Chaptre Finance PLC, Re
[2024] EWHC 2908 (Ch)
Revolution Bars Limited, Re
8 August 2024
[2024] EWHC 2949 (Ch)
High Court
A struggling bar company wanted a court to approve its plan to pay back its debts differently. The plan wasn't fully agreed by all creditors, but the judge said it was okay because everyone would be at least as well off as if the company went bankrupt. No one objected, so the judge approved the plan.
Key Facts
- •Revolution Bars Limited ('Plan Company') sought court sanction for a restructuring plan under Part 26A of the Companies Act 2006.
- •The Plan Company, a subsidiary of Revolution Bars Group plc, faced financial difficulties stemming from the COVID-19 pandemic and subsequent economic pressures.
- •The plan involved eight creditor classes, some of which did not meet the statutory majority for approval.
- •The application relied on a 'cross-class cram down' under Section 901G of the CA 2006, as some creditor classes dissented.
- •The plan aimed to restructure debt with the Primary Secured Creditor (NatWest), defer VAT payments to HMRC, and adjust lease liabilities with various landlords.
- •The relevant alternative considered by the court was the administration of the Plan Company and related entities.
- •FTI Consulting provided financial modeling comparing outcomes under the plan and the relevant alternative.
- •No creditors appeared to object to the plan at the sanction hearing.
Legal Principles
Cross-class cram down under Section 901G of the Companies Act 2006 requires the court to be satisfied that dissenting creditors would be no worse off under the plan than in the relevant alternative and that the plan has been agreed by a 75% majority of a class of creditors who would receive a payment or have a genuine economic interest in the company in the event of the relevant alternative.
Companies Act 2006, Section 901G
The 'relevant alternative' is what the court considers most likely to occur if the plan is not sanctioned.
Companies Act 2006, Section 901G(4); Re Virgin Active Holdings [2021] EWHC 1246 (Ch)
The court should recognize that directors are normally in the best position to identify what will happen if a scheme or restructuring plan fails.
Re ED & F Holdings Limited [2022] EWHC 687 (Ch)
In determining the fairness of a plan, the views of 'out of the money' creditors (those who would receive no payment in the relevant alternative) count for very little.
Re Virgin Active Holdings [2021] EWHC 1246 (Ch)
The court has jurisdiction to effect a cross-class cram down even in circumstances where there was no meeting of dissenting classes.
Re Listrac Midco Limited and others [2023] EWHC 460 (Ch)
Outcomes
The court sanctioned the restructuring plan.
The court accepted the Plan Company's evidence regarding the relevant alternative (administration) and FTI's financial modeling demonstrating that dissenting creditors would be no worse off under the plan. The court found no evidence of unfairness in the plan's distribution of benefits, considering the circumstances and lack of objection from creditors.