Re TT International Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 17 June 2010
• Neutral Citation: [2010] SGHC 177
• Citation: [2010] SGHC 177
• Docket Number: Originating Summons No 92 of 2009 (Summons No 6449 of 2009)
• Published date: 13 March 2012
• Hearing Date: 18 February 2010,19 February 2010,15 March 2010
• Plaintiff Counsel: Alvin Yeo SC, Chan Hock Keng, Chang Man Phing, Tan Yee Siong and Cheng Caline (WongPartnership LLP) and Nish Shetty (Cliffordchance LLC)
• Defendant Counsel: Lee Eng Beng SC, Low Poh Ling (Rajah & Tann LLP),Ashok Kumar and Kevin Kwek (Stamford Law Corporation),Lek Siang Pheng and Tang Jin Sheng (Rodyk & Davidson LLP),Peter Sim and Khoo Boo Han (Sim Law Practice LLC),Edwin Tong and Kenneth Lim (Allen & Gledhill LLP)
• Subject Matter: Companies,Schemes of arrangement
• Court: High Court (Singapore)

Judith Prakash J:

This was an application by TT International Limited (“the Company”) for an order pursuant to s 210(3) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) approving the scheme of arrangement dated 9 September 2009 and modified by an addendum dated 28 September 2009 (“the Scheme”) as approved at a 16 October 2009 meeting of the scheme creditors so as to be binding upon the Company and the scheme creditors.

I made an order approving the Scheme. One group of bank creditors (“the Opposing Bank Creditors”) and Ho Lee Construction Pte Ltd (“Ho Lee Construction”) opposed the making of the order. I now give the reasons for my decision.

Background facts Leading up to the Scheme The Company’s business

The Company was incorporated in Singapore on 19 October 1984 as a private limited company. Having been converted into a public company in May 2000, the following month it was listed on the Main Board of the SGX-ST under its present name, TT International Limited.

The Company is principally engaged in the business of trading and distribution of consumer electronic products. Thus, the main value of the Company’s business is in its trade receivables, inventory and distribution networks in various countries. The Company has various subsidiary companies (the Company and its subsidiaries are referred to collectively as “the Group”) in jurisdictions around the world, including Australia, South Africa, Poland, France, United Arab Emirates and Nigeria.

Financial troubles

The Company started facing financial difficulty in the later part of 2008 as a consequence of the global financial crisis. The resultant economic slowdown and weakened investor confidence in stock markets worldwide led to steps being taken by banks and financial institutions to pull back credit facilities and the Company was not spared. By 31 October 2008, some $83m of the Company’s bank facilities had been cancelled or frozen. This had an adverse impact on the Group’s existing working capital structure and the Company was forced to call for a moratorium on debt repayment.

By their very nature, the Group’s main business activities required high work capital; credit facilities were essential for its business operations. The Company did not manage to obtain new facilities to replace those which had been cancelled or frozen. This led to cash flow problems and consequential difficulties in servicing its borrowings and other obligations. Some of the Company’s bank creditors declared an event of default in respect of their facility agreements entered into with the Company, recalled their facilities and demanded repayment of the sums due. The financial pressure on the Company was compounded by its trade creditors’ threats or commencement of legal proceedings against it to recover sums owed to them.

Actions taken by the Company

By the end of October 2008, the Company had realised that it needed to focus its strategy on: (a) improving cash to be generated from sale of substantial stocks and receipts from receivables; (b) implementing cost control and operational efficiency measures; and (c) restructuring its liabilities to creditors. To those ends, on 31 October 2008, the Company appointed nTan Corporate Advisory Pte Ltd (“nTan”) as an independent financial advisor to the Group and WongPartnership LLP (“Wong P”) as its legal advisor.

That same day, the Company held an informal creditors’ meeting to seek the support of the bank creditors to allow a standstill of repayment of amounts owing to them pending a consensual restructuring of its operational activities and financial arrangements. Subsequently, the Company announced a standstill of repayment of debts pending such consensual restructuring, save for amounts owing to those trade creditors which were essential for the continuation of the Company’s day-to-day business activities.

Leave to propose the Scheme and stay of all proceedings against the Company

Pursuant to s 210(1) of the Act, the Company applied for and received approval from the court on 29 January 2009 to call a meeting of its creditors for it to propose a scheme of arrangement for the creditors’ consideration. This meeting was to be held by 29 July 2009.

On 21 July 2009, the Company applied for and was granted an extension of time to call the meeting by 21 October 2009.

The Company also successfully sought a court order restraining the commencement or continuation of proceedings against it pending the court’s approval of the proposed scheme of arrangement.

The proposed Scheme Notice to Scheme Creditors

On 9 September 2009, the documents relating to the Scheme (“Scheme documents”) were despatched by prepaid post to all creditors who had claims against the Company as at the Ascertainment Date, viz, 31 July 2009 (“Scheme Creditors”). The Scheme documents informed the Scheme Creditors that the meeting to consider the Scheme (“the Meeting”) would be held on 16 October 2009. The Scheme documents comprised the following: (a) the Scheme dated 9 September 2009, to which was appended the Company’s Annual Report 2009 and its Quarterly Financial Report for the period ended 30 June 2009; (b) the explanatory statement containing information required to be furnished under s 211 of the Act; and (c) the proxy form for use at the Meeting.

Pursuant to the 29 January 2009 court order, notice of the Meeting was advertised on 14 September 2009 in the Straits Times newspapers.

On 28 September 2009, the Company issued an addendum (“the Addendum”) to the Scheme documents and despatched it by prepaid post to the Scheme Creditors. The Addendum was advertised in the Straits Times on 30 September 2009. The amendments set out in the Addendum related chiefly to the process of proof of debt. Pursuant to the Addendum, the last date and time for lodgement of proof of debt was extended from 28 September 2009 at 5 pm to 6 October 2009 at 5 pm and the particulars of the consideration referred to in the proof of debt were changed.

Main features of the Scheme

The salient features of the Scheme are as follows: A complete moratorium is imposed on any action against the Company by any of its creditors until the Scheme is terminated. A restructuring plan will take place under the supervision of nTan (“the Scheme Manager”). The Company will accumulate cash by continuing its trading and distribution operations, selling non-core assets and businesses, inventories and collecting receivables. Cash will also be obtained from the operations of the Group’s subsidiaries by collecting dividend payments to the Company and repayment of inter-company balances wherever possible. A sum of $30m from such accumulated cash will be applied by the Company and the Scheme manager towards deleveraging the claims against the Company. Under the supervision of the Scheme Manager, the Company will pursue a deleveraging exercise through a “reverse dutch auction” on terms and timing that the Scheme Manager deems appropriate. Under this exercise, Scheme Creditors will be invited to offer their claims, at a discount, to be retired using those monies. The Scheme Creditors offering the highest discount will be retired first. With respect to the remaining debt at the end of the deleveraging exercise, once the Company’s operations have been stabilised, a reasonable determination can be made on the level of debt the Company can sustain (“Sustainable Debt”). This has been determined as at the Ascertainment Date to be a sum of $150m with reference to projected cash flows, working capital and capital expenditure requirements and estimated interest costs of the Group. The Sustainable Debt will be structured as revolving facilities or term loan facilities. The remaining debt, if any, will be considered not sustainable by the Company (“Non-sustainable Debt”) and will be converted into redeemable convertible bonds (“RCB”) to be issued to the Scheme Creditors on a pari passu basis. The Company will grant a fixed and floating charge over all the assets of the Company in favour of the Scheme Creditors. The Scheme Creditors will be repaid in accordance with the restructuring plan.

The Company duly convened the Meeting on 16 October 2009 and the Scheme Creditors voted on the Scheme. As the Scheme Manager required more time to complete the review and assessment of the proofs of debt filed in respect of the Scheme, the chairman of the Meeting (“the Chairman”) could not report the results of the Meeting immediately. On the Company’s application, the court granted an extension of time for the Chairman to report the results of the Meeting to the court by 17 December 2009.

Results of the Meeting

In a report dated 17 December 2009 (“the Chairman’s Report”), the Chairman stated that 84.81% of the Scheme Creditors attending in person or by proxy, representing 75.06% of the value of debts owing to the Scheme Creditors, had voted in favour of the Scheme. In tabular form, the results as reported are as follows:

	Number of Scheme Creditors	Admitted value of the Scheme Creditors’ Claim SGD’million
Scheme Creditors present and voting at the Meeting (inclusive of proxies)	79	485.39
Scheme Creditors voting in favour of the proposed Scheme of Arrangement	67	364.34
Scheme Creditors voting against the Proposed Scheme of Arrangement	12	121.05
Scheme Creditors abstaining from voting on the proposed Scheme of Arrangement	4	17.43

Rejection of claims by the Scheme Manager

The Scheme provides at cl 4.4 for the proofs of debt to be reviewed and assessed by the Scheme Manager and for the Scheme Manager to admit or reject any claim or part of any claim after such review and assessment. Under cl 4.6, creditors whose claims are rejected in whole or in part may request the Company to commence court proceedings...