English High Court sanctions Amicus restructuring plan

Quick read

On 15 November 2021, the English Court released its reasoned judgment for the sanction of Amicus Finance Plc's (Amicus) restructuring plan.

Background

Amicus, a short term property lender, entered administration in 2018. The administrators proposed a restructuring plan to compromise creditors' claims, exit the administration and ultimately restore the company as a going concern. The company faced imminent liquidation if the plan was not approved. Secured creditor, Crowdstacker, an online peer-to-peer lending platform, opposed the plan.

Amicus asked the court to exercise its power of cross-class cram down to sanction the plan against Crowdstacker. The court needed to be satisfied that Crowdstacker would not be any worse off under the plan than the 'relevant alternative' in this case, liquidation (Condition A), and the consenting class of creditors had a genuine economic interest in the event of the relevant alternative (Condition B).

Decision

It was accepted by all parties that Condition B had been met as the consenting expense creditor class would receive a payment in a liquidation. The dispute centred on Condition A. Crowdstacker argued that the administrators had undervalued recoveries in a liquidation because a liquidator could pursue litigation in respect of antecedent transactions, which would increase recoveries.

The judge found that Condition A had been met because:

while 'clawback claims' can be factored into a 'no worse off' test,'a mini trial of ‘clawback’ claims without disclosure or evidence' cannot take place in a sanction hearing
he was satisfied on a balance of probabilities that Crowdstacker was not worse off under the plan than it would be if Amicus entered liquidation.

Restructuring plan 'firsts'

This case, while specific to its facts, involved a series of 'firsts' for UK restructuring plans: the first sanction of a plan proposed by administrators; the first for a mid-market company; and the first to involve the use of the cross-class cram down for a secured creditor.