Legal Analysis: Framework Surrounding Road King’s Creditor Classification Debate

Relevant Document:
RSA Terms
 

• Class composition has become a critical point of contention in Road King Infrastructure Ltd.’s restructuring proposal. It intends to group the Hong Kong-listed property developer and toll road owner’s bonds and perpetual securities together for its concurrent restructuring schemes of arrangement (jurisdiction(s) not confirmed yet). The move is being contested by an Independent Bondholder Group, IBG, which argues for separate classes on the basis that the bonds are already due and payable while the perps are not;
• Class composition is critical because scheme approval requires majority support in number and 75% in value for each distinct class (assuming a scheme jurisdiction without a cross-class cram-down mechanism);
• Depending on the holdings of the IBG (which as of June 17, 2026 claims to hold over 23% of the bonds’ outstanding principal), a multiple-class structure could grant it a veto to block the restructuring, whereas grouping all debt into a single class strategically dilutes the holdout power of any dissenting minority;
• The bonds and perps appear to be ranked pari passu. Road King’s restructuring proposes that the bonds and perps release identical claims against the same guarantors, with the instruments receiving identical restructuring consideration options. Case law precedent also establishes that differing maturities alone do not fracture a class; and
• In determining class composition, courts place significance on a scheme’s “relevant alternative” – which in Road King’s case is liquidation – including by considering whether creditor groups share an overarching interest in avoiding formal insolvency. While the IBG argues a liquidation would yield higher recoveries, Road King counters with independent analysis demonstrating that the restructuring preserves greater value.

One of the central disputes between Road King Infrastructure Ltd. and an Independent Bondholder Group, or IBG, around the Hong Kong-listed property developer and toll road owner’s restructuring proposal is the class composition under its planned schemes of arrangement. Given guiding principles from case law, the company’s proposed single-creditor-class structure – which the IBG is campaigning against – appears convincing. If this matter reaches court, the outcome will be important for the construction of future restructurings.

It should be noted that both Road King and the IBG have publicly accused the other of not providing analysis to substantiate their respective class-composition position. However, Road King counsel Linklaters said on an all-holder call that the company has obtained a “very clear opinion” from an English King’s Counsel – all the securities covered by the planned schemes are governed by English law – endorsing the single-class approach.

The following analysis engages with some of the issues the dispute may raise.

Dispute Background

Road King, advised by Linklaters and Alvarez & Marsal, contends that its bonds and perpetual securities (see capital structure) should be all be grouped into a single class for its proposed concurrent schemes, given their pari passu ranking, as outlined in its restructuring support agreement, or RSA. This position is supported by a consenting creditor group labeled the Ad Hoc Group, which has nearly 28% of the outstanding principal of the bonds and perps, and is advised by PJT Partners and Kirkland & Ellis.

Conversely, the oppositional IBG, represented by Latham & Watkins and holding as of June 17, 2026 23.72% of just the outstanding principal of the bonds, argues that the bonds must be placed in a separate class from the perps. This is on the basis that the bonds are currently due and payable (following missed coupons and acceleration) while the perps are not, given their deferred distributions, and according to the IBG, they are “unlikely to become payable absent voluntary redemption”.

Creditor classification is important because it often dictates voting dynamics. A scheme is only approved if each class votes in favor, assuming the jurisdiction doesn’t allow a cross-class cram down, which is likely the case for Road King (see below). A favorable vote requires a majority in number representing at least 75% in value of the creditors present and voting per class.

A multiple-class structure would make it easier for the bondholder-based IBG to veto the scheme, empowering the group to extract better terms. Conversely, grouping all creditors into a single class would dilute the IBG’s potential holdout position, particularly since, as reported, the supportive Ad Hoc Group holds both bonds and perps.

Scheme Jurisdiction

The RSA does not specify the jurisdiction(s) in which the schemes will be conducted, but given Road King’s proposed single-class structure, there doesn’t seem any intention to domicile the process in a jurisdiction that allows for a cross-class cram down. As such, the single versus multi-class structure is paramount in this situation.

The Hong Kong-listed guarantor Road King is incorporated in Bermuda, the subsidiary guarantors in Hong Kong or, along with the bond and perp issuers, in the British Virgin Islands and the debt is governed by English law. New Select Global Limited, a guarantor and the holding company for Road King’s Indonesian toll road asset, which is also being schemed, is BVI incorporated.

None of these jurisdictions other than England offer schemes with a cross-class cram down. England provides a cross-class cramdown under its restructuring plan, as was controversially used to cram-down Chinese developer Sino Ocean Group’s bondholders in a restructuring effective in March 2025. However, given Road King’s proposed single-class structure, this doesn’t appear to be in play.

Class Composition

To assess creditor class composition, courts consider both creditor “rights in” and “rights out” of a scheme.

According to the English High Court’s Re Hawk Insurance Co Ltd [2002] BCC 300, “rights in” are the “rights which are to be released or varied under the scheme” and the “rights out” are the “new rights (if any) which the scheme gives, by way of compromise or arrangement, to those whose rights are to be released or varied.”

Notably “material differences in the rights of creditors do not necessarily fracture the class. A proliferation of classes should be avoided if possible and the court should be careful to ensure that the test is not applied in such a manner that it becomes an instrument of oppression by a minority[,]” as per English High Court’s Re OQ Chemicals Holding Drei GmbH [2024] EWHC 2036 (Ch).

Relevant Comparator

To determine if creditors receive similar “rights out”, courts evaluate what each class would receive in the scheme’s “relevant alternative” – which for Road King and most companies being restructured, is liquidation.

As established in other landmark English corporate insolvency and restructuring cases like Re APCOA Parking Holdings GmbH [2014] EWHC 3849 (Ch): [2015] B.C.C. and Re Stronghold Insurance Co Ltd [2018] EWHC 2909 (Ch), this liquidation comparator is often the most critical factor in the analysis.

When the alternative is formal insolvency, the court’s primary focus becomes whether the grouped creditors share a common interest in avoiding liquidation, rather than focusing on theoretical differences in their current debt terms. The court assesses whether the rights of the grouped creditors are “not so dissimilar as to make it impossible for them to consult together with a view to their common interest.”

Road King Application

Applying this framework to Road King, a single creditor class structure appears convincing.

“Rights In”

In terms of “rights in”, Road King’s proposed restructuring would see the bonds and perps release their claims against their respective issuers and the guarantors under the parallel guarantee packages. The claims are the same (apart from the different issuers) see the company’s organizational structure below:
 

However, in terms of an ability to exercise these “rights in” today, given that the perps are not due and payable but the bonds are, only bondholders can take action (and they have done so by petitioning for the winding-up of New Select Global).

As is generally the case for perps, Road King’s have highly limited events of default and acceleration triggers. For example, in addition to lacking a maturity, the perps allow for distribution deferrals – a right that has been exercised across all the perps.

And this is likely a point the IBG would raise in terms of trying to distinguish the position between the perps and bonds – despite the pari passu ranking of claims under the two debt instruments themselves – the perps cannot, today, exercise any “rights in”.

However, that changes upon a liquidation of the guarantor or issuer – which as detailed above, courts focus on for class composition (see below).

“Rights Out”

Turning to the proposed “rights out”, the bonds and perps are to be provided with the same restructuring consideration options under both the RKI and New Select schemes. There does not seem to be a different recovery narrative based on the different issuers of the debts.

The debts are being treated the same. This reflects the pari passu ranking, which Road King’s counsel noted during a bond-and perp-holder call on June 3 is clear in the perps’ offering documentation.

As an example, the offering memorandum for the $300 million 7.75% senior guaranteed perps details that the perp’s guarantee claim against Road King and the subsidiary guarantors ranks pari passu with all of other present and future unsecured and unsubordinated obligations of those entities. The bonds, like the perps, are unsecured obligations and share the same guarantee package.

The bond indentures further support equal treatment by including both debt instruments in the definition of “Pari Passu Securities”. Under the previous liability management exercise in 2024, the asset sale provisions required Road King to apply sale proceeds to redeem “Pari Passu Securities”, without prescribing temporal seniority, effectively neutralizing the bonds’ maturity advantage over the perps. This illustrates the company has been consistent in its view that the debts are pari passu and not distinguishing between temporal seniority previously.

This may be because courts have already provided guidance that a single class could include debt with differing maturities. While not completely analogous to the IBG’s position that the bonds should be in a separate class on the basis they have been accelerated while the perps are not due, this guidance does provide some direction on where the courts’ lean.

In Re ED&F Man Treasury Management plc [2020] EWHC 2290 (Ch), it was held that despite various debts having different interest rates and maturities, this did not fracture the class where the relevant alternative was a formal insolvency proceeding. The relevant alternative to Road King’s schemes is likely liquidation.

The relevant alternative is also important in relation to the IBG’s position that the perp’s contingent status distinguishes their “rights out” against those of the bonds.

Until payments under the perps are due, holders are contingent creditors.

However, as detailed in an example perp offering memorandum, in a liquidation scenario of either the respective perp issuer, Road King, or a subsidiary guarantor (including New Select), perp holders are able to (1) institute winding-up proceedings against, (2) prove in a winding-up of, or (3) claim in liquidation of one of those entities “for such payment” – presumably referring to amounts owing under the perps.

These actions are subject to holders of 25% in principal amount of the outstanding perps instructing the trustee to take such action (as well as prefunding/ indemnifying the trustee).

The terms of the perps arguably do limit the right to institute proceedings to wind-up proceedings to circumstances when payment under the perps are due. However, based on the drafting, the above limitation does not appear to apply to proving in a winding-up, or submitting a claim in a liquidation of those entities, including Road King, if that underlying proceeding is already taking place.

Furthermore, a winding-up of those entities triggers an obligation under the perps to satisfy all outstanding distribution arrears in full.

Therefore, in the relevant alternative scenario whereby Road King or New Select (winding-up already on foot) is liquidated, perp holders claims, which are pari passu with the bonds, appear to be exercisable rather than contingent.

The relevant alternative of Road King’s liquidation is potentially what the IBG referred to during its June 17, 2026 call as the “unlikely” scenario whereby the perps “become payable absent voluntary redemption.”

Materially Different Rights

In addition, the ruling in Boart Longyear Ltd. [2017] NSWSC 567 illustrates how far courts have been willing to accommodate creditors being placed within the same class.

The Australian court found in that case that creditors could be placed in the same class even in scenarios where there are material differences under the terms of debt to be schemed and such debt is accorded a different treatment of their rights under the scheme.

The court analyzed the complete set of rights each creditor held against the company and how the proposed scheme alters those rights both individually and holistically.

Furthermore, the court found that separate classes are only warranted if a scheme’s practical impact effectively destroys the creditors’ common foundation of interest. But if the likely alternative to the scheme is imminent insolvency (as Road King is suggesting for its own scheme), substantial weight should be placed on creditors’ shared interest in avoiding liquidation when grouping them.

Despite the seeming shared interest in avoiding insolvency, the IBG, in a call with bondholders early this month, rebuts this premise by arguing that a liquidation of the Indonesian toll road assets (held by guarantor New Select Global Ltd.) would actually generate a significantly higher recovery than Road King’s current restructuring proposal.

In response, Road King’s financial advisor, Alvarez & Marsal maintained on yet another all-holder call early this month that a reputable independent third party is conducting a liquidation analysis to prove that the restructuring preserves greater value for creditors. Alvarez said this analysis would be presented in court during scheme hearings.

See Octus’ APAC Special Situations Weekly and coverage for further details.