Vol 7 (2010) - Issue 4

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COMI Shifting: A Review of the Implications of the Wind Hellas Judgment

The judgment in Wind Hellas1 has received much press coverage and speculation as to its impact on the UK insolvency and restructuring industry. A short, but significant judgment, it identifies the main considerations that may be relevant in determining a company’s 'centre of main interest' (COMI).

In general, the jurisdiction in which a company may enter into an insolvency proceeding is determined by the location of that company’s COMI.2 The location of the registered office is presumed to be the COMI without proof to the contrary. The COMI should correspond to the place where the company conducts the administration of its interests on a regular basis, thereby being ascertainable by third parties. The Wind Hellas decision is important for its finding that a company successfully shifted its COMI from Luxembourg to England. The decision has proved to be a controversial one with a leading hedge fund investor claiming that Britain is at risk of being labelled as the 'bankruptcy brothel of the world'.

Lewison J., in his judgment also offered guidance as to the use of pre-packs as he gave the administrators liberty to enter into the proposed pre-pack sale following the making of the administration order. The decision appears to be the first time the High Court has expressed support for a specific pre-pack sale. A prepack is a sale by an administrator on terms which have been agreed before the administration and which is carried out shortly after the administrator is appointed.

Background
The Hellas company group is one of the largest telecoms operators in Greece. WIND Hellas Telecommunications S.A. (‘Hellas’) was the main group operating company.

The group’s debt obligations comprised: (a) a EUR 250m revolving credit facility, EUR 1.25bn senior secured notes and EUR 355m senior unsecured notes (guaranteed by various subsidiaries (including Hellas)); and (b) EUR 1.23bn subordinated notes, EUR 200m subordinated note hedging and PIK notes (that were both structurally and contractually subordinated (effectively only having recourse to Hellas Telecommunications (Luxembourg) II SCA (the 'Parent Company'), (the 'Subordinated Debt').

In 2009 the group’s financial performance declined. This resulted in the group entering into restructuring negotiations. The Parent Company took steps in August of last year to move its COMI from Luxembourg (where the Parent Company was registered) to London for the purposes of restructuring its debt. The restructuring negotiations led to a proposal that the shares in Hellas be sold to a new company ('Weather Investments') by way of a pre-pack sale.

In November 2009 Hellas and its directors applied to the English courts for an administration order under the Insolvency Act 1986 (the 'Act') on the grounds that Hellas was unable to pay its debts and that administration would produce a better result for creditors than a winding up.

Lewison J. had to be satisfied that he had jurisdiction to make the order sought. This involved an analysis of whether the Parent Company’s COMI had successfully moved to England.