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Re Mongolian Mining Corporation (In Provisional Liquidation In The Cayman Islands

Judgment Cited authorities 9 Cited in 17 Precedent Map Related
Vincent
Judgment Date07 September 2018
Neutral Citation[2018] HKCFI 2035
Judgement NumberHCMP370/2017
Citation[2018] 5 HKLRD 48
Year2018
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP370/2017 RE MONGOLIAN MINING CORPORATION (in Provisional Liquidation in the Cayman Islands)

HCMP 370/2017

[2018] HKCFI 2035

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 370 OF 2017

________________

IN THE MATTER of Mongolian Mining Corporation (in Provisional Liquidation in the Cayman Islands)

and
IN THE MATTER of section 673 of the Companies Ordinance (Cap 622)

________________

Before: Hon Harris J in Court
Date of Hearing: 25 April 2017
Date of Decision: 25 April 2017
Date of Reasons for Decision: 7 September 2018

_________________________________

REASONS FOR DECISION

_________________________________

Introduction

1. On 14 March 2017, under section 670 of the Companies Ordinance, Cap 622 (“Ordinance”), I gave leave to Mongolian Mining Corporation (“Company”) to convene a meeting (“Scheme Meeting”) of a discrete group of creditors (“Scheme Creditors”) in order that they could consider and vote on a proposed scheme of arrangement to restructure the debts owed to them (“Scheme”). The Scheme Meeting took place on 11 April 2017 and all Scheme Creditors present at the Scheme Meeting voted in favour of the Scheme. On 20 April 2017 the Company issued a petition seeking the court’s sanction, which I granted on 25 April 2017. These are my reasons for approving the Scheme.

Background to the Scheme

2. The Company is—

(a) a company incorporated in the Cayman Islands;

(b) registered in Hong Kong as an overseas company since 18 August 2010, with its principal place of business in Hong Kong;

(c) listed on the Hong Kong Stock Exchange since 13 October 2010;

(d) an investment holding company with operating subsidiaries in Mongolia carrying on the business of producing and exporting high quality coking coal;

(e) balance-sheet insolvent; and

(f) in provisional liquidation in the Cayman Islands since 19 July 2016.

3. The Company’s financial indebtedness comprises—

(a) US$600,000,000 senior secured notes, governed by New York law, listed in Singapore, and secured by charges over shares in the Company’s subsidiaries in Hong Kong and Luxembourg (“Old Notes”);

(b) a secured loan facility of US$150,000,000; and

(c) two promissory notes in the aggregate original principal amount of US$52,500,000.

4. In view of its financial difficulties, the Company’s debt restructuring is to be achieved—

(a) bilaterally and consensually in respect of the secured loan facility and promissory notes; and

(b) by means of inter-conditional parallel schemes of arrangement in Hong Kong and the Cayman Islands in respect of the Old Notes.

5. In brief, the effect of the Hong Kong scheme is that debts owed to the Scheme Creditors will be released and discharged; in return, the Scheme Creditors will obtain new notes and shares in the Company. The effectiveness of the Hong Kong scheme is conditional on the Cayman scheme being sanctioned by the Cayman court and recognised in the United States under Chapter 15 of the Bankruptcy Code.

Jurisdiction — Concept of Creditor

6. As the Old Notes are held in a global form or global restricted form through the clearing systems, the Scheme Creditors are defined in the Scheme as the beneficial holders of the Old Notes who have a right, upon satisfaction of certain conditions, to be issued with definitive notes in accordance with the terms of the Old Notes.

7. Counsel did not explain why the Scheme Creditors (as opposed to the legal holder of the global note) were proper parties to the Scheme, nor cite any authority for the court’s scheme jurisdiction over the Scheme Creditors. Nevertheless the court has conducted research and I am satisfied that the court has scheme jurisdiction over the Scheme Creditors.

8. Part 13 of the Ordinance confers on the court a jurisdiction to sanction arrangements or compromises between a company and its creditors provided the two pre-conditions set out in section 674(1) are satisfied. First, a majority in number of the class of creditors present and voting must agree to it (“headcount” test), and secondly, 75% in value of the class of creditors present and voting must agree to it (“majority-in-value” test).

9. There is no statutory definition of “creditor” for the purposes of Part 13. It is established that a “creditor” will consist of anyone who has a monetary claim against the company which, when payable, will constitute a debt. Contingent claims are included for this purpose. Creditor with security is also a creditor for the purposes of the scheme jurisdiction.[1]

10. In the present case, because the Scheme Creditors are entitled, upon satisfaction of certain conditions, to be issued with definitive notes in accordance with the terms of the Old Notes, they are contingent creditors for the purposes of the scheme jurisdiction.[2] The Scheme Creditors are therefore proper parties to the Scheme.

Jurisdiction — Sufficient Connection

11. In order to justify the court exercising its jurisdiction to sanction the Scheme, it is necessary for the Company to demonstrate sufficient connection between the Scheme and Hong Kong.[3]

12. In the present case, sufficient connection between the Scheme and Hong Kong exists for these...

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17 cases
  • Re Leading Holdings Group Ltd
    • Hong Kong
    • 18 July 2023
    ...of a global note as “contingent creditor” for the purpose of voting in schemes of arrangement, such as Re Mongolian Mining Corp [2018] 5 HKLRD 48, Enice Holding Co [2018] 4 HKLRD 736, Re Castle Holdco 4 Ltd [2009] EWHC 3919 (Ch) and Re Haya HoldCo 2 plc [2022] EWHC 1079 130. In my view, the......
  • Re China Singyes Solar Technologies Holdings Ltd
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 18 March 2020
    ...of First Instance High Court Mr Look Chan Ho, instructed by Kirkland & Ellis, for the company The bond holders appeared in person [1] [2018] HKCFI 2035; [2018] 5 HKLRD 48 at [2] [2019] HKCFI 1730 at [19]–[21]. [3] Sections 669, 670 & 673. [4] [2010] BCLC 496. [5]...
  • Da Yu Financial Holdings Ltd (Formerly Known As China Agrotech Holdings Ltd) (In Liquidation)
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 17 October 2019
    ...that serves no purpose. (See: Re Winsway Enterprises Holdings Ltd [2017] 1 HKLRD 1 at §§15 – 16 per Harris J; Re Mongolian Mining Corp [2018] 5 HKLRD 48 at §§11 and 13 per Harris J; Re Hong Kong Building and Loan Agency Ltd [2019] HKCFI 2088 (HCMP 2268/2018, unreported, 20 August 2019),per ......
  • Re Da Yu Financial Holdings Ltd (Formerly Known As China Agrotech Holdings Ltd) (In Liquidation)
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 17 October 2019
    ...that serves no purpose. (See: Re Winsway Enterprises Holdings Ltd [2017] 1 HKLRD 1 at §§15 – 16 per Harris J; Re Mongolian Mining Corp [2018] 5 HKLRD 48 at §§11 and 13 per Harris J; Re Hong Kong Building and Loan Agency Ltd [2019] HKCFI 2088 (HCMP 2268/2018, unreported, 20 August 2019),per ......
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