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2012 MarsdenLR 2274
HIGH COURT MALAYA KUALA LUMPUR
TRANSMILE GROUP BERHAD & ANOR – Appellant
Versus
MALAYSIAN TRUSTEE BERHAD & ORS – Respondent
[Originating Petition No: D-26NCC-30-2011]
The court confirmed that all creditors of an insolvent entity rank pari passu and must be fairly represented in creditor arrangements, ensuring no coercion of minority interests.
Headnote:(A) Companies Act 1965 - Section 176(3) - Petition for schemes of arrangement - Court sanction of a restructuring plan for an insolvent subsidiary - Court determined that all creditors rank pari passu, rejecting claims of wrongful classification and assessing claims for prioritization based on legal rights as creditors, not interests. (Paras 10, 11, 25, 99)
(B) Legal principles of creditor arrangements - The court required assurance that statutory provisions were adhered to and that class interests were respected; no coercion of minority by majority was evident. (Paras 22, 24)
Facts of the case:
The petitioners sought court sanction for schemes of arrangement following TAS’s insolvency. MTB claimed priority due to previous court findings on loan categorization and creditor rights. (Paras 2-4, 9-12)
Findings of Court:
The court upheld the schemes, confirming all unsecured debts are treated equally, hence supporting the restructuring arrangement. The schemes had substantial creditor support and were deemed reasonable. (Paras 99-102)
Issues: The key issues included classification of creditors, prioritization of debts, actions of creditors, and the viability of the respective schemes versus liquidation. (Paras 20, 21, 54)
Ratio Decidendi: The court emphasized that creditor classifications must be based on legal rights indicative of equality among creditors, and substantially supported the schemes after assessing creditor voting outcomes. (Paras 40-44, 99)
Result: Schemes of arrangement sanctioned and approved.
| Table of Content |
|---|
| 1. governor of scheme under companies act. (Para 1 , 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. overview of tas and tgb debt restructuring schemes. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 3. objections to the sanction sought. (Para 21 , 22 , 23 , 40 , 41 , 54) |
| 4. guidelines for court review of schemes. (Para 24 , 25 , 38) |
[1] This is a petition presented by Transmile Group Berhad (TGB) and Transmile Air Services Sdn Bhd (TAS) seeking the sanction of this court for the schemes of arrangement between each of them and their respective scheme creditors pursuant to s 176(3) of the Companies Act 1965 . Section 176 (3) provides as follows:
"(3) If a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy at the meeting or the adjourned meeting agrees to any compromise or arrangement the compromise or arrangement shall if approved by order of the court be binding on all the creditors or class of creditors or on the members or class of members (as the case may be) and also on the company, or in the case of a company in the course of being wound up, on the liquidator and contributories of the company."
Brief Facts
[2] The salient facts relating to this petition are comprehensively set out in the submissions of the petitioners and the 1st respondent, Malaysian Trustee Berhad (MTB) and I adopt the same. TAS is the main operating subsidiary of TGB. Its principal activity is to provide cargo services. TAS is insolvent. It is unable to meet the payments due to its lenders comprising medium term notes holders, (MTNs), syndicated term lenders, (STLs) and convertible bond special purpose vehicle (CB SPV) through which the convertible bond holders claim.
[3] MTB, the 1st respondent is the trustee for the holders of medium term notes issued by TAS in 2003. It is not in dispute that MTB is the creditor of TAS as trustee for the MTN Holders. The debt due and owing to MTB is RM111.8 million as at 30 December 2010. The debt is an unsecured debt.
[4] The 2nd to 13th respondents, R2-MTB3 or the syndicated term lenders are bankers. Vide a facility agreement dated 16 May 2005, the STLs granted an unsecured syndicated term loan of USD100 million to Transmile Air (SPV) Limited (STL SPV), a Labuan company and a wholly owned subsidiary of TGB. TGB guaranteed this loan.
[5] STL SPV channelled or on-lent these loan monies to TAS in 2005. This loan is also unsecured.
[6] After this, STL SPV was wound up on 11 August 2010. By an assignment dated 7 September 2010 (the assignment) STP SPV assigned the debt owing by TAS to it, onto each of the STLs on a pro rata basis. As a consequence of the assignment, each of the STLs became blockquoteect individual creditors of TAS. This is not in dispute. As at 30 December 2010 the amount due to the STLs was 210.4 million.
[7] The 14th respondent, CB SPV is a Labuan company and a wholly owned subsidiary of TGB. CB SPV issued convertible bonds in 2005 constituted by a Trust Deed dated 17 May 2005. TGB guaranteed the convertible bonds. CB SPV then channelled or on lent the bond proceeds to TAS in 2005. This loan is also unsecured. As at 30 December 2010, the debt due to CB SPV is RM219.3 million.
[8] On 13 July 2010 TGB and TAS filed Originating Summons No D-22-NCC-239-2010 (the s 176 OS) for, inter alia, leave to convene respective creditors meetings of TGB and TAS to approve a debt restructuring scheme pursuant to s 176(1) of the Companies Act 1965 and a restraining order under s 176(10). The basis of the scheme was that all bankers would participate pari passu and form part of the same class of creditors.
[9] In the s 176 OS, MTB raised a preliminary issue relating to the priority of claims. In essence MTB claimed that by virtue of cl 10.1(cc) of the MTN Trust Deed, the debts owing to the STLs and CB SPV are subordinated to the loan of the MTN Holders. The STLs and CB SPV contend, to the contrary th
