Chaptre Finance - Case Update

The High Court has approved a Part 26A restructuring plan for Chaptre Finance — the second restructuring plan for the company in two years — while at the same time providing useful insights into the use of expert evidence in cases of this kind.

Chaptre Finance was incorporated for the purpose of financing the construction of a biomass power plant in Teesside. The plant is designed to produce electricity by burning wood pellets and chips and is the largest of its kind in the world.

The plant became operational in 2023, but suffered from several technical problems and ceased to operate by the summer of 2023. The company proposed a restructuring plan which was sanctioned in July 2023, and the power plant returned to power generation in September 2023. There were, however, further serious technical problems leading to expensive outages, and the Chaptre Group required a significant injection of new money to continue operating as a going concern.

As a result, the company proposed a second restructuring with the main purpose of amending the Group's finance documents to allow it to raise up to £85 million of new super senior financing. The amendments bind four classes of financial creditors, including the existing senior secured creditors, who are entitled (but not obliged) to participate in the new super senior funding on a pro rata basis.

The plan was overwhelmingly approved by three classes of creditors, but only 23.9% in value of those voting at the meeting of senior creditors. The senior creditors therefore constituted a dissenting class for the purposes of Part 26A and opposed the plan on the basis that they would be worse off under the plan than in a formal insolvency process.

The Court disagreed and sanctioned the plan, finding that absent the plan, the Chaptre Group would likely enter administration. The opposing creditors would be no worse off under the plan than in the relevant alternative, under which they would be totally out of the money.

Interestingly, the Court was critical of the opposing creditors for not cross-examining the company’s expert witnesses, stating that although the distressed sale discount advanced by the company’s expert was “considerably higher than in a number of other cases”, it would not be right to reject it without cross-examination. The Court emphasised that an objecting party should produce its own expert witness who should also be cross examined, and that this approach has already been followed in numerous restructuring plan cases.

The decision can be accessed HERE.

Professionals involved:

• Ryan Perkins of South Square (instructed by A&O Shearman) for Chaptre Finance

• Charlotte Cooke of South Square (instructed by DLA Piper) for the opposing creditors