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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Representation of Transtech Glass Investment Limited (Royal Court : Hearing (Civil)) [2025] JRC 069 (12 March 2025) URL: https://www.bailii.org/je/cases/UR/2025/2025_069.html Cite as: [2025] JRC 069, [2025] JRC 69 |
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Insolvency - Winding-Up Application
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Before : |
R. J. MacRae, Esq., Deputy Bailiff, and Jurats Ronge and Entwhistle |
IN THE MATTER OF THE REPRESENTATION OF TRANSTECH GLASS INVESTMENT LIMITED
AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991 (AS AMENDED)
Advocate J. W. Angus for the Representor, Transtech Glass Investment Limited.
judgment
the deputy bailiff:
1. Transtech Glass Investment Limited ("the Company") is a private Jersey company, limited by shares, incorporated under the laws of Jersey, with the registered company number 99583, being incorporated on 18 December 2007. The Company is the ultimate holding company of an international Group of companies collectively known as AGP Group. The AGP Group is engaged in the business of development, manufacture and supply of specialist automotive and security glass products. As is further particularised below, the operations of the Group are predominantly divided between a European business and an American business.
2. By an application heard and determined on 4 December 2024, the Company sought, inter alia, an order that it be wound up on the just and equitable basis pursuant to Article 155 of the Companies (Jersey) Law 1991 ("the Law").
3. The share capital of the Company is arranged as follows:
(i) 4,000,000 Ordinary A Shares with a par value of US$1.00 each. The Company has issued 735,976.4955 Ordinary A Shares.
(ii) 112,412.166250 Ordinary C Shares with a par value of US$2,275.18385 each. The Company has issued 112,412.1663 Ordinary C Shares.
(iii) 79,205.23314 Series B-1 Preferred Shares with a par value of US$2,275.18385 each. The Company has issued 31,3161.9739 Series B-1 Preferred Shares.
(iv) 38,899.97265 Series B-2 Preferred Shares with a par value of US$782.7769 each. The Company has issued 29,579.86754 Series B-2 Preferred Shares.
(v) 87,943.637450 Series C Preferred Shares with a par value of US$2,274.18385 each. The Company has issued 87,943.67542 Series C Preferred Shares.
(vi) 67,276.88265 Series D Preferred Shares with a par value of US$2,274.18385 each. The Company has issued 67,276.88264 Series D Preferred Shares.
4. The Board of Directors of the Company is comprised as follows:
(i) Mr Miguel Martinez Alanis. Mr Martinez Alanis is a Private Equity Fund Manager by profession, and is a representative of MXO Capital, one of the Company's shareholders on the board. Mr Martinez-Alanis joined the Board on 5 July 2023.
(ii) Mr Edgar David Legaspi. Mr Legaspi is a Partner at BDT & Company, one of the largest shareholders and creditors of the Company. Mr Legaspi joined the Board on 9 April 2021.
(iii) Mr Mario Arturo Benjamin Mannheim Astete. Mr Mannheim is the Chief Executive Officer of the AGP Group and is a member of the family who founded the AGP Group in the 1930s. Mr Mannheim joined the Board on 23 November 2017.
(iv) Professor Barry James Nalebuff. Professor Nalebuff is the Milton Steinbach Professor of Management at Yale University. Professor Nalebuff joined the Board on 20 January 2016.
(v) Mr William Michael Russo. Mr Russo is a specialist advisor in the automotive industry and a management consultant. Mr Russo joined the Board on 29 April 2021.
(vi) Mr Nick Pike. Mr Pike is the Chief Executive Officer of Pike Restructuring and formerly a partner at Pinsent Masons in London, where he headed the Restructuring team. Mr Pike joined the Board on 21 February 2024.
(vii) Mr Sam Gabbita. Mr Gabbita is a co-founder of Qell Holdings UGP alongside Mr Engle. Mr Gabbita is an experienced investment manager. Mr Gabbita was appointed as a director on 30 August 2024.
5. The AGP Group consists of twenty-three companies spread across fifteen jurisdictions in Europe, Asia, North America, and Central and South America. The business began trading as a family business in Peru in the 1930s.
6. The principal trading activities of the Group occur in respect of the European business in three companies, and in respect of the American business in four companies.
7. The AGP Group develops, manufactures and supplies glass products, with its business predominantly falling into two broad categories. First, a business which develops, manufactures and supplies high-tech glazing material to original equipment manufacturers in the car industry hence called OEMs. This is known as the "eGlass Unit". Secondly, a business which develops, manufactures and supplies security and defence glass for naval, military and law enforcement applications, known as the "sGlass Unit".
8. The eGlass Unit is the largest part of the business of the AGP Group. European customers include such manufacturers as Volkswagen, BMW, Volvo and Jaguar Land Rover. American customers include Tesla and Polestar.
9. The AGP Group derives its value from income generated from commercial activities, plant machinery and materials owned by companies in the Group and intellectual property owned by the Group.
10. The Company has liabilities arising from various facility agreements instituted between the Company and various lenders and other members of the AGP Group, second-ranking facility agreements and a further facility agreement entered into between the Company and Tesla.
11. The Company also has a number of contingent liabilities arising pursuant to parent company guarantees provided by the Company in respect of the ordinary business activities of other parts of the AGP Group.
12. Unfortunately, the AGP Group has been in a difficult financial position since the pandemic, and this deteriorated further in early 2023. This deterioration arose from previous decisions taken to obtain financing to expand the operations of the Group so as to meet the anticipated demands of large customers, in particular Tesla. The pandemic; the Ukraine conflict; delays in the launch by its customers of new vehicles for which the AGP Group was the supplier of glazing products, meant that the Group had expended significant resources to permit supply, and there was lower than anticipated customer demand for such products.
13. Owing to the nature of products made by the AGP Group, significant investment in research and development is required to design and build and meet the specifications demanded by OEMs.
14. In respect of the European business, the AGP Group won contracts with OEMs to supply products for future launches and invested in facilities in Belgium. The cost of investment and operation of the facilities meant that the cost per unit of product made exceeds by a number of multiples the cost which the OEMs are prepared to pay. In the American business, the main customer is Tesla and revenue is directly impacted by the needs and demands of that company. The AGP Group won a significant contract to supply Tesla with glazing for the windscreen and roof of the Tesla Cybertruck which was anticipated to sell in substantial quantities. The AGP Group invested in building a new factory in Monterey, Mexico in order to service the needs of Tesla. This was funded by borrowing. The launch of the Cybertruck was delayed, the demand for the Cybertruck is significantly below original expectations, and now the cost per unit manufactured is much higher than anticipated and higher than the cost per unit which Tesla is contractually obliged to pay.
15. The cumulative effect of these factors is that notwithstanding the excellence of the AGP Group product and its high quality client book, the business now has negative earnings before income tax, depreciation and amortisation -� EBITDA.
16. For the last eighteen months or so, the Company and the AGP Group have explored a number of ways to stabilise the Group. These include, in the briefest summary, attempting to raise capital by the issue of shares, seeking bridging finance and sale of parts of the AGP Group. We were given significant detail in relation to each of these possible routes. None were successful. In particular, it was not possible to agree commercial terms with any of the interested parties, the lenders of the Company and the customers of the AGP Group.
17. Throughout this time, the AGP Group did receive financial support from its customers referred to Accommodation Agreements, whereby the OEMs provided financial support to the AGP Group companies with whom they had a contractual relationship. This happened in relation to both the European and American businesses. For example, in relation to the European businesses, each OEM agreed to provide the Company with funds, unsecured, to assist the Company with meeting its capital and operating expenditure.
18. In relation to the American business, for example, Tesla agreed to pay for products being shipped to them within ten days, as opposed to the contractually agreed sixty days, and agreed to pay a surcharge on products provided by the Company. These measures provided a level of short-term security to the AGP Group.
19. The AGP Group sought to negotiate long-term Accommodation Agreements with the OEMs and senior lenders, but it proved impossible for such agreement to be reached.
20. The AGP Group reached a "point of no return" when these negotiations broke down. In relation to the European business, there was, inter alia, too large a gap between the current EBITDA of the AGP Group companies that service the European business and a viable positive EBITDA under the terms of the proposed Accommodation Agreements.
21. In relation to the American business, the largest customer, Tesla, has located an alternative supplier for the products manufactured by the AGP Group. AGP was able to negotiate an agreement whereby Tesla would purchase all glazing sets for the Cybertruck, pay a surcharge on those glazing sets and pay for any glazing sets delivered but only until 15 October 2024. After this date, which has now passed, Tesla moved its supply requirements to its new supplier and ceased ordering product from the AGP Group.
22. Given the size and complexity of the AGP Group and the potential for certain parts of the AGP Group to continue to trade as going concerns, it is anticipated that the liquidation of the Group will take place in stages. Six of the companies at the date of the hearing had entered insolvency proceedings in their home jurisdictions.
23. The Company considered that each of its creditors, including contingent and trade creditors, customers and directors, are fully aware of the intentions of the Company and the AGP Group as a whole to enter into a global winding down of the business via bankruptcy and / or restructuring. In the circumstances, we were invited to order the winding up of the Company on the just and equitable basis with public notices being placed in the Jersey Gazette, the Gazette in England and Wales and the relevant Gazette / similar publication in Mexico, with all affected third parties being given liberty to apply.
24. The Company liaised with the Viscount in advance of the issuing of the Representation. The Viscount has confirmed that he had no objection to the Company seeking an order that it is wound up on the just and equitable basis.
25. Article 155 of the Law provides:
26. Where the affairs of a company are complex or particularly technical, the just and equitable winding up can result in a more cost effective winding down than a désastre given the potential of the Viscount to expend considerable time and resources, including through engagement of external advisers and service providers.
27. The picture in this case is of a complex corporate structure with particularly complex security and inter-creditor arrangements with the potential to trigger multiple cross-structure defaults, claims and liabilities, a number of which would directly engage the Company. For example, as security for the Company's borrowing, it has pledged as collateral its current and future shareholdings in the companies it directly owns, namely AGP Lux and AGP Panama. There is also in this context a need for the AGP Group to continue trading for a time, with the potential for some parts of the AGP Group to be sold as going concerns, for example, the Peruvian companies.
28. The selected liquidators have substantial knowledge and expertise and the two selected have been engaged with the Company for a period of time and have context of the Company's insolvency contingency planning. They are closely acquainted with the affairs of the Company and the AGP Group.
29. The affidavit sworn on behalf of the Company indicates that parts of the AGP Group will need to continue to trade for a period of time to meet customer demand and maximise value in the relevant companies. This will benefit the creditors.
30. Importantly, most of the creditors of the Company knew about the hearing before the Royal Court on 4 December 2024 and, critically, all the creditors referred to at paragraph 10 herein, namely the secured creditors of the Company and other members of the AGP Group, were fully aware of the hearing before the Court and its purpose. Collectively the creditors are owed several hundred million dollars. The creditors, who are shareholders who have advanced substantial funds to the Company and connected companies, were represented at a meeting of the directors of the Company on 20 November 2024, and were fully aware of the fact that a just and equitable winding up of the Company was being sought before the Royal Court on 4 December 2024 and were aware of other proceedings affecting other companies in the AGP Group, including insolvency proceedings began under judicial administration in Belgium on 29 October 2024, insolvency proceedings began in Switzerland on 31 October 2024, chapter 7 applications filed in relation to the US and German companies on 14 November 2024, and other liquidation proceedings in Luxembourg, Hong Kong and China. The board unanimously resolved that an application should be sought from this Court to wind up the Company on the just and equitable basis.
31. In Aston Martin Lagonda Limited [2024] JCA 071, Storey JA, giving the judgment of the Court, having set out the relevant extract from Article 155 of the Law, referred to the judgment of the Royal Court appealed as follows:
32. As to loss of substratum, the Royal Court stated at first instance in the Aston Martin case (see in Re Ferguson [2023] JRC 250 at paragraph 46):
33. As can be seen, the Royal Court said that the substratum or purpose for which the company was established was to act as a buffer between the shareholders or between the shareholders and AMW.
34. On appeal, the Court accepted this finding and said at paragraph 33:
35. In this case, although the substratum of the Company was not spelt out in the affidavit sworn on behalf of the Company, it was submitted that the Company is a holding company and the board in this case (as was proved by the minutes exhibited to the affidavit of Mr Pike) is the controlling mind of the AGP Group as a whole. Although the board of the Company did not take decisions affecting the day-to-day activities of the underlying companies, it did take critical decisions affecting the AGP Group as a whole. For example, it was the board of the Company that dealt with attempts to sell the whole AGP Group business. As a consequence of the insolvency of the underlying vehicles, the Company would soon have no underlying purpose. Either some or all of such companies would be wound up and sold, leaving the Company without a role. At the termination of that process its substratum will have gone, and a gradual loss of that substratum would begin as the Company was denuded of its assets. The Company was a traditional holding company with strategic authority over a trading group, the substratum of which will gradually be lost. We accepted this proposition, and we accept the fact that the AGP Group is on track to be dissolved in the short to medium term amounts to a loss of substratum.
36. The Court has repeatedly said that it should exercise caution before permitting a just and equitable winding up to proceed in preference to other insolvency procedures. At the date of the hearing, the Company was not insolvent on a cashflow basis but was insolvent on a balance sheet basis. Other parts of the Group are insolvent on either basis. It was urged upon us that a creditors' winding up or désastre procedure were unsuitable for various reasons. The shareholders of the Company may have difficulty in passing a Special Resolution to place the Company into a creditors' winding up or a désastre as this would involve a statement that the Company was, at the date of the Resolution, cashflow insolvent. The directors of the Company were unlikely to be comfortable either waiting until a claim against the Company crystallises into cashflow insolvency or swearing a solvency statement as matters stand for the purpose of a summary winding up.
37. In summary, the Court accepted that a just and equitable winding up was appropriate in the circumstances, where:
(i) There was a need for parts of the AGP Group to continue to trade for a period of time for the benefit of creditors and customers;
(ii) There was a potential for parts of the AGP Group to be sold as a going concern;
(iii) The Company would soon lose its substratum with the liquidation or wind down of its subsidiaries; and
(iv) There are advantages of having the proposed liquidators appointed by the Court rather than liquidators selected as part of a creditors' winding up. They have been involved with the Company since March 2024 and are familiar with the workings of the Company, the AGP Group as a whole, and have attended board meetings on a regular basis.
38. In the circumstances, we granted the application. We accepted it was unnecessary to convene all the creditors, in particular having regard to the fact that on the evidence we saw only the senior lenders to whom we have referred, all of whom are fully apprised of the steps being taken for the orderly winding up of the AGP Group and are supportive of the steps taken hitherto and to be taken, are likely to benefit from the winding up of the Company. We also note that pursuant to the terms of the order we made, the liquidators appointed may need to return to the Court in due course to seek further directions in relation to the Company exercising its rights as shareholder to various transactions in underlying companies, particularly in relation to the Panamanian holding company. In any event, the Notices which we have ordered be placed in relevant publications will give all persons affected liberty to apply.