Re Afiniti Ltd (Provisional Liquidators Appointed for Restructuring Purposes

• Jurisdiction: Bermuda
• Court: Supreme Court (Bermuda)
• Judgment Date: 21 March 2025
• Docket Number: Commercial Jurisdiction 2024 No 265

In the matter of Afiniti Ltd (Provisional Liquidators Appointed for Restructuring Purposes

And in the matter of the Companies Act 1981

[2025] Bda LR 37

Commercial Jurisdiction 2024 No 265

In The Supreme Court of Bermuda

Leave to appeal against court's refusal to grant adjournment of JPLs application — Sanctions under section 175 of the Companies Act — Case management decision — Realistic prospect of success

The following cases were referred to in the judgment:

HRH Prince Abdulaziz bin Mishal bin Abdulaziz al Saud v Apex Global Management Ltd [2014] UKSC 64

Apex Fund Services Ltd v Clingerman and Silk Roads Funds [2020] Bda LR 12

Templar Capital Ltd v Griffin Line Trading LLC [2023] Bda LR 98

Greenhaven Motors Ltd (in liq) [1999] BCLC 635

Ms F Taube KC, Mr S Stevens and Mr K Masters for the Applicant

Mr A Al-Attar KC, Mr S White and Mr D Luca for the Joint Provisional Liquidators

Ms B Leahy KC, Mr J Riihiluoma and Ms L Vaswani for the Secured Lenders

RULING of Martin J

Introduction

1. This is an application by Mr Chishti for leave to appeal against this Court's Ruling of 20 November 2024. By that decision, the Court refused Mr Chishti's application for a further adjournment of the hearing of an application by the Joint Provisional Liquidators (the “JPLs”) for the Court's sanction to enter into a restructuring transaction (the “Transaction”) whereby effectively the whole of the assets and undertaking of Afiniti Ltd (In Liquidation) (the “Company”) were to be transferred and/or sold to a new company ultimately owned and controlled by the secured lenders. The Court proceeded to grant sanctions to the JPLs to enter into the Transaction both as a compromise and a sale under section 175(1)(e) and 175(2)(a) of the Companies Act 1981.

Background

2. The details of the history of the Company's indebtedness to the secured lenders are set out (so far as material) in the Ruling and do not need to be repeated for the purposes of this application. The debt owed under the Loan Facility and other unsecured debt exceeded USD500,000,000 and the Company's available cash was insufficient by a long margin to meet the repayment of US$125,000,000 that was about to fall due for payment when the extension granted by the secured lenders expired at the end of November 2024.

3. The evidence showed that (i) the Company was profoundly insolvent on a balance sheet basis and on the brink of cash flow insolvency (ii) the Company's business would collapse if a restructuring were not achieved before the Company's cash resources ran out despite a last minute offer by Mr Chishti to factor some of the Company's receivables (iii) the secured lenders had negotiated a transaction with the Company to acquire the assets and business undertaking on terms that would enable the business of the Company to continue (iv) the Transaction was structured in several steps, the first two of which were the transfer of the assets of the Company to a new company established for the purpose by the secured lenders in exchange for a restructuring of the debt in terms of the existing repayment obligations and the grant of new terms of financing (v) the Company had exhausted any realistic prospect of raising additional capital and an alternative sales transaction was not achievable before the failure of the Company's liquidity (vi) the secured lenders had refused to advance further credit or extend terms and (vii) a liquidation would achieve a much worse financial result than the proposed Transaction.

4. The JPLs independently reviewed the analysis and report of Teneo FA which had concluded that (i) the value of the Company's assets fell well below the amount of the Company's indebtedness (ii) the was no realistic alternative accelerated merger and acquisition process with another bidder but even if there had been, the result would also fall well below the amount needed to repay the Company's indebtedness (iii) a formal liquidation process would produce much less realisable value than the Transaction and (iv) that the Enterprise Value of the Company (and its affiliated entities) on a going concern basis (pre-Proposed Transaction basis) that formed the basis of the commercial terms of the Transaction provided the greatest recovery of value to the Company and its affiliates.

5. The JPLs (having conducted their own review and after discussions with the Company's management) considered that the terms of the Transaction were the best that were likely to be achievable in the circumstances, and applied for the Court's sanction to enter into the...