Background
SCUR-Alpha 1092 GmbH is a German-incorporated holding company sitting above the Schleich group, the German toy manufacturer founded in 1935 and known for licensed figurines and playsets. The group, acquired by private equity sponsor Partners Group in 2019, ran into severe financial difficulty following a failed “Fit 4 Future” operational restructuring programme, the discontinuation of the “Sofia’s Beauty” franchise (generating a c.€5.6 million loss), a post-pandemic decline in sales volumes, and a liquidity crisis arising from a contractual obligation to repurchase approximately €13 million of unsold goods from key supermarket customer EDEKA — a demand the group could not meet from its own resources, triggering €9.4 million in guarantee calls. By March 2025, management was actively managing cash flows and negotiating payment deferrals to avoid triggering insolvency under German law.
The group’s borrowing facilities — principally a €169 million English-law term loan and a €20 million revolving credit facility under a Senior Facilities Agreement (“SFA”), maturing August 2026 — were drawn in full. A €32 million interim bridging facility was put in place pending a comprehensive restructuring. The proposed scheme of arrangement under Part 26 of the Companies Act 2006 was designed to restructure the English-law-governed SFA liabilities as part of a broader package that would: transfer ownership to an autonomous Dutch foundation; create a new €119.6 million super senior facility (with a new money option for eligible creditors carrying a 1.45× elevation mechanic); exchange remaining SFA liabilities into a €12 million restated term facility and a €35 million holdco PIK facility; waive residual claims; and issue contingent value rights giving creditors a share in any eventual equity upside. The restructuring would reduce total group debt (excluding local facilities) from approximately €241 million to €166.6 million.
At the convening hearing, the court was required to consider: adequacy of notice; class composition (one or two creditor classes, depending on whether a parallel German StaRUG proceeding would bring lender UniCredit into the scheme as a scheme creditor); conduct and timing of the scheme meeting(s); adequacy of documentation; and whether any jurisdictional “roadblock” existed. One creditor, MeSoFa Vermögensverwaltungs AG in Abwicklung — designated a Sanctions Disqualified Person — objected to its proposed treatment under the scheme, including to the characterisation of its status and the mechanics by which its entitlements would be held in trust pending resolution of its sanctions position.
The Court’s Holding
Mr Justice Hildyard granted the order convening the creditor meeting(s). On jurisdiction, the court confirmed that although SCUR-Alpha 1092 GmbH is incorporated in Germany, it is liable to be wound up as an unregistered company under Part V of the Insolvency Act 1986 and therefore qualifies as a “company” for Part 26 purposes. The SFA and intercreditor agreement are governed by English law and subject to the exclusive jurisdiction of the English courts, providing the necessary connection to this jurisdiction. The scheme has the requisite “give and take” to constitute a compromise or arrangement: scheme creditors’ existing rights under the term loan and revolving credit facility are released, exchanged or waived in return for participations in the new facilities and the CVR entitlement.
On notice, the court was satisfied that 21 clear days’ notice was adequate given the sophistication of the creditor body (institutional lenders), the extensive pre-scheme engagement since April 2025 (including fortnightly lender calls and a steering committee process), and the fact that creditors holding approximately 79% by value had already signed or acceded to the amended lock-up agreement by the date the Practice Statement Letter was issued. No creditor complained of inadequate notice. On the comparator, expert evidence from EY Parthenon indicated that mid- and high-case creditor recoveries under the scheme (13.9% and 19.7% respectively) materially exceeded estimated returns in an insolvency scenario (10.7% and 14.8%), making creditor approval of the scheme not illogical, though ultimate fairness — including whether the elevation structure disproportionately benefits new money participants — was expressly reserved for the sanction hearing.
The court also addressed the treatment of MeSoFa as a Designated Scheme Creditor subject to sanctions restrictions. The proposed mechanism — holding its restructuring entitlements in a trust pending lifting of its sanctions designation or expiry of the trust term — was considered as part of the scheme architecture. MeSoFa’s substantive objections to its characterisation and treatment were noted but, consistent with established principle, questions of fairness and discretion at this stage go only to whether there is an obvious roadblock, with detailed merits reserved for sanction. Class composition questions — including the contingent second class if the StaRUG Debt Exchange brings UniCredit within the scheme — were addressed applying the Sovereign Life / Hawk Insurance framework, which turns on whether creditors’ legal rights are sufficiently similar to permit consultation in a common interest.
Key Takeaways
- A German GmbH with English-law-governed debt can access the English scheme of arrangement jurisdiction: foreign incorporation is no bar where the company is liable to be wound up as an unregistered company and the relevant contracts are governed by English law and subject to English jurisdiction.
- At the convening stage, courts examine only whether there is a jurisdictional roadblock or a clear obstacle to sanction — questions of fairness, including whether differential treatment of new money participants is proportionate, are expressly reserved for the sanction hearing.
- The court approved a bespoke sanctions-compliant scheme structure, under which a Sanctions Disqualified Person’s restructuring entitlements are held on trust by a Holding Period Trustee, as a mechanism capable of being presented to creditors — without prejudging the objecting creditor’s arguments on its merits at sanction.
- The 1.45× elevation mechanic — giving creditors who provide interim or new money a proportionally greater allocation of the new super senior facility — is a feature for creditors to assess commercially and for the court to evaluate for fairness at sanction, not a per se obstacle to convening.
- Expert valuation evidence placing mid-case scheme recoveries materially above the insolvency comparator is an important but not determinative factor at the convening stage; the court confirmed that the mid-case scenario is the appropriate comparator, following Re Standard Profil Automotive GmbH.
Why It Matters
This decision continues the well-established use of the English scheme of arrangement as the restructuring tool of choice for continental European borrowers with English-law-governed leveraged finance facilities. The Schleich case is notable for combining several features that courts and practitioners will study: a parallel German StaRUG process held in reserve as a condition to the scheme; a complex elevation mechanic designed to incentivise new money participation; and the challenge of structuring a scheme that is compliant with OFAC and OFSI sanctions obligations while remaining fair to a creditor whose entitlements must be placed in a holding trust rather than distributed directly. The judgment reaffirms that such features are not automatic roadblocks and can be assessed by creditors at the meeting and by the court at sanction.
For restructuring practitioners advising European corporates, the decision also underlines that sustained pre-scheme lender engagement — regular calls, open information sharing, and a high lock-up rate before the Practice Statement Letter — can compress the convening notice period and reduce the risk of procedural challenge. The treatment of the comparator analysis, endorsing the mid-case as the reference point for assessing whether creditor approval is rational, provides useful authority for future cases where insolvency scenario ranges straddle scheme recovery outcomes in certain stress cases.