Glossary

A · B · C · D · E · F · I · L · M · N · P · R · S · V · W

A

Accession letter

A short letter by which a noteholder joins the lock-up after signing day. A signer may sell its Notes only to a buyer that signs one. The buyer takes over the seller’s promises and its right to the consent fee, so a promised vote stays promised. Lock-up Agreement, as summarised, paragraph 6.7 · Chapter 4 · see Lock-up, Consent fee

Account holder letter

The only form by which a noteholder votes on the plan, usually sent by its custodian. It gives the holding and the vote, and the custodian confirms the holding. It must reach the information agent before the voting deadline. Explanatory Statement, Appendix 7 · Chapter 8 · see Blocked Notes, Voting deadline

B

Blocked Notes

Notes held in the clearing system under an account holder letter, so that they cannot be sold until the plan meetings end. A noteholder’s vote counts only for Notes blocked in this way. The bank holds no Notes and votes by a proxy form instead. Explanatory Statement, definitions, “Blocked Notes” · Chapter 8 · see Account holder letter

C

Class

A group of creditors whose rights are close enough for them to vote on the plan together. Each class votes at its own meeting. Valkenrade has two: the bank for its €150 million, and the noteholders for their €300 million. Explanatory Statement, paragraph 4.1 · Chapter 1 · see Cram down, Plan meeting

Cleansing announcement

A public announcement that ends a secret by publishing what insiders were told. Valkenrade made one on the day the lock-up was signed, publishing what the committee had seen. From then, members may trade the Notes again, if nothing that could move the price is still secret. Explanatory Statement, paragraph 1.4 · Chapter 3 · see Committee, Inside information

Committee

A few large noteholders who agree the terms with the company before the others are asked. Valkenrade’s had five members, with €120 million of Notes between them, and advisers that Valkenrade paid. Each member saw the secret business plan, so it became an insider and could not trade. Explanatory Statement, paragraph 1.4 · Chapter 3 · see Cleansing announcement, Inside information

Consent fee

A payment to noteholders who join the lock-up in time and then vote for the plan. Valkenrade’s is €1 for every €100, open to every noteholder on the same terms and paid only if the plan takes effect. A large fee for a few could split their class. Lock-up Agreement, as summarised, paragraph 6.4 · Chapter 4 · see Class, Lock-up

Convening hearing

The first court hearing, at which the judge looks at the proposed classes and orders a meeting of each. At Valkenrade’s, the fund argued that noteholders taking the consent fee should vote apart, and lost. The order does not approve the plan. Explanatory Statement, definitions, “Convening Hearing” · Chapter 8 · see Practice statement letter, Sanction

Cram down

The court binding a class that voted against the plan, relying on another class’s yes. Its full name is cross-class cram down. Nobody in the class that said no may be worse off than without the plan, and a class that would be paid, or has a real economic interest, without the plan must vote for. Explanatory Statement, paragraph 5.3 · Chapter 1 · see No worse off test, Relevant alternative

D

Deed of Covenant

A document in which Valkenrade makes its promise directly to the account holders in the clearing systems. If the global note goes unpaid, each of them gets its own claim, called contingent direct rights. That claim makes each account holder a creditor in the plan, with a vote. Deed of Covenant, clause 4 · Chapter 8 · see Account holder letter

Directors’ interests

What each director stands to gain or lose from the plan, which the statement must disclose under section 901D. Two of Valkenrade’s three directors belong to the family, so they share its new stake. The plan also releases the directors from claims about the deal. Explanatory Statement, Part 10 · Chapter 6

E

Effective date

The day the plan takes effect, once every condition in it is met. That day the Notes are cancelled, the new Notes and shares are issued and the consent fee is paid. The statement calls it the Restructuring Effective Date. Explanatory Statement, definitions, “Restructuring Effective Date” · Chapter 10 · see Long-stop date

Event of default

An event listed in the terms of the Notes that lets each noteholder demand its money at once. Proposing the plan may itself be one, as an arrangement with creditors generally. So the lock-up carries a standstill and a waiver. Condition 9.1 · Chapter 3 · see Standstill

Explanatory Statement

The document a company sends its creditors before they vote on a plan. It explains the plan, what each creditor gets with it and without it, and how to vote. Most creditors read its summary of terms and little else, so the summary must match the plan. Explanatory Statement, title page · Chapter 1

Extraordinary Resolution

A noteholders’ decision at a meeting, under the terms of the Notes. It needs three quarters of the votes cast, and then binds every noteholder. The fund’s third of the Notes can block one, which is why Valkenrade uses a plan instead. Condition 12.2 · Chapter 2 · see Restructuring plan

F

Fiscal Agent

The agent that makes payments on the Notes. It acts for Valkenrade alone, so it has no vote and needs no noteholder’s consent to cancel the Notes. The bank’s London Branch does this job, in a team separate from its lending. Condition 11.1 · Chapter 5

I

Information agent

The firm that receives the account holder letters and counts the votes. Each letter must reach it before the voting deadline. It also holds documents creditors may ask for, such as the four market test letters. Explanatory Statement, definitions, “Information Agent” · Chapter 8 · see Account holder letter

Inside information

Precise news about a company that is not yet public and would move the price of its listed securities. A rescue still being agreed is such news. A noteholder that hears it may not trade until it is public or too old to move the price. Chapter 3 · see Cleansing announcement, Committee

Intercreditor agreement

A contract between creditors who share security, which says who is paid first. Under Valkenrade’s, everything recovered goes to the bank until both its loans are repaid, and only then to the new Notes. A security agent holds the security for all of them. Term sheet, security and ranking · Chapter 5 · see New money

L

Lock-up

A contract in which those who back a restructuring promise to support it before anyone votes. Signers vote for the plan, do not sue while it goes through and waive the defaults it causes. Valkenrade signed one with the bank, the family and noteholders holding €200 million. Lock-up Agreement, as summarised, paragraph 6.1 · Chapter 1 · see Accession letter, Consent fee, Standstill

Long-stop date

The last day for the plan to take effect. If it has not by then, the plan lapses, the lock-up ends and the Notes go on unchanged. Valkenrade’s falls at the end of August 2033, just before the Notes fall due. Lock-up Agreement, as summarised, paragraph 6.6 · Chapter 4 · see Effective date

M

Market test

Asking other lenders whether they would lend on better terms. Valkenrade asked four other banks to replace the bank’s loans, and none offered better. That shows the bank’s terms are market terms, one good reason for its better deal. Explanatory Statement, paragraph 3.4 · Chapter 5 · see New money

N

New money

Fresh lending put into a rescue. The bank lends Valkenrade €50 million of new money, but only if it is paid first. New money is never counted as value the plan saves, because the bank lends it fresh. Term sheet, Hollinde Bank · Chapter 5 · see Intercreditor agreement, Market test

No worse off test

The first condition for cram down: no creditor in the class that voted no may be worse off under the plan than in the relevant alternative. Valkenrade’s noteholders get €70 for every €100 under the plan, against €30 in the bankruptcy, so the test is met. Explanatory Statement, paragraph 5.3 · Chapter 7 · see Cram down, Relevant alternative

P

Plan meeting

The meeting at which one class votes on the plan, ordered by the court at the convening hearing. Valkenrade held two, one for the bank and one for the noteholders. Sanne, the one director with no shares, chaired both. Explanatory Statement, definitions, “Plan Meetings” · Chapter 8 · see Class

Practice statement letter

The early letter that tells every creditor about the plan and the proposed classes before the convening hearing. The court’s Practice Statement requires it, so that any argument about classes comes up early. It opens with a table of the plan’s terms. Explanatory Statement, Appendix 5 · Chapter 8 · see Convening hearing

R

Recognition

A court abroad giving effect to an English court’s order. No EU rule makes a Dutch court recognise Valkenrade’s plan. Dutch counsel relies instead on the EU rule that a contract’s own law decides how its obligations end, and both plan debts are under English law. Explanatory Statement, paragraph 8.3 · Chapter 10

Relevant alternative

What would most likely happen to the company without the plan. The court decides it, on the evidence. For Valkenrade it is the bankruptcy of the group, where the bank and the noteholders each get €30 for every €100. Explanatory Statement, paragraph 3.1 · Chapter 7 · see No worse off test

Restructuring plan

A way for a company in financial difficulty to change its debts by its creditors’ votes in classes, under Part 26A of the Companies Act 2006. The court then decides whether to sanction it. Unlike a scheme, it can bind a class that voted no. Explanatory Statement, title page · Chapter 1 · see Cram down, Scheme of arrangement

S

Sanction

The court’s approval of a plan, given at the second hearing. It binds every creditor in the plan, those who voted no included. Sanction is the court’s choice: it checks that the rules were followed, the statement was adequate and the plan is fair. Explanatory Statement, paragraph 5.1 · Chapter 1 · see Cram down

Scheme of arrangement

A deal between a company and its creditors that the court approves after they vote in classes. Each class needs a majority in number and three quarters of the money voted. A scheme cannot bind a class that votes no, so the fund could have blocked one. Explanatory Statement, paragraph 1.5 · Chapter 2 · see Restructuring plan

Standstill

A promise not to demand money early or sue while the lock-up lasts. It protects Valkenrade from the defaults its own plan may cause. The fund never signed the lock-up, so it gave no such promise. Lock-up Agreement, as summarised, paragraph 6.2 · Chapter 4 · see Event of default, Lock-up

Sufficient connection

A real tie between a plan and England, which the court needs before it acts for a foreign company. Valkenrade is Dutch, but both its plan debts are under English law and let creditors sue in the English courts. Explanatory Statement, paragraph 8.2 · Chapter 2

V

Voting deadline

The time by which an account holder letter must reach the information agent for its vote to count. The chair may accept a late letter, but need not. One letter in Valkenrade’s vote arrived on the last day, just before the deadline. Explanatory Statement, definitions, “Voting Deadline” · Chapter 8 · see Account holder letter

W

WHOA

The Dutch procedure in which a court confirms a plan between a company and its creditors: the Dutch Act on Court Confirmation of Extrajudicial Restructuring Plans. It could not change Valkenrade’s English-law Notes, so the fund could still sue on them in London. Explanatory Statement, paragraph 1.5 · Chapter 2 · see Restructuring plan