FEDERAL COURT OF AUSTRALIA
Nine Entertainment Group Limited, in the matter of Nine Entertainment Group Limited (No 1) [2012] FCA 1464
Citation: Nine Entertainment Group Limited, in the matter of Nine Entertainment Group Limited (No 1) [2012] FCA 1464 Parties: NINE ENTERTAINMENT GROUP LIMITED ACN 122 201 905 and PAR LENDERS AND HEDGE COUNTERPARTIES IDENTIFIED IN THE INTERLOCUTORY APPLICATION FILED ON 17 DECEMBER 2012 and GOLDMAN SACHS and SUPPORTING SENIOR LENDERS IDENTIFIED IN NOTICE OF APPEANCE FILED 1 DECEMBER 2012
and UBS AGFile number: NSD 2079 of 2012 Judge: JACOBSON J Date of judgment: 20 December 2012 Catchwords: CORPORATIONS – creditors’ scheme – first court hearing – opposition to convening meeting – creditors required to accept shares in company in substitution for debt – composition of classes of creditors Legislation: Corporations Act 2001 (Cth), ss 231, 260A, 411 Cases cited: Anzon Australia Limited, in the matter of Anzon Australia Limited [2007] FCA 2079
Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485
Isles v Daily Mail Newspaper Ltd (1912) 14 CLR 193
Re Alabama, New Orleans, Texas and Pacific Junction Railway Company (1890) 1 Ch 213
Re Bulong Nickel Pty Ltd [2002] 42 ACSR 52
Re City of Melbourne Bank (in liq) (1897) 19 ALT 80
Re Crusader Limited [1995] 1 Qd R 117
Re Empire Mining Company (1890) 44 Ch D 402
Re Hills Motorway Ltd (2002) 43 ACSR 101
Re Hunter Resources Limited (1992) 34 FCR 418
Re Jax Marine Pty Limited [1967] 1 NSWR 145
Re NRMA Limited (No 1) (2000) 156 FLR 349
Re Opes Prime Stockbroking Ltd (No 2) (2009) 73 ACSR 385
Re Seven Network Limited (No 3) (2010) 267 ALR 583
Sovereign Life Assurance Co v Dodd [1892] 2 QB 573Date of hearing: 17 December 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 72 Counsel for the Plaintiff: Dr AS Bell SC with Mr J Williams Solicitor for the Plaintiff: Gilbert + Tobin Counsel for the Applicant: Mr JC Sheahan SC with Mr GKJ Rich Solicitor for the Applicant: Ashurst Counsel for Goldman Sachs: Mr SG Finch SC with Mr R Alkadamani Solicitor for the Supporting Senior Lenders: Mr L Zwier of Arnold Bloch Leibler Counsel for UBS AG: Mr MA Jones SC
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2079 of 2012
IN THE MATTER OF NINE ENTERTAINMENT GROUP LIMITED ACN 122 201 905
BETWEEN: NINE ENTERTAINMENT GROUP LIMITED ACN 122 201 905
PlaintiffAND: PAR LENDERS AND HEDGE COUNTERPARTIES IDENTIFIED IN THE INTERLOCUTORY APPLICATION FILED ON 17 DECEMBER 2012
OtherGOLDMAN SACHS
OtherSUPPORTING SENIOR LENDERS IDENTIFIED IN NOTICE OF APPEARANCE FILED 1 DECEMBER 2012
OtherUBS AG
Other
JUDGE:
JACOBSON J
DATE OF ORDER:
20 DECEMBER 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Corporations Act) the Plaintiff, Nine Entertainment Group Limited (Scheme Company), convene a meeting of each of the following classes of creditors…
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Details
- Case
- [2012] FCA 1464
- Decision Date
CaseChat Overview and Summary
The case before the court involved Nine Entertainment Group Ltd and its subsidiary, Nine Holdings Ltd, and was heard by Justice Gilmour of the Federal Court of Australia. The dispute centred on a proposed scheme of arrangement for the reorganisation of Nine Holdings Ltd, including the grant of security interests to various creditors, which was opposed by some creditors who argued it contravened s 260A of the Corporations Act 2001. The court was required to determine whether the granting of security interests by Nine Holdings Ltd to certain creditors constituted financial assistance within the meaning of s 260A(1) and whether such assistance materially prejudiced the interests of the company.
The court examined the nature of the proposed scheme and the circumstances surrounding the grant of security interests. It considered whether the granting of security interests to certain creditors constituted financial assistance and, if so, whether this assistance materially prejudiced the interests of the company. The court also assessed whether the scheme provided an opportunity for all secured creditors to consent with full disclosure of the details of the proposed transaction, as suggested in Anzon Australia Limited, in the matter of Anzon Australia Limited. The court found that the scheme was the product of negotiations between sophisticated commercial parties and that it was intended to prevent the Nine Holdings Group from entering insolvency administration. The court concluded that the scheme could be approved by the Court, subject to certain conditions being met at a subsequent hearing.
In light of the findings, Justice Gilmour proposed to make orders generally in accordance with the orders submitted by counsel for the company, subject to the scheme meeting the necessary conditions at the second Court hearing. The court emphasised the importance of the commercial reality of the negotiations and the need for further debate on the corporate governance provisions at the meeting of senior beneficiaries. The decision highlighted the balance between the protection of creditors' interests and the need to facilitate the reorganisation of a company to prevent insolvency.
The final orders of the court were to be made in accordance with the submissions of counsel for the company, subject to the scheme meeting the necessary conditions at the subsequent hearing. The court's decision provided clarity on the application of s 260A of the Corporations Act 2001 to the proposed scheme of arrangement and set the stage for the approval of the scheme, provided the conditions were satisfied.
The court examined the nature of the proposed scheme and the circumstances surrounding the grant of security interests. It considered whether the granting of security interests to certain creditors constituted financial assistance and, if so, whether this assistance materially prejudiced the interests of the company. The court also assessed whether the scheme provided an opportunity for all secured creditors to consent with full disclosure of the details of the proposed transaction, as suggested in Anzon Australia Limited, in the matter of Anzon Australia Limited. The court found that the scheme was the product of negotiations between sophisticated commercial parties and that it was intended to prevent the Nine Holdings Group from entering insolvency administration. The court concluded that the scheme could be approved by the Court, subject to certain conditions being met at a subsequent hearing.
In light of the findings, Justice Gilmour proposed to make orders generally in accordance with the orders submitted by counsel for the company, subject to the scheme meeting the necessary conditions at the second Court hearing. The court emphasised the importance of the commercial reality of the negotiations and the need for further debate on the corporate governance provisions at the meeting of senior beneficiaries. The decision highlighted the balance between the protection of creditors' interests and the need to facilitate the reorganisation of a company to prevent insolvency.
The final orders of the court were to be made in accordance with the submissions of counsel for the company, subject to the scheme meeting the necessary conditions at the subsequent hearing. The court's decision provided clarity on the application of s 260A of the Corporations Act 2001 to the proposed scheme of arrangement and set the stage for the approval of the scheme, provided the conditions were satisfied.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
In my opinion, the short answer to this question is that even if the grant of security does constitute financial assistance, it does not contravene s 260A because any such assistance does not materially prejudice the interests of the company within the meaning of s 260A(1)(a) since the scheme provides the opportunity for all secured creditors (including Red Earth) to consent with full disclosure of the details of the proposed transaction: see Anzon Australia Limited, in the matter of Anzon Australia Limited [2007] FCA 2079 at [34] (Lindgren J).Conclusion and orders The details of the scheme are the product of commercial negotiations between a majority of the senior and subordinated beneficiaries and representatives of the Nine Holdings Group as well as Red Earth. These are sophisticated commercial parties who were represented by experienced legal and financial advisers. The compromise which is supported by all of the senior and subordinated beneficiaries other than the opponents is one which is intended to prevent the Nine Holdings Group entering insolvency administration. The corporate governance provisions appear to reflect the commercial reality that Apollo and Oaktree hold an effective majority of the senior debt. Nevertheless, there is no reason why that issue cannot be the subject of further debate at the meeting of senior beneficiaries. The scheme is one which is capable of approval by the Court at the second Court hearing, subject to satisfaction of the matters which are to be considered at that hearing. I endeavoured to summarise the relevant matters in my decision in Re Seven Network Limited (No 3) (2010) 267 ALR 583 at [31]ff. Accordingly, I propose to make orders generally in accordance with the orders submitted by counsel for the company.
Ratio Decidendi
Legal Principle Established
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