• We saw the High Court reject the challenge brought by aggrieved landlords to the company’s CVA in New Look. Just a few days later, the High Court sanctioned the company’s Part 26A restructuring plan in Virgin Active leaning heavily on the cross-class cram down power to deal with multiple classes of dissenting landlords. Then came the Regis CVA challenge where this time – albeit on rather unusual facts and with limited practical consequence – landlords succeeded in revoking the CVA (which had already terminated) on a finding of unfair prejudice.
• The decision in New Look - which is being appealed - is vindication for the structures used in plentiful landlord/tenant CVAs in recent years and underscores the ability of a CVA to arrange different deals with different sub-groups of creditors. It sheds light on “vote swamping” and unfair prejudice concerns and calls attention to how the treatment of creditors under a linked scheme of arrangement or in any wider restructuring may justify their differential treatment in the CVA. The result in Regis is less significant but serves as a timely reminder for how careful planning in all aspects of a CVA – around the selection of unimpaired critical creditors for example – should be a priority.
• The subsequent decision in Virgin Active sent ripples across the restructuring market. The decision is difficult reading for out-of-the-money creditors whose dissenting votes will carry little weight. For in-the-money creditors, the case provides significant comfort and it also offers a potential route map for private equity groups looking to retain their interests – particularly when they are providing important support to a restructuring. Its lessons for all stakeholders on the evidential burden required to mount a challenge are vital to understand.
• The refusal by the High Court to sanction the company’s Part 26A restructuring plan in Hurricane Energy – which would have seen existing shareholders significantly diluted – highlights the importance of establishing the ‘relevant alternative’. It also underscores that if directors are required to have regard to creditors’ interests, they should not overlook shareholders who may have a realistic prospect of equity value where an immediate insolvency process is not likely.

If you’ve not already seen our alerts on these decisions, please see What the Virgin Active Part 26A Restructuring Plan challenge means for future Restructuring Plans, What the New Look and Regis CVA challenges mean for the future shape of CVAs and Hurricane Energy: a failed cram down of a debt for equity swap. We would be happy to discuss these further with you. In this edition of Insolvency Bitesize, we cover an assortment of issues, including:

• the latest position on a range of Covid-19 support measures and how they might affect future deals between landlords and tenants;
• a look at how the new “connected person” test might work in practice in insolvency sales;
• the first proposed use of the Part 26A restructuring plan by a company already in administration; and
• the Bank of England’s first (we believe) use of its powers to recognise a third-country law bail-in of English law governed bonds.

We hope you find this edition useful. As ever, please get in touch with any questions you may have.