CLARIFICATION: Selecta LME Litigation: Creditors File Complaint in New York: Challenge Co-Op Agreement as Collusion, Dutch Foreclosure, New York-Law Exchange in Landmark Antitrust Case

Editor’s Note: This article has been updated to clarify certain of the claims that are made under the New York complaint and to distinguish from claims that could be pursued under English law.

Legal Analyst: Shan Qureshi

Relevant Document:
NY Complaint

• A group of Selecta’s challenging first lien noteholders has filed a detailed complaint in the Southern District of New York against Swiss vending machine operator Selecta Group BV and a consortium of its creditors, alleging that the 2025 liability management exercise unlawfully stripped their rights and subordinated their debt.
   
• The claim combines antitrust and indenture-based causes of action under New York law with allegations of misrepresentation and procedural impropriety in the Dutch share-pledge enforcement, as well as highlighting potential breaches of English law.
   
• The plaintiffs seek damages exceeding the face value of their notes and invoke the Sherman Act §1 and the New York Donnelly Act, arguing that a cooperation agreement among “favored holders” amounted to a “collusive” scheme to control pricing in the secondary debt market. A decision on this argument will have huge consequences on the restructuring industry as the enforceability of cooperation agreements is yet untested.
   
• The suit challenges a growing European trend in which majority lenders use LME-style recapitalizations outside of formal restructuring regimes.
   
• The case may become a transatlantic test of the limits of creditor-on-creditor subordination where New York-law indentures intersect with continental enforcement tools.

A group of institutional investors: Deltroit Directional Opportunities, Algebris, Fineco Asset Management, the CQS family of funds, Mercer and Faros Point have filed a complaint in the U.S. District Court for the Southern District of New York against Selecta Group BV and its affiliates, as well as a set of major investment funds including Invesco, Man Group, Strategic Value Partners (SVP) and Diameter Capital Partners. The complainants are represented by Faegre Drinker Biddle & Reath LLP in New York.

The plaintiffs, collectively holding more than €65 million of Selecta’s 2020 first lien notes, allege that Selecta and a core of “favored holders” engineered an LME that stripped minority lenders of their pari passu status. The underlying debt instruments are governed by New York law, yet the core enforcement mechanism (share-pledge enforcement) occurred in the Netherlands, giving the dispute a dual-jurisdictional character.

The complaint asserts 10 counts spanning U.S. federal antitrust law, New York contract law and related torts as well as touching on English law issues. It centers on a transaction executed between April and July 2025, in which control of Selecta was transferred to a new holding vehicle (owned by the “favored holders”) called Seagull Bidco Ltd., through a Dutch foreclosure. Plaintiffs claim that they were left holding “third-out” instruments of negligible value while the favored creditors received new “first-out” notes and equity control (via second out debt, which owns 82% of Seagull equity).

Background: Structure of the LME
Selecta’s recapitalization followed a familiar European LME pattern but was executed with unusual aggression. By early 2025, the Swiss-headquartered vending and coffee services group faced a wall of maturities in 2026: Approximately €150 million super-senior RCF, €821 million first lien notes, and €377 million second lien notes. Octus analysis estimated group leverage at over 8× EBITDA, leaving the existing capital structure unsustainable with the group reaching interest payment defaults.

To address this, a majority of first and second lien creditors, later identified as the favored holders, entered into a framework agreement and parallel cooperation agreement in April 2025. The plan was to transfer Selecta’s equity, pledged by its Swiss parent, into a newly incorporated Jersey-Dutch chain comprising Seagull Topco, Seagull Holdco and Seagull Bidco. Kroll, acting as security agent under the 2018 intercreditor agreement, initiated enforcement proceedings in the Netherlands Commercial Court or NCC.

The favored holders arranged an interim financing facility of approximately €50 million, later increased to €60 million with accrued interest and fees, to support Selecta Group BV during the negotiation period preceding the restructuring. This “Interim Financing” was funded exclusively by existing noteholders within the special group and was secured against Selecta’s assets, giving them enhanced control over the process. Announced on Jan. 13, 2025, it was presented as a bridge to stabilize liquidity while the restructuring terms were finalized. In practice, it further entrenched the favored holders’ dominance, as no other creditors were offered participation or equivalent protections.

On May 13, 2025, the NCC approved the private sale of shares in Selecta Group BV from the parent entity to Bidco for a nominal consideration of €1 plus debt release. Upon completion, all first lien notes were replaced with “3O Notes” deeply subordinated claims against Bidco. The favored holders then conducted a private exchange into “1O Notes,” secured by the same assets but benefiting from enhanced priority and reduced consent thresholds. Nonparticipating holders, the plaintiffs, could only join if they released all claims and waived sacred rights, including the 90% modification consent threshold contained in the 2020 indenture.

Only 40% of excluded holders accepted. The remainder were left holding 3O instruments trading at 15 cents to 20 cents on the euro, while the 1O notes of the favored group traded near 75 cents, highlighting a dramatic value transfer.

The plaintiffs have contended, amongst other things, that this structure breached both the ratable-payment requirement of the first lien indenture and the duty of equal treatment under the intercreditor agreement, which mandated that recoveries from enforcement be distributed “without preference or priority of any kind.”

The New York Complaint
The complaint pleads several counts, dividing them broadly between New York law contractual breaches and federal and state antitrust violations as well as Dutch and English law issues. The key allegations are:

1. Sherman Act Violation – that the cooperation agreement constituted a horizontal collusion among competing noteholders to control the market for Selecta’s debt instruments.
    
2. New York Donnelly Act Violation – the state analogue to the Sherman Act.
    
3. Breach of the First Lien Indenture (New York law) – failure to pay principal and interest, nonratable distribution following enforcement and unlawful substitution of debt.
    
4. Breach of Implied Covenant of Good Faith – concealment of restructuring terms and deliberate subordination of excluded holders.
    
5. Breach of Fiduciary Duty – against directors of Selecta group for duty of care dereliction.
    
6. Tortious Interference – against the favored holders for inducing Selecta to breach contract.
    
7. Damages and Attorneys’ Fees – including treble damages under antitrust statutes.

Analysis of Claims
1. Antitrust Collusion Under Sherman Act §1

The plaintiffs’ most novel argument frames the cooperation agreement as a price-fixing and market-allocation pact. By agreeing to act collectively, the favored holders allegedly restrained competition in the secondary market for Selecta’s debt, thereby inflating the value of their own holdings while depressing those of excluded creditors. The agreement’s clause prohibiting members from supporting any alternative restructuring is cited as a per se unlawful restraint of trade.

The claim exploits the New York nexus of the indenture and the global trading of the notes. Success would require showing that the debt instruments constitute a relevant “market” and that the cooperation agreement had anti-competitive intent.

2. Breach of the First Lien Indenture

The core contractual claim asserts that the foreclosure and replacement of notes breached Sections 4.01 and 6.10 of the indenture by denying ratable distribution. The plaintiffs received securities of “significantly inferior value,” violating the requirement that enforcement proceeds be shared pro rata among all first lien holders. The complaint also alleges breach of Section 9.02, which mandates 90% consent for amendments to sacred rights was circumvented when the 1O notes removed that protection, changing it to just 50%.

3. Antitrust and Contractual Overlap

The complaint pairs antitrust theory with contractual violations to frame the cooperation agreement as both a breach of indenture equality provisions and a collusive market device. Plaintiffs argue that by prohibiting members from supporting competing restructuring proposals, the agreement reduced liquidity and manipulated market pricing of the notes.

4. Tortious Interference

The favored holders (Invesco, Man Group, SVP, Diameter as named in the complaint) allegedly used their majority position to induce Selecta to breach its obligations and then captured disproportionate value through the 1O exchange. Plaintiffs cite the indemnities disclosed in the exchange memorandum as evidence that Bidco and the favored group anticipated legal challenge and insulated themselves accordingly.

English Law Claims
While the New York complaint forms the main procedural front, parts of the dispute also engage English law through the governing law of certain subsidiary guarantees and through potential jurisdictional overlap arising from the presence of Selecta’s English entities and the English law-governed intercreditor agreement. We set out some of the possible English law claims here.

The first lien indenture itself is governed by New York law, but the intercreditor agreement and certain security documents were governed by English law. The guarantors (Selecta U.K. Ltd., Selecta Finance U.K. Ltd. and Selecta U.K. Holding Ltd.,) are English companies that provide guarantees and security governed by English law. The foreclosure of those guarantees was coordinated through Kroll as security agent in London before being enforced in the Netherlands.

Accordingly, although the New York court has primary jurisdiction, the plaintiffs assert that several breaches also fall under English contract and equitable principles, particularly relating to:

• Breach of fiduciary or equitable duty by the directors;
   
• Improper release of English-law guarantees without requisite creditor consent; and
   
• Breach of the implied duty to act for the benefit of all secured creditors under minority protection principles.

The complaint relies on clause 1.2(z) of the intercreditor agreement (an English-law instrument) which expressly provides that the agent cannot take steps that would present “a material risk of liability or breach of fiduciary duty” for any member of the group. By authorizing the share pledge enforcement and subsequent substitution of the debt, the security agent allegedly violated this clause and thereby breached English fiduciary duties of loyalty and impartiality owed to all secured creditors.

Under the English-law governed guarantees and security issued by the U.K. subsidiaries, enforcement of the share pledge should have triggered payment obligations to the first lien holders in proportion to their holdings. The plaintiffs contend that the release of these guarantees, effectively achieved when the U.K. entities were re-aligned within the Bidco structure, was undertaken without the 90% supermajority consent required under both the New York indenture and English-law intercreditor agreement.

This allegation mirrors the U.S. contractual claims but invokes the English-law principle of pari passu treatment, which prohibits a security agent from preferring one class of secured creditor over another absent explicit authority. By accepting instructions solely from the favored holders, Kroll is said to have breached its equitable duty as a trustee-like agent, a concept recognized under English law since Belmont Park Investments v BNY Corporate Trustee Services [2011] UKSC 38.

The plaintiffs also highlight that notices distributed via Euroclear and Clearstream originated from Kroll’s London office and therefore are governed by English procedural obligations. English law imposes a duty of fair presentation when an agent communicates material enforcement steps to beneficiaries. The truncated and opaque notices, which failed to state that first lien notes would be converted into deeply subordinated 3O instruments, are alleged to breach this duty, amounting to misrepresentation by omission under English equitable principles.

The plaintiffs have not yet filed separate English proceedings, but their New York pleadings preserve the right to pursue relief under English law against the U.K. guarantors and against Kroll in its London capacity as security agent.

Remedies Under English Law
The likely remedies in an English forum would differ markedly from those sought in New York.

While the U.S. complaint demands monetary damages and treble recovery, an English claim would more likely seek:

• Equitable rescission or rectification of the enforcement steps involving English-law guarantees;
   
• Account of profits or equitable compensation for breach of fiduciary duty;
   
• Declaratory relief confirming that releases of English-law security were void for lack of proper consent; and
   
• Injunctions preventing enforcement of the Bidco-level security against U.K. assets pending resolution.

The Dutch Proceedings
The Dutch Commercial Court’s decision of May 13, 2025, authorized enforcement of the share pledge but did not address the substitution of debt instruments. The foreclosure was conducted privately and without a hearing, after Kroll requested confidentiality. Plaintiffs allege that material misstatements were made to the court, including failure to disclose that first lien noteholders would be issued subordinated 3O notes.
Because the share pledge and intercreditor security are governed by Dutch law, the NCC’s approval gave Bidco legal title to Selecta’s shares. However, the plaintiffs argue that this process was procedurally defective, lacking notice and violating the intercreditor requirement that recoveries be distributed ratably.

Parallel to the New York action, several minority holders have filed Dutch annulment proceedings seeking to void the foreclosure for procedural irregularities. Yet the NCC’s decision has already been implemented, and reversal may be limited to damages.

Broader Implications
Selecta’s recapitalization typifies a new generation of European LMEs that blend New York law debt instruments with continental enforcement mechanics to sidestep formal restructuring regimes. The model’s legal vulnerability lies in its reliance on contractual trustee actions rather than statutory creditor processes.

If the New York court accepts jurisdiction and permits discovery on antitrust and indenture breaches, the case could redefine how far majority lenders may go when using foreign enforcement to effect de facto uptiers. It also tests whether New York law’s “ratable payment” principle can reach beyond U.S. borders where the operative transfer occurred elsewhere.

For European investors, the complaint underscores the risks of mixed-law capital structures, particularly those combining Dutch security packages with New York indentures.