UK Court’s first reported decision on the new moratorium procedure

The English High Court has rejected a creditor's application to bring a moratorium to an end following the monitors' decision not to terminate the moratorium.

Background

A monitor must terminate the moratorium if they 'think' that the company is unable to pay any pre-moratorium debts for which the company does not have a 'payment holiday'. Surprisingly, debts arising under an agreement involving 'financial services' are excluded from the payment holiday.

Decision

The Corbin & King operational companies (OpCo) (the owners of The Wolseley and The Delaunay among other restaurants) were under the protection of a moratorium. The creditor applicant had provided loan facilities to the holding company of the OpCos. The OpCos had guaranteed the loan, the applicant demanded payment under the guarantee and the OpCos were unable to pay.

The monitors considered that it was likely that the Opcos would be rescued as going concerns and the loan repaid in full in the reasonably near future. An offer had been made by a third party to the administrators of TopCo, which would result in the repayment of the loan in full thereby discharging the liability under the guarantee.

The Court held that the Opcos were trading successfully and as there was an immediate prospect of the debt being repaid the moratorium could continue.

Key Takeaways 

• Monitors must assess whether funding is immediately capable of discharging relevant debts, if not, the monitor must terminate the moratorium.  
• The Court will allow monitors to adopt a “flexible and commercially realistic approach taking into account the circumstances as a whole”.
• Courts will 'balance the harm' of terminating the moratorium for the company against the harm of not terminating for the creditors.  

Find out more

To discuss the new moratorium procedure in more detail, please reach out to a member of our Restructuring & Insolvency team.