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CVAs and Restructuring Plans in 2023 - Coggle Diagram
CVAs and Restructuring Plans in 2023
2. Restructuring Plans (RPs)
1. Key characteristics
[1. Affects secured creditors too]
2. Pre-conditions
[1. Financial difficulties AND => ]
[2. <= It will help those difficulties]
3. Creditors are divided into classes
[1. Landlords]
[2. Suppliers]
[3. Inter-company]
[4. Finance creditors]
[5. HMRC]
[6. Others?]
2. RP Process
1. Court hearings
1. Convening hearing
[1. To decide what the classes are]
[2. To order the vote to be taken]
2. Sanctioning hearing
[1. Sanctions the plan after the votes]
2. Creditors receive
[2. Meeting to discuss]
1. Detailed Explanatory Statement
[1. Draft restructuring plan]
[2. Store level P&L's]
[3. Valuation reports]
3. Creditors Vote
[1. Each class votes]
[2. 75% of votes needed by Value]
3. Cross-class cram down
1. Enables court to sanction if 75% not achieved
[1. If none of the dissenting class members can be worse off than in an insolvency process AND =>]
[2. <= If one approving class member would gave been "in the money" in an insolvency process]
2. Confirmed in Virgin Active case
[1. Landlords would have received nothing in an insolvency process]
4. Process for challenging an RP
1. Obtaining Financial Information
[2. Creditors report]
1. Disclosure of company information
[1. Voluntary OR]
[2. Court process]
2. Using the Financial Information
[1. Are the creditors "in the money"]
[2. To show you are better off in the alternative insolvency process]
4. Grounds for challenge
[1. Abusing the cross-class cram down]
[2. Incorrect financial information - is that right Mathew?]
3. Timing for a challenge
[1. Must be before the court sanctions the plan]
[2. No 28 day challenge period afterwards]
1. Company Voluntary Arrangements (CVA)
1. CVA Characteristics
[1. Allows company to pay only part of its debts]
[2. Does not affect a secured creditor]
[3. Company directors stay in control]
[4. Not an insolvency process]
5. 3rd Party involvement
[1. Nominee oversees the CVA's implementation]
[2. Nominee becomes the Supervisor after implementation]
2. CVA Process
1. Kick off
[1. Nominee report recommends a vote]
2. Notice to creditors
[1. 14 days’ notice to all unsecured creditors]
3. Creditors Vote
1. Direct Creditors
[1. 75% must vote in favour]
[2. By value]
Indirect/unconnected Creditors
[1. 50% must vote in favour]
[2. By value]
4. Effect of vote
[1. Binds all credit]
[2. Including the “no” voters]
5. Challenge Deadline
[1. 28 days]
[2. No extension]
[3. Calendar days]
3. CVAs & Landlords
1. CVA's can affect financial terms
[1. Rent arrears]
[2. Dilapidations]
3. Future rents
[1. Rents can be partially reduced]
[2. Rent can be reduced to zero]
2. CVA's cannot affect proprietary rights
[1. Can't break the Lease]
[2. Can't restructure the right to forfeit]
4. CVA Challenge Process
1. Unfair prejudice
1. Vertical Comparison
[1. are you worse off than in an insolvency process]
[2. e.g. Powerhouse "guarantee"]
2. Horizontal Comparison
[2. Or a class of creditors]
1. Can't disadvantage individual creditors
2. Examples
[1. Debenhams]
[2. Regis UK]
4. Vote Swamping
[1. New Look]
5. Getting off the Bus
[1. If you reduce the rent =>]
[2. <= Landlord must have the right to end the Lease]
3. Compensation funds
[1. What does that mean Mathew?]