Judgment Hand Down: SCUR-Alpha 1092 GmbH — convening judgment on the Schleich restructuring plan

The High Court has granted permission to convene creditor meetings for a Part 26 scheme of arrangement forming part of a wider restructuring of the Schleich toy group, the well-known German figurine and playset manufacturer founded in 1935. The scheme company, SCUR-Alpha 1092 GmbH, is a German-incorporated holding company within a group ultimately controlled by entities advised by Partners Group. Adam Al-Attar KC, instructed by Latham & Watkins, appeared for the scheme company; Nicholas Yeo KC and Christopher Snell, instructed by Gherson, appeared for a designated (sanctioned) scheme creditor (“MeSoFa”).

The group faced acute liquidity pressure following a post-pandemic decline in sales from 2023, a costly and ultimately counter-productive operational restructuring (the “Fit 4 Future” programme), the write-off of discontinued franchise stock, and a substantial repurchase and guarantee liability arising from a loyalty campaign with the supermarket group EDEKA. With existing facilities fully drawn and an interim bridging facility in place, the group required a comprehensive recapitalisation to avoid a value-destructive German insolvency.

The scheme compromises only the English-law-governed liabilities under the group’s senior facilities agreement (a €169m term facility and a €20m revolving credit facility). The restructuring transfers ownership to a new structure held by an autonomous Dutch foundation (stichting), establishes a new super senior facility (with a new-money option and a 1.45x elevation incentive for participating creditors), restates a smaller term facility, creates a new holdco PIK facility, waives residual claims, and issues contingent value rights for potential equity upside. According to the comparator evidence from EY-Parthenon, the restructuring achieves significant deleveraging — total debt falling from c.€241m to c.€166.6m — and offers creditors a better mid- and high-case return than the insolvency comparator.

Consistent with established practice (Re Noble Group), the court confined itself to class composition, notification, meeting arrangements, and any jurisdictional “roadblock,” reserving questions of overall fairness to the sanction stage (Re Telewest).

Notice and jurisdiction. The court accepted 21 clear days’ notice as adequate given creditor sophistication and the extensive prior engagement, and confirmed jurisdiction over the German company as one liable to be wound up as an unregistered company (Re Drax Holdings), with the requisite “give and take” present.

Class composition. Applying the settled Sovereign Life v Dodd / Hawk Insurance test, the court accepted a single class. Differences between the term and revolving facilities were not material against an insolvency comparator; and the familiar features said capable of fracturing a class did not do so here — entry into the lock-up agreement (Telewest), differential new-money participation where the opportunity was open pro rata to all (Re OQ Chemicals, Re Standard Profil), market-rate backstop fees (Pizza Express, Petra Diamonds), reimbursement of advisers’ costs (Re Lecta Paper), and governance/investor-director rights attaching to position rather than identity (Hibu, New Look, Nostrum). A separate class and meeting were provided for, contingently, should UniCredit become a scheme creditor via a possible parallel German StaRUG process.

Sanctions and the designated creditor. A central feature was the position of MeSoFa, a creditor in solvent liquidation in Austria, treated as a “Sanctions Disqualified Person” because it is OFAC-designated and because one of its joint liquidators is OFSI-designated, raising a control question under regulation 7 of the Russia (Sanctions) (EU Exit) Regulations 2019. The court confirmed that sanctioned status is a personal characteristic rather than a difference in legal rights, and so does not bear on class composition (Re Nostrum, Re Praesidiad). The mechanism for holding a designated creditor’s entitlements in a holding period trust pending resolution was endorsed in principle.

At the hearing, MeSoFa substantially narrowed its case: it did not object to the scheme, accepted it could not participate in new money (being in liquidation), accepted it had not in fact been denied documentation, and reduced its objection (apart from costs) to the payment of its entitlements into the holding period trust. The court declined to direct a preliminary issue on MeSoFa’s sanctioned status before sanction, accepting Mr Al-Attar’s submission that the question could safely be determined later (in a freestanding Part 7 claim if necessary), could not affect class composition or the voting outcome given overwhelming support, and that the scheme company was entitled to take a cautious approach to sanctions (Re SGB-SMIT). The judge observed that the application had “the smell” of a delaying tactic in pursuit of commercial aims, while making clear MeSoFa remained free to raise its points at sanction (at risk as to costs).

Roadblocks. The court found no roadblock: outstanding conditions (including the sanctions licences, possible StaRUG and facility refinancing) were of a kind the court can accommodate (Re Smile Telecoms, Re Steinhoff); a sufficient connection with England was established through the English-law-governed debt and exclusive jurisdiction (Re OJSC International Bank of Azerbaijan); and there was a reasonable prospect of recognition in Germany on the expert evidence (Re DTEK Energy).

The court made the convening order sought, permitting a one- or (contingently) two-class meeting to proceed, with fairness and the sanctions questions reserved to the sanction hearing.

Read the full judgment here