Since France has not been a favorite venue for reorganization of major companies, Bankruptcy Judge Martin Glenn of Manhattan used the restructuring of CGG S.A. to explain why a so-called safeguard plan under French law qualifies for recognition and enforcement in the U.S.
Demonstrating how procedures developed in the U.S. over the last 20 years have been adopted worldwide, the French restructuring proceeded not unlike a prepackaged chapter 11 case in Delaware. Before filing, the debtor negotiated lock-up and restructuring support agreements with the principal creditors.
Immediately after initiating a safeguard proceeding in France in June, the company filed a chapter 15 petition in New York. In July, Judge Glenn recognized the French proceedings as the foreign main proceeding under chapter 15.
At the creditors’ meeting under French law, the lenders, together with holders of high-yield and convertible bonds, voted to approve the safeguard plan by significantly more than the two-thirds in amount required in France. The workers’ representative also supported the plan.
The safeguard plan was similar to a chapter 11 plan in the U.S. It called for the conversion of high-yield and convertible bonds to equity. For accrued interest, holders of high-yield debt got new second lien notes. Existing shareholders received warrants and preferential subscription rights for new shares. Going forward, the company was financed with a new $500 million.
In December, the French court approved the safeguard plan, overruling an objection by a convertible bondholder. The French court determined that different treatment of creditor groups was reasonable and justified in view of the facts.
Because he said there have been “few times” for a U.S. court to sanction a French reorganization, Judge Glenn wrote an eight-page opinion on Dec. 21 laying out his reasons for recognizing and enforcing the safeguard plan in the U.S.
Judge Glenn explained that enforcing a foreign confirmation order qualifies as “appropriate relief” that a court is authorized to grant under Section 1521(a)(7) and as “additional assistance” under Section 1507.
Recognizing and enforcing the French plan, Judge Glenn said, would ensure that implementation of the reorganization could proceed “without disruption or adverse actions being brought against the Foreign Debtor or its assets in the U.S.”
As appropriate relief under Section 1521(e), Judge Glenn also granted a permanent injunction against actions inconsistent with the safeguard plan.
Finally, Judge Glenn declared that the securities issued in France would be exempt from registration under U.S. and state laws under Section 1145(a)(1), again as additional relief authorized by Sections 1507 and 1521.