LAWFUEL – The Law News Network – Allen & Overy said today the High Court’s decision dismissing claims by two TXU creditors clears the way for KPMG Corporate Recovery to distribute over GBP350 million to creditors using company voluntary arrangements (CVAs).
“The judgement emphatically confirms CVAs are available in all appropriate types of restructuring and insolvency. It is also good news for the creditors who have been waiting for nearly three years in what has been one of the market’s largest and most complex insolvencies,” said Mark Sterling, Partner in Allen & Overy’s Restructuring Practice.
The challenge to CVAs was filed under section 6 of the Insolvency Act 1986 (the Insolvency Act) against Energy Holdings (No. 3) Limited (in liquidation) (EH3) and Energy Group Overseas BV (in administration) (EGO BV) and was dismissed by the High Court on 9 September 2005. Confidentiality restrictions on the judgement were lifted this week following settlement of potential litigation with TXU Corp.
The Insolvency Act allows a period of 28 days for a creditor to apply to the Court for a company voluntary arrangement (CVA) to be set aside. Such a challenge was received by KPMG LLP partners, Phil Wallace and Finbarr O’Connell, the joint administrators of EGO BV and Jim Tucker and Jeremy Spratt, the joint liquidators of EH3. SISU Capital Fund (and other funds managed by SISU Capital Limited) and UNUM Life Insurance Company of America (and other funds managed by Provident Investment Management LLC) sought to have the CVAs of EH3 and EGO BV set aside on the grounds of unfair prejudice and/or material irregularity and further sought the removal of the KPMG LLP partners as officeholders of EH3 and EGO BV. All of these applications were dismissed.
The applicants have confirmed that they will not be appealing against any aspect of the judgment.
The applicants are now required to pay the legal costs of the proceedings, to be assessed, and to make an interim payment in respect of these costs of GBP3.5m.
The CVAs of EH3 and EGO BV are two of 16 interconditional CVAs of companies in the TXU Europe Limited group in respect of which Allen & Overy LLP advised Phil Wallace and Jim Tucker of KPMG LLP jointly with Cadwalader, Wickersham & Taft LLP.
The Allen & Overy team was lead by partners Marc Florent, Mark Sterling and Katrina Buckley.
For further information, please contact Campbell McIlroy ([email protected]) on +44 20 7330 2783