27 May 2021
R&I update – June 2021 – 2 of 4 Insights
On 12 May 2021, in the first opposed cross-class cram down case, the English High Court sanctioned Virgin Active's restructuring plans, the first to bind landlords to lease compromises.
While the opposing landlords challenged the valuation evidence advanced by the companies, they did not advance evidence of their own. The court accepted the companies' evidence that:
The opposing landlords contended that the court should nonetheless refuse to sanction the plans as it was unfair that the companies' shareholders would be entitled to retain their equity. They also contended that they should be entitled to benefit from any "restructuring surplus".
The court disagreed, ruling that since the shareholders were providing new money in return for their equity, it was permissible for secured lenders (as the "in the money" creditors) to determine how the restructuring surplus was allocated. The landlords – as "out of the money" creditors – therefore had no right to complain.
To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.