Dutch Court Hears Arguments Over Admissibility of Selecta Share Pledge Enforcement Appeal; Deltroit Says ‘Fate of European Restructuring’ in the Balance; Decision Due June 30

Last week, Dutch appeal judges heard arguments over the admissibility of an appeal brought by Selecta’s former minority bondholders. The appellants, led by Deltroit, CQS and Algebris, are seeking to overturn a May 2025 share pledge enforcement that handed the Swiss vending machine group to an ad hoc group of its bondholders (including SVP, Diameter and Man Group) from incumbent sponsor KKR for €1 in a controversial restructuring.

The sale of pledged shares under article 3:251 of the Dutch Commercial Code, or DCC, is typically not subject to appeal. This has traditionally been justified by the purchaser’s needs for quick clarity on whether it has become owner of the relevant asset or not. However, the appellants seek to overcome this prohibition in the present case and unwind the share pledge enforcement.

However before the full appeal can be heard the court will first rule on whether the appeal is admissible, and in particular whether the appellants have standing to bring the appeal at all as “interested parties.” The court heard arguments about the allegedly coercive nature of the restructuring which followed the enforcement, whether the appellants’ rights to a fair trial have been breached and whether beneficial noteholders have any rights to litigate outside of the express terms of the intercreditor agreement.

The matter was heard by three appeal judges of the Netherlands Commercial Court in Amsterdam on April 16 and was attended by Octus. A judgment is expected on June 30. The parties also indicated that an appeal to the Dutch Supreme Court is likely either way.

In a statement read to the court in person, William Moreno, head of situational investing at Deltroit, said the idea that the minority noteholders are not interested parties is “absurd.” They and other minority holders who have chosen not to fight, such as Dutch asset manager Robeco, have incurred tens of millions of euros in losses, he said, which is money that ultimately belongs to institutional investors such as pension funds and insurance companies.

“This is not just about Selecta, but the fate of financial restructurings in Europe and whether similar abuses will be allowed going forward,” Moreno said. “We are almost certain that the majority lenders will do this again if they get away with it this time.”

Moreno suggested that the facts of the case are so “upsetting” that business school case studies will be written on it in years to come, and he wouldn’t be surprised if someone writes a book about it.

Lawyers for Selecta said the company “cannot help but feel that the main objective of the appellants is to hold Selecta and its stakeholders hostage in these Dutch proceedings, with the threat of a reversal of the share pledge enforcement.”

The court heard that the future of the proceeding is likely to comprise three phases:
 

• Phase one: (the April 16 hearing) concerns admissibility. If the appeal is deemed inadmissible the appeal will fail;
   
• Phase two: If the appeal is deemed admissible, the court will then consider if there are grounds to lift the appeal prohibition i.e., the appeal will be heard on the merits; and
   
• Phase three: The decision at first instance is reopened and will be reconsidered. The original share pledge enforcement judgment will either be affirmed or quashed.
   

Submissions were made by appellants, Deltroit and CQS. The respondents, Kroll as trustee and security agent, Selecta and Seagull Bidco as the acquisition BidCo for the majority ad hoc noteholders were all independently represented.

Professor Jared Elias, Professor Riz Mokal, Judge Shelley Chapman (retired) and Stephen Robins KC as expert witnesses on matters of English and New York law also attended the hearing remotely. They were on hand to respond to any questions about their written evidence, though none were forthcoming.

Enforcement as a Prelude to a ‘Discriminatory’ Restructuring

Opening proceedings for the appellants, Sid Pepels of Jones Day explained that discrimination against the minority noteholders “is at the very heart of the Selecta restructuring.”

The appellants say Kroll, as trustee and security agent, “abused” the statutory mechanism of article 3:251 DCC and the procedures of the court with the sole aim of enriching the majority noteholders to the detriment of the equally ranked minority noteholders. In such circumstances, they say, the rationale for upholding the appeal prohibition should not apply.

In particular, they say the court was not correctly informed that the enforcement was a necessary precondition for a subsequent debt exchange in which first lien debt was exchanged for essentially worthless third priority notes issued by the acquisition SPV, Seagull Bidco Ltd. As such, the appellants say they should have been considered interested parties and were not given the opportunity to be heard by the court. Had they done so, they argue, the court would not have approved the sale.
 

A larger copy of the recapitalization summary is HERE.

As Pepels explained to the court, all first lien noteholders received third-out notes following the shared pledge enforcement. The majority of holders were, on June 12, 2025, given the opportunity to immediately exchange those third-out notes for first-out notes, which they all did via a private exchange. A week later, the minority holders were granted the same opportunity.

However, two months prior in an April 9, 2025, term sheet, Selecta and the ad hoc group had agreed that the new first-out notes would contain two “highly unusual and discriminatory conditions that actively discouraged the minority holders from converting their third outs into first outs.” The first related to sacred rights in the indenture, the second to payments for consent.

The first-out notes provide that sacred rights, such as the right to demand payment of principal, the entitlement to interest and changes to the maturity date can be stripped with simple majority consent during the 12 months following the restructuring (a term which can be extended) and not the typical 90% threshold which applies to the second- and third-out notes.

Similarly, the first-out indenture contains a payments for consent clause, intended to ensure that if Selecta pays some holders of the first-out notes in order to obtain the required 50% consent to waive sacred rights, all other noteholders are entitled to receive the same payment, i.e., a pari passu protection. However that protection also does not apply during the first 12 months after the restructuring, which can also be extended with majority consent.

This raises the possibility of Selecta offering a majority of the first-out notes new first ranking bonds in exchange for canceling the existing notes without compensation. “By deactivating the payments for consent clause,” Pepels told the court, “the first out indenture expressly authorises discrimination against minority holders of first out notes.”

Pepels also highlighted the discriminatory effect of the cooperation agreement, also signed on April 9, 2025, in which the majority holders agreed to only use the non-market conditions in the first-out notes exclusively for their own benefit.

As the majority holders own nearly all the shares in Selecta and more than half of the first-out notes, “they now completely control whatever happens to the first out notes.”

Quoting Octus, Pepels said the minority holders were presented with a “Hobson’s choice” of opting to either convert to first-out notes that could be canceled without compensation or holding on to worthless third-out notes.

“The minority holders could choose between being shot in the left foot or in the right foot, whilst the majority holders were handed the trigger,” Pepels said. That some minority holders chose to convert in no way demonstrates that the coercive offer was fair, as the ad hoc SPV suggests, it merely highlights that both options were “equally awful,” he added.

The appellants ultimately chose not to convert their third-out notes as any minority holder wishing to do so was required to sign an extensive release letter waiving any rights to challenge the restructuring. Instead they chose not to convert so they “could seek to undo the injustice” Pepels said. He added that some minority holders who did convert have told them that they were unaware of the release waivers in the “fine print.”

The appellants say the discrimination is obvious from the price of the new notes in the secondary market. Deltroid has adduced evidence from brokers showing recent pricing for the first-, second- and third-out notes. First-out notes held by the majority holders are offered at 60% or 65% of their nominal value, while minority held first-out notes not party to the cooperation agreement are offered between 4 to 7 cents on the dollar.

The appellants explained that the discriminatory treatment of the minority holders was unnecessary to refinance Selecta and provided no benefit to the company itself, which paid €66 million in transaction fees, including for the ad hoc group’s advisors, to obtain €36 million of additional cash and hardly deleveraging at all.

The appellants have adduced an expert report from Professor Riz Mokal who concludes that the enforcement instruction on which this entire share pledge enforcement is based is void under English law, as it was given for improper purpose and in bad faith, rendering the share pledge enforcement null and void as well, sometimes referred to as the abuse principle, most recently confirmed in the 2012 Assénagon case.

Lawyers for Seagull, the ad hoc group-owned SPV, say there is no room to read such implied constraints into the clear and comprehensive provisions of the intercreditor agreement, which have been negotiated between sophisticated parties.

The Right to Be Heard and Access to the Case File

Appellants say they were deliberately excluded from the share pledge enforcement proceedings despite being the parties most directly affected by its outcome.

For the appellants, Camilo Schutte of Avizor said their fundamental right to be heard, under Article 6 of the European Convention of Human Rights (right to a fair trial) has been breached and that the possibility of lifting a prohibition of appeals was created for precisely cases such as this.

Schutte says the appellants must be presumed to be interested parties at least on a preliminary basis until the appeal is heard in full. As such, he says, the appellants should be granted access to the case file of the first instance proceedings, the exhibits filed with the court and the unredacted version of the enforcement judgment.

Schutte told the court that Selecta “will do anything to keep the case file from the light of day. The question is why? The petition is not a secret proceeding. The defendant’s desire to keep the case file undisclosed is simply illegitimate.”

Selecta says the lower court was informed that CQS and Algebris and Robeco had been in discussions with Selecta about providing financing and it was the court itself which decided not to summon them to appear as interested parties. Schutte said to operate on this basis, without access to the court file, is to ask the court to adjudicate on the basis of hearsay. What information was submitted to the lower court will have to be reviewed in the merits phase on the basis of the actual submissions to the lower court, he added.

“In any event, it is already clear that something went wrong, I would say terribly wrong, in the proceedings before the NCC,” Schutte said. He accused Selecta, Kroll and the ad hoc group of “pre-cooking” the petition to the court behind their back and keeping them, and the court, “in the dark” about their intentions.

For Selecta, Vincent Vroom of Loyens Loeff said this was a misrepresentation of fact. He said not only do the appellants not qualify as interested parties, “they did not even try to be heard” despite the fact that they were well aware, or should have been aware of the restructuring and the enforcement proceeding. “The appellants consciously chose to stay on the sidelines, which cannot be a justification for now lifting the appeal prohibition.”

Issues with the Enforcement Judgment

The appellants also contend that the original enforcement judgment contains material errors that undermined the decision. Selecta neglected to sufficiently disclose to the court the discriminatory nature of the restructuring, Pepels said.

Firstly, the court appears to have incorrectly assumed that the entire $1.2 billion of debt would be waived. Pepels said the enforcement in this case should not be confused with a traditional credit bid since, he argues, the first lien and second lien notes were not released in return for the shares, rather, those notes were exchanged for new first-, second- and third-out notes.

“To the extent that the Selecta restructuring did indeed result in any debt reduction debt for the group […] this in no way constitutes a purchase price for the shares,” he told the court.

Pepels said the share pledge enforcement deviated substantially from previous holistic credit bids such as in Lebara or Hema, both of which involved share pledge enforcements and sales approved by the Amsterdam court. If the sale had been by way of a traditional credit bid involving a set off or a holistic approach (which accounts for a commitment from the buyer to reduce part of the outstanding debt after the share transfer) then the outcome would have been different. In this scenario, the shares would have been allocated to all first lien noteholders as creditors entitled to the enforcement proceeds and they would have all received their pro-rata portion of the shares based on their percentage of holdings.

Dispute Over Whether Adequate Notice of the Hearing Was Given

Deltroit and CQS maintain that they were not adequately notified about the share pledge enforcement proceedings.

A lawyer for Selecta said, “The fact is that appellants were aware of the shared pledge enforcement but chose not to act. In their written submissions, the appellants tried to give the impression that they were purposefully kept in the dark about the fact that the restructuring took place. However, this is not the case.”

Selecta pointed to the fact that creditor negotiations had been widely reported on in the press and the appellants had engaged with the company and its advisors about finding a solution to its financial difficulties but they “chose not to act.”

From March 2025, Deltroit expressed only a general willingness to provide new money, Selecta said, which was conditional upon further review of the economics. However “Deltroit never put forward a concrete, committed and readily implementable proposal.”

Selecta conceded that it had received a preliminary restructuring proposal from a group including Robeco and CQS as of April 16, 2025, but that it had already agreed a framework with the ad hoc group “simply because there was no time left” as all Selecta’s debt was due at the end of the month.

However, the framework provided insufficient basis for Selecta to resolve its financial difficulties and did not constitute a readily implementable and unconditional offer for the shares. When Selecta explained this to the Robeco group, they said Robeco simply stopped the correspondence with Selecta, whereas before that moment they had been in contact almost every day.

The company said it has negotiated the only viable solution presented to it, and on April 30, 2025, all first lien noteholders received notice through the clearing systems. “This notice stated amongst others that Kroll, in its capacity as security agent, had filed a petition with the NCC to request approval for the envisaged share pledge enforcement. CQS was also informed of the petition directly via email.”

The appellants contend that this “two sentence notice” does not constitute notice under the Dutch civil procedure rules as notice to interested parties must include a copy of the petition.

Deltroit also said it never received the notice, but Selecta said this is an issue between Deltroit and its custodian, Barclays, and has nothing to do with them.

The appellants say the right to be heard can also be violated by scheduling proceedings on such short notice that participation is impossible. “As Kroll is acutely aware, it takes time to push information down the clearing system,” Schutte explained. Kroll, he said, filed the enforcement petition April 30, 2025, and the same day, Selecta asked the court to grant a petition without holding a hearing. On May 1, 2025, the court ruled on the interested parties issue, and several days later the share pledge enforcement was scheduled for judgement. “They did everything they could to get a judgement as soon as possible,” Schutte said.

Selecta said that later the same day, April 30, 2025, the company issued a press release confirming that the deal would be implemented through a controlled enforcement process.

In court, the appellants’ lawyers quoted Octus’ own Chris Haffenden regarding the paucity of information in the press release, “I looked for the outline of terms at the bottom of the release, but there was nothing more; nada, diddley squat, just two pages, and one with CEO quotes.”

Joost Volkers of Van Doorne for Kroll, dismissed this as “opinionated reporting aimed at stirring controversy.”

Admissibility: Interested-Party Status

The respondents, Selecta, Kroll and Seagull Bidco deny that the appellants have standing to appeal as interested parties and maintain that only Kroll as trustee is entitled to take enforcement action on the instruction of the majority of noteholders. Both sides contested the meaning of a recent decision of the Dutch Supreme Court issued in late March dealing with the issue of interested parties in litigation.

Joost Volkers of Van Doorne for Kroll told the court that almost all the arguments raised by the appellants in court are irrelevant to the narrow threshold question of admissibility and are instead aimed at drawing the court into a hearing into a substantive debate on the merits of the restructuring.

Throughout the restructuring, Volkers said, every step was taken in strict accordance with the applicable finance documents, as evidenced by the expert opinions of Judge Chapman and Stephen Robins KC.

In particular the terms of the notes bind individual noteholders to majority decisions instructing the trustee and security agent. The restructuring included enforcement of a pledge of the shares by way of a private deal, and the ad hoc group constituted an instructing majority for the purposes of enforcement under the increditor agreement. “The appellants bound by those mechanisms cannot now circumvent them by claiming individual standing,” Volkers said.

The appellants are dissatisfied with the terms of new debt instruments subsequently issued by Seagull and have since embarked on a campaign in multiple jurisdictions to challenge those terms, he added.

Volkers said the appellants are beneficial noteholders anyway and do not actually hold the notes, as such their interest is “too remote” for them to be interested parties.

For the appellants, Camilo Schutte of Avizor explained that minority noteholders clearly have standing to bring the appeal as interested parties. He pointed to the Dutch WHOA procedure as an example of beneficial noteholders who are ultimately impacted by a restructuring being permitted to take part in, and vote on, proceedings.

Accepting the appellant’s reasoning would mean that any party bearing an economic consequence of an enforcement could claim interested-party status, Volkers said. Various authors have warned against a broader interpretation of the interested-party concept in share pledge enforcement proceedings because it would risk opening Pandora’s box, as practically any creditor would then have standing.

Echoing this point, Vroom for Selecta said the test for interested parties is construed strictly in enforcement cases as it provides for legal certainty and is in line with the intentions of Dutch legislators, “If individual note holders can bypass those syndicated loan structures by claiming interested party status, the safeguards underpinning collective creditor representation by a trustee or security agent becomes completely illusory.”

However, Kroll, Schutte said, cannot possibly be expected to file and plead in favor of the enforcement petition on behalf of the majority holders, and also, argue against that same petition on behalf of the minority holders.

Counsel

Deltroit was represented by Jones Day. CQS was represented by Avizor. Kroll was represented by Van Doorne, Selecta by Loyens Loeff, and Seagull Bidco by De Brauw.