Section 86 of the Companies Act (2021 Revision) and Pearl Holding III Ltd
| Jurisdiction | Cayman Islands |
| Judge | Justice David Doyle |
| Judgment Date | 25 October 2021 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 254 OF 2021 (DDJ) |
The Hon. Justice David Doyle
CAUSE NO. FSD 254 OF 2021 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Sanction of a scheme of arrangement with creditors pursuant to section 86 of the Companies Act (2021 Revision)
Lachlan Greig of Harney Westwood & Riegels for the Petitioner/Company
The matter presently before the court neatly evidences the significant international commercial business that the Cayman Islands legitimately facilitates.
This is the hearing of the petition of Pearl Holding III Limited (the Company), a company incorporated in the Cayman Islands as an exempted limited company in March 2015. The Company acts as an intermediate holding company with its direct and indirect subsidiaries (the Group) being located in Singapore, Hong Kong, the United States, Thailand, Malaysia and the People's Republic of China (PRC).
The principal business of the Group is the manufacturing of precision plastic injection moulds, high precision plastic injection moulding, laser marking and decorative finishing for engineering components for the automotive, healthcare and consumer product industries. The main operating facilities of the Group are located in the PRC.
As at 31 March 2021 the total indebtedness of the Company amounted to US$183,500,000, representing approximately 93% of the total indebtedness of the Group. The Company's principal financial indebtedness arises in respect of: (1) the existing notes, which were issued pursuant to a New York law governed indenture; and (2) the senior secured revolving credit facility, which matures in November 2022.
The financial position of the Company and the Group has been severely affected by a number of factors, said to be beyond the Group's control, which have led to its deteriorating financial performance since 2018. These factors include: (1) low market demand; (2) US-China trade tensions; (3) supply chain disruptions due to the COVID 19 pandemic; and (4) loss of certain customers.
The Group will be unable to satisfy its annual interest burden and/or repay in full the indebtedness under the existing notes on maturity.
In early 2021 the Company commenced discussions and negotiations with an ad hoc group of holders of the existing notes holding approximately 60% in aggregate of the principal outstanding amount of the existing notes. In May 2021 the Company entered into a restructuring support agreement (the Restructing Support Agreement) pursuant to which the consenting creditors undertook to support the proposed Scheme.
As at the date of the petition 52 note holders representing approximately 94.25% of the total indebtedness owing under the existing notes agreed to the Restructuring Support Agreement.
The purpose of the Scheme is to allow the Company and the Group to continue to operate on a going concern basis. The Scheme is intended to restructure the existing notes only. The Scheme Creditors will release and discharge any and all claims against the Company and others in respect of their holdings in the existing notes in return for distributions of the Scheme Consideration comprising cash, new debt and equity instruments. The Company has also proposed the SSRCF Refinancing.
If the Scheme fails there would most likely follow an insolvent liquidation of the Company in which scenario Scheme Creditors are projected to receive significantly lower returns than they would receive if the Scheme was successfully implemented.
The object of the petition is to obtain the sanction of the Grand Court of the Cayman Islands to the scheme of arrangement between the Company and certain of its creditors, pursuant to section 86 of the Companies Act (2021 Revision) (the Companies Act).
I have read the papers submitted in the hearing bundles. I have also considered the helpful skeleton argument dated 4 October 2021 and the authorities. I am most grateful to Lachlan Greig, who appears for the Company, for his continuing assistance to the Court.
I am satisfied that the single class of Scheme Creditors was correctly constituted and that the Order made on 6 September 2021...
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