High Court Grants Case Management Stay In Liability Management Exercise Dispute Pending New York Litigation

The Financial List has stayed a claim brought by a group of senior secured noteholders against the issuer and security agent, on the basis that it is materially parallel to related proceedings in New York: Cheyne European Special Situations Fund Investments SCA & Ors v TMF Trustee Ltd & Anor [2026] EWHC 2091 (Ch).

At the heart of this dispute was a type of liability management exercise, known as an “up-tiering transaction”, in which a borrower collaborates with a majority group of lenders to issue new, super-priority debt that forcefully subordinates non-participating minority lenders. Here, the claimant minority noteholders challenged the validity of the up-tiering transaction and purported enforcement by the majority noteholder (including the cancellation of the claimants’ notes), following the issuer’s subsequent default. Separate proceedings were issued by the claimants, firstly in New York and subsequently in England, and the defendants applied for a case management stay of the English claim.

Ultimately, the court held that there was a real risk that the English court and the New York court would arrive at inconsistent judgments and ordered a case management stay of the English claim. While there was an exclusive jurisdiction clause in favour of the English courts in an intercreditor agreement (the ICA), it was common ground that the claimants were not parties to the ICA. The exclusive jurisdiction clause provided a genuine nexus with England, but this was not a particularly strong factor in the specific circumstances and did not outweigh the risk of inconsistent judgments.

Firms trading and investing in securities will be interested in the court’s consideration of the “no look through” principle in immobilised securities trading. The question for the court was whether the claimants were “Senior Secured Noteholders” such that they could rely on the third-party rights clause in the ICA, and therefore the exclusive jurisdiction clause. Addressing this argument, the court considered the legal position of beneficial holders of securities held through clearing systems. The court held that the claimants were not Senior Secured Noteholders within the meaning of the third-party rights clause, because the parties intended the “no look through” principle to apply (per Secure Capital SA v Credit Suisse AG [2017] EWCA Civ 1486 - see our previous blog post). This meant the claimants, as beneficial holders, were not Senior Secured Noteholders for the purpose of the relevant clause. In consequence, the claimants could not invoke the ICA's exclusive jurisdiction clause, removing what would otherwise have been the strongest basis for resisting the stay.

We consider the decision in more detail below.

Background

Hunkemöller International BV (the Company), a European retailer based in the Netherlands, issued senior secured notes with a face value of €272,500,000 (the SSNs) under an indenture governed by New York law and a non-exclusive jurisdiction clause in favour of New York (the Indenture). The SSNs were constituted by a single global note registered in the name of a depositary and traded through the Euroclear and Clearstream settlement systems. TMF Trustee Limited (the Security Agent) was a party to an ICA governed by English law, which contained an exclusive jurisdiction clause in favour of the English court and regulated the priority between the Company's creditors. The claimants, a group of investment funds, were beneficial owners of €71,363,000 SSNs and formed part of a wider ad hoc group of beneficial noteholders (the AHG). Separately, Redwood Capital Management LLC and its related entities (together, Redwood) became the beneficial owners of €186,075,000 SSNs.

In June 2024, the Company entered into a series of transactions (the Up-Tiering Transaction) under which Redwood committed €50 million of new funding in return for the elevation of its existing SSNs to a higher priority ahead of other noteholders, including the claimants. The Company issued a new global note for the benefit of Redwood and cancelled Redwood's holdings under the original global note, reducing the SSNs in circulation to €86,425,000. Redwood subsequently provided further unsecured interim facilities to the Company.

In November 2024, the AHG commenced proceedings in the Supreme Court of the State of New York (the New York Claim) challenging the validity of the Up-Tiering Transaction as a breach of the Indenture. 

In February and March 2025, the Company defaulted on interest payments and the Security Agent, acting on instructions from Redwood as the purported "Instructing Group" under the ICA, enforced security over the Company's holding structure and transferred the secured liabilities to a Redwood entity for €86.7 million. The claimants' SSNs were subsequently cancelled. In connection with the enforcement, Grant Thornton produced a valuation of the secured debt which was disputed by the claimants. 

In October 2025, five claimants, who are each part of the AHG, issued separate proceedings in England (the English Claim) against the Security Agent and the Company. The claimants claimed that:

1. The purported enforcement and distressed disposal steps were invalid and ineffective because the Security Agent was not validly instructed, on the basis that Redwood did not constitute a valid “Instructing Group” (the Up-Tiering Claim).
2. Alternatively and/or in addition, the purported enforcement and distressed disposal steps were invalid/ineffective because, in giving the instruction to the Security Agent, Redwood did not act bona fide in the interests of the class of senior secured creditors as a whole, but in a manner that was oppressive or otherwise unfair to the minority, contrary to an implied term of the ICA, per the decision in Assenagon Asset Management SA v Irish Bank Resolution Corporation Ltd [2012] EWHC 2090 (Ch) (the Minority Oppression Claim).

In respect of both claims, the claimants sought declarations that the enforcement and distressed disposal steps were invalid and ineffective, and that the Security Agent was obliged to take all necessary steps to unwind the enforcement and distressed disposal actions. The defendants applied for a case management stay of the English Claim, arguing that it was materially parallel to the New York Claim.

Decision

Applicable test for a case management stay

The applicable test for a case management stay is whether it is in the interests of justice to grant a stay. This test was not in dispute, but the parties differed as to how that test should be applied, principally in respect of the significance of parallel proceedings and of the exclusive jurisdiction clause in the ICA.

The court noted that in Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See [2022] EWCA Civ 1051, the Court of Appeal corrected the “common misapprehension” that a case management stay could only be granted in “rare and compelling circumstances". 

The court then considered how that test applies where there are parallel proceedings in another jurisdiction. The prospect of inconsistent decisions could weigh heavily in favour of a stay, particularly where the party opposing the stay has itself commenced the foreign action. Borrowing Brandon LJ’s phrase from The Abidin Daver [1984] AC 398, the court referred to the associated risk of an “ugly rush” to judgment.  

That factor is not, however, determinative. Within the scope of the interests of justice test, the court must consider whether there is a countervailing reason for the English court to assert its jurisdiction. The case for allowing the English Claim to continue may be stronger where England is the contractually or legislatively designated forum, or where the foreign decision would not bind the parties in England. 

The application of the test therefore turned on the strength of the parallel proceedings factors on the one hand, and the significance of the ICA’s exclusive jurisdiction clause on the other. 

Parallel proceedings and the risk of inconsistent judgments 

Applying the framework set out above, the court considered each limb of the claim in turn.

The Up-Tiering Claim

The court accepted the defendants’ submission that the English and New York courts would be required to determine the same issues concerning whether the Company had breached the New York law-governed Indenture in implementing the Up-Tiering Transaction. In both proceedings, the alleged Indenture breaches were materially the same, and advanced allegations of bad faith likely to turn on the same facts. The Indenture contained a non-exclusive jurisdiction clause in favour of the New York court.

The court made the following observations:

• The validity of the Up-Tiering Transaction was central to the Up-Tiering Claim (that Redwood did not constitute the requisite Instructing Group for the subsequent enforcement under the ICA), and so the overlap was material to the English court’s analysis. 
• Any findings made by the New York court on the pleaded breaches of the Indenture would, if the New York proceedings were decided first, give rise to an issue estoppel binding on the Company in the English Claim, although the scope would be uncertain. 
• The Security Agent, although not party to the New York Claim, had agreed to be bound by the New York court’s findings concerning the Up-Tiering Transaction. 

For these reasons, the court considered there was a real risk that the English court and the New York court would arrive at inconsistent judgments in the English and New York Claims. This weighed strongly in favour of staying the Up-Tiering Claim, subject only to there being any stronger reasons for the court to maintain or assert its own jurisdiction to decide that claim (see exclusive jurisdiction clause discussion below).

The Minority Oppression Claim    

The court concluded that it was not possible to satisfactorily "hive off" the Minority Oppression Claim from the Up-Tiering Claim, and that a partial stay limited to the Up-Tiering Claim alone would therefore not be appropriate. 

The defendants argued that the relationship between the two claims was closer than the claimants suggested, because of the valuation issues arising in each. A central issue in the Minority Oppression Claim was whether the consideration attributed to the SSNs in the enforcement materially exceeded their economic value and, consequently, whether Redwood had abused its majority powers by instructing the Security Agent to transfer them on those terms. The economic value of the claimants’ SSNs could depend on the enterprise valuation ultimately adopted and, at certain valuations, on the ranking of the claimants’ SSNs when issued.

The court emphasised that the Minority Oppression Claim would not necessarily fail if the New York court upheld the Up-Tiering Transaction or accepted the relevant valuation evidence. However, if the Minority Oppression Claim and Up-Tiering Claim were determined separately, it would expose the two courts to reaching different conclusions on the Grant Thornton valuation and the economic value of the SSNs. Those overlapping issues meant the two claims were sufficiently intertwined that they could not sensibly be separated for case management purposes, and a partial stay limited to the Up-Tiering Claim would therefore not be appropriate.

The exclusive jurisdiction clause in the ICA

The claimants relied on the ICA’s exclusive jurisdiction clause as a countervailing reason for refusing the stay, and advanced three arguments:

1. The wording of the exclusive jurisdiction clause encompassed their claim even if they were otherwise third parties to the ICA; alternatively
2. As holders of the SSNs, they were entitled to rely on the third-party rights conferred by the ICA and therefore on the exclusive jurisdiction clause; alternatively
3. If neither of those arguments succeeded, the ICA’s English governing law and forum non conveniens clauses provided a nexus with England which should weigh against a stay. 

The court rejected the claimants’ first argument on the proper construction of the ICA: the benefit of the exclusive jurisdiction clause was limited to parties to the ICA themselves. The question therefore turned to whether the claimants could bring themselves within the third-party rights clause in the ICA.

The third-party rights clause provided that third-party rights would apply to any “Senior Secured Noteholder”. The claimants’ second argument was that they fell within that definition. In addressing this argument, the court considered the legal position of beneficial holders of securities held through clearing systems. 

It referred to the decision in Secure Capital, where the Court of Appeal applied the “no look through” principle, under which each participant in the custody chain only has rights against its own counterparty. A beneficial holder cannot simply look through that structure to enforce the contractual rights attached to the underlying securities. However, the court also considered Caxton International Ltd & Ors v Essity Aktiebolag (Publ) & Anor [2025] EWHC 1477 (Ch) (see our previous blog post), which distinguished between the direct enforcement of contractual rights and an application by a beneficial holder for declaratory relief. Caxton established that the absence of direct contractual rights does not necessarily prevent a beneficial owner with “a sufficient and legitimate interest” from asking the court to determine a dispute concerning the underlying securities. 

In the court’s judgment, the claimants were not Senior Secured Noteholders within the meaning of the third-party rights clause, because the parties intended the “no look through” principle to apply to the ICA, the Indenture and the SSNs. This meant the claimants, as beneficial holders, were not Senior Secured Noteholders for the purpose of the relevant clause. 

The court accepted the claimants’ third argument: that the ICA’s exclusive jurisdiction provisions provided a genuine nexus with England, and the claimants were entitled to bring proceedings in England seeking negative declarations in relation to the enforcement notwithstanding that they themselves were not parties to the ICA.

However, the weight to be given to that nexus was a significant issue. Earlier authorities cited by the court, including MAD Atelier International BV v Manès [2020] EWHC 1014 (Comm) and Athena had treated an exclusive jurisdiction agreement as capable of providing a strong reason for the English court to proceed notwithstanding the risk of inconsistent judgments. The court distinguished those cases on the basis that they arose in a materially different context. Both involved the Brussels Recast Regulation, under which jurisdiction had been allocated to the English court. In MAD Atelier, the foreign proceedings would also not give rise to an issue estoppel. In the circumstances, there was a “positive reason” for the English court to assert its jurisdiction notwithstanding the risk of inconsistent judgments. 

Those features were absent here. The New York proceedings would be capable of giving rise to an issue estoppel on issues material to the English Claim and there was no equivalent or treaty-based scheme allocating jurisdiction between the English and New York courts. In addition, the claimants were not themselves parties to, or entitled to invoke, the ICA’s exclusive jurisdiction clause. 

Outcome

The court held that, although the ICA’s jurisdiction provisions provided a genuine nexus with England, this was neither decisive nor a particularly strong factor and did not outweigh the risk of inconsistent judgments. Accordingly, the court ordered a case management stay of the English Claim until the decision at first instance in the New York Claim, with permission for the defendants to restore their application for a further stay pending any appeal, and gave the claimants liberty to apply to vary or discharge the stay in the event of any material change of circumstances. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.