CR-2025-004514 - [2025] EWHC 2755 (Ch)

It is well settled that where a class of creditors approves a scheme then Court accepts that those creditors are likely to be the best judges of their own commercial interests, but that the Court is not bound by their view and retains a discretion. The court will ask whether the plan is one of which an intelligent and honest class member might, having regard to their class interests, reasonably approve (“the rationality test”). The application of this test serves to highlight any matters extraneous to class issues that may have influenced the outcome of the meeting and to test whether it is appropriate to compel dissentients to accept the deal. I hold that the Poundland plan passes this rationality test.

First, I am satisfied that the restructuring plan is an alternative to an imminent and inevitable insolvency. For Class A and B landlords, an asset realisation administration would mean that they would be left with empty units in respect of which no rent or property costs are being paid; and they would be faced with the choice of either accepting a surrender/forfeiting leases (facing the prospect of a void period, enhanced business rate charges, and security issues) or awaiting the conversion of the administration into a liquidation and the disclaimer of the leases. Having a tenant in place under the plan, albeit at a reduced rent, presents an attractive alternative, particularly when coupled with a “break right” which preserves an ability to recover possession if the market provides better opportunities than the amended lease. For Class C and DC landlords, where exit under the plan is probable, the advantage is an orderly return of possession rather than a disorderly return of an unoccupied property in the course of administration or liquidation.

Second, except in the case of Pepco, the restructuring plan provides a greater and quicker return than that which is achievable in the relevant alternative. There is a 170% uplift on the Estimated Return. There is the prospect of participation in future profits. Under the plan payments will be made in 9 or 12 months. The base figures (ignoring prospective profit share) derived from the FTI Comparator Report are shown in the following table:-

The votes of Pepco (which approved the plan both as Secured Loan and Unsecured Loans Creditor) are explicable because it chose to sacrifice its own financial interests in favour of acting as a responsible former owner of the business which was seeking to support its transition to new ownership (as it had made clear both by its provision of liquidity support and its agreement to the sale terms). I therefore see no reason to differ from the opinion of the assenting classes.