Vol 3 (2006) - Issue 1

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Shareholder Rights in UK Public Company Restructurings – the Case of British Energy Plc

Introduction
In the early summer of 2004 the financial restructuring of the UK’s only private nuclear operator, British Energy plc (the ‘Company’) appeared to be nearing completion, bar the issue of a state aid approval1 (‘State Aid Approval’) from the European Commission (the ‘Commission’). As discussed below however, in the late summer of 2004 a small number of shareholders headed by Polygon Investment LLP (‘Polygon’) led a campaign to overturn the terms of the agreed restructuring,championing a proposed transaction that was more favourable to shareholders.
This article highlights the strategies and arguments employed by Polygon to disrupt the restructuring and also focuses on the tactics used by the Company and the Bondholders’ Committee2 to seek to ensure the restructuringcompleted as envisaged. In reviewing the measures taken by Polygon we analyse: (a) the interaction of the provisions relating to shareholder approval in the Creditor Restructuring Agreement (the ‘CRA’) between the Company and its significant creditors which set out the detailed terms of the restructuring (the ‘Restructuring’) and the applicable provisions of the Listing Rules;3 (b) the legal arguments raised by Polygon; and (c) Polygon’s tactics. We also focus on the strategies employed by the Bondholder Committee and the Company to defend the CRA. Although as history shows Polygon’s campaign failed and the Company’s Restructuring was completed in January 2005 as envisaged,the colourful skirmish illustrates a number of themes that may presage future battles between creditors and shareholders in restructurings.