important judgment has been handed down sanctioning the Part 26A restructuring plan proposed by Hong Kong Airlines Ltd

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